<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
GIANT INDUSTRIES, INC. SAN JUAN REFINING COMPANY
GIANT INDUSTRIES ARIZONA, INC. CINIZA PRODUCTION COMPANY
GIANT EXPLORATION & PRODUCTION COMPANY GIANT FOUR CORNERS, INC.
GIANT STOP-N-GO OF NEW MEXICO, INC. GIANT MID-CONTINENT, INC.
PHOENIX FUEL CO., INC.
</TABLE>
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
<TABLE>
<S> <C> <C>
DELAWARE 86-0642718
ARIZONA 86-0218157
TEXAS 74-1501967
NEW MEXICO 85-0389396
NEW MEXICO 74-2759385
NEW MEXICO 74-2468207
ARIZONA 86-0739055
ARIZONA 86-0784398
ARIZONA 2911, 5541 86-0109486
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
23733 NORTH SCOTTSDALE ROAD
SCOTTSDALE, ARIZONA 85255
(602) 585-8888
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
MORGAN GUST
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
GIANT INDUSTRIES, INC.
23733 NORTH SCOTTSDALE ROAD
SCOTTSDALE, ARIZONA 85255
(602) 585-8849
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
KAREN CIUPAK MCCONNELL
FENNEMORE CRAIG, P.C.
3003 NORTH CENTRAL, SUITE 2600
PHOENIX, ARIZONA 85213-2912
(602) 916-5000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment, please check the following box. [X]
If any of the securities being registered on this form are to be offered in
connection with the termination of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF CLASS OF AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9% Senior Subordinated Notes due 2007...... $150,000,000 100% $150,000,000 $45,454.55
- ---------------------------------------------------------------------------------------------------------------------------
Subsidiary Guarantees (2).................. (3) (3) (3) (2)
===========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933.
(2) Giant Industries Arizona, Inc., Giant Exploration & Production Company,
Ciniza Production Company, Giant Stop-N-Go of New Mexico, Inc., San Juan
Refining Company, Giant Four Corners, Inc., Giant Mid-Continent, Inc., and
Phoenix Fuel Co., Inc. are direct or indirect wholly-owned subsidiaries of
Giant Industries, Inc. and each is registering guarantees of the payment of
the principal of, and premium, if any, and interest on the 9% Senior
Subordinated Notes due 2007 being registered hereby. Pursuant to Rule 457(n)
under the Securities Act of 1933, as amended, no registration fee is
required with respect to the Subsidiary Guarantors.
(3) No separate consideration will be received from the purchasers of the 9%
Senior Subordinated Notes due 2007 with respect to the Subsidiary
Guarantees.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS
[GIANT INDUSTRIES, INC. LOGO]
OFFER TO EXCHANGE ALL OF ITS OUTSTANDING 9% SENIOR SUBORDINATED NOTES
DUE 2007 FOR 9% SENIOR SUBORDINATED NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
THE REGISTERED EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
Giant Industries, Inc., a Delaware corporation ("Giant" or the "Company"),
hereby offers (the "Registered Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal") relating to the Registered Exchange
Offer, to exchange $1,000 principal amount of its 9% Senior Subordinated Notes
due 2007 (the "Exchange Notes"), which will be registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to the Registration
Statement of which this Prospectus is a part, for $1,000 principal amount of its
outstanding 9% Senior Subordinated Notes due 2007 (the "Notes"), of which an
aggregate of $150,000,000 in principal amount is outstanding as of the date of
this Prospectus. The form and terms of the Exchange Notes are substantially
identical in all material respects to the form and terms of the Notes (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions and with respect to the payment of additional interest under
circumstances relating to breaches of the Registration Rights Agreement (as
hereinafter defined) by the Company and the Subsidiary Guarantors (as
hereinafter defined)).
Interest on the Exchange Notes will be payable on March 1 and September 1 of
each year, commencing March 1, 1998. The Exchange Notes will mature on September
1, 2007 and will be redeemable, in whole or in part, at the option of the
Company at any time on or after September 1, 2002 at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to September 1, 2000, the
Company may, at its option, redeem up to 35% of the aggregate principal amount
of the Exchange Notes originally issued with the net cash proceeds of one or
more Public Equity Offerings (as defined) at a redemption price equal to 109% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of redemption, provided that at least 65% of the aggregate initial
principal amount of the Exchange Notes remain outstanding after giving effect to
each such redemption. Upon the occurrence of a Change of Control (as defined),
the holders of the Exchange Notes may require the Company to purchase the
Exchange Notes, in whole or in part, at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase.
The Exchange Notes will be senior subordinated unsecured obligations of the
Company. The Exchange Notes will be subordinate in right of payment to all
Senior Indebtedness (as defined) of the Company, and will rank pari passu with
all Pari Passu Indebtedness (as defined) of the Company. The Company's
obligation to pay the principal of, premium, if any, and interest on the
Exchange Notes will be unconditionally guaranteed, jointly and severally on a
subordinated basis, by each of the Company's subsidiaries. As of June 30, 1997,
on a pro forma basis after giving effect to the sale of the Notes and the
application of the net proceeds therefrom, the Company and its subsidiaries
would have had approximately $7.3 million in aggregate principal amount of
Senior Indebtedness, $150.0 million in aggregate principal amount of the Notes
and $100.0 million in aggregate principal amount of Pari Passu Indebtedness
(consisting of $100.0 million in aggregate principal amount of the Company's
9 3/4% Senior Subordinated Notes due 2003 (the "9 3/4% Notes")) outstanding.
The Company will accept for exchange any and all Notes validly tendered on
or before 5:00 p.m., New York City time, on , 1997, unless extended
(if and as extended, the "Expiration Date"). Tenders of Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See
"The Registered Exchange Offer."
The Exchange Notes are being offered hereunder to satisfy certain
obligations of the Company contained in the Registration Rights Agreement. Based
on interpretations by the staff of the Securities and Exchange Commission (the
"SEC") set forth in no-action letters issued to third parties, the Company
believes the Exchange Notes issued pursuant to the Registered Exchange Offer in
exchange for Notes may be offered for resale, resold and otherwise transferred
by any holder thereof (other than broker-dealers, as set forth below, and any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
that such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. Any holder who tenders
in the Registered Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the Exchange Notes or who is an
affiliate of the Company may not rely upon such interpretations by the staff of
the SEC and, in the absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Holders of Notes wishing to
accept the Registered Exchange Offer must represent to the Company in the Letter
of Transmittal that such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Registered Exchange Offer must agree that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Notes where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from this Registered Exchange
Offer. No dealer-manager is being used in connection with this Registered
Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BEFORE TENDERING NOTES IN THE REGISTERED EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the SEC. Copies of the
Registration Statement (with exhibits), as well as such reports and other
information, can be obtained by mail from the Public Reference Section of the
SEC, at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such materials can be inspected and copied at the
public reference facility referenced above and at the SEC's regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048. The
SEC maintains a web site (http://www.sec.gov) that contains registration
statements, reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
SEC. In addition, such material also may be inspected and copied at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005,
on which exchange the Common Stock, $0.01 par value of the Company is listed.
The Company has filed with the SEC a Registration Statement on Form S-4
(No. 333- ), including any amendments thereto, under the Securities Act
with respect to the Exchange Notes offered hereby (the "Registration
Statement"). This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Exchange Notes, reference is
made to the Registration Statement and the exhibits and schedules filed as a
part thereof. Statements made in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement. Each such statement is qualified in
all respects by reference to such exhibit.
The following are incorporated herein by reference: (1) the Company's
Annual Report on Form 10-K for the year ended December 31, 1996; (2) the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997; (3) the Company's Current Reports on Form 8-K filed June 12,
1997 and June 17, 1997; and (4) the audited financial statements, report thereon
and notes thereto of Bloomfield Refining Company as of December 31, 1994 and
1993, and for each of the three years ended December 31, 1994, contained in the
Company's Current Report on Form 8-K filed October 19, 1995. All other reports
filed pursuant to Section 13(a) or 15(d) of the Exchange Act since December 31,
1996 are also incorporated by reference.
Each document filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the consummation of the Registered Exchange Offer made hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such document.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
GIANT INDUSTRIES, INC., AT ITS PRINCIPAL EXECUTIVE OFFICES, 23733 NORTH
SCOTTSDALE ROAD, SCOTTSDALE, ARIZONA 85255, ATTN: MORGAN GUST, SECRETARY,
TELEPHONE: (602) 585-8888. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY , 1997.
i
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the detailed information and consolidated financial statements
and notes thereto appearing elsewhere in this Prospectus. Unless otherwise
specified, references herein to pro forma information for a specified period
means information that gives pro forma effect to: (i) the Company's recent
acquisitions (the "1997 Acquisitions") of 96 service station/convenience stores
and related assets (the "Thriftway Stations") and Phoenix Fuel Co., Inc.
("Phoenix Fuel") as if such acquisitions had occurred at the beginning of such
period, and (ii) the sale of $150.0 million of the Notes at an interest rate of
9.0% and the application of the estimated net proceeds therefrom as if such
transactions had occurred at the beginning of such period. Certain terms used
herein are defined in the Glossary.
THE COMPANY
Giant is the leading refiner and one of the largest marketers of petroleum
products with operations in the fast-growing Four Corners area of the
southwestern United States. Giant owns and operates two high-conversion crude
oil refineries in northwestern New Mexico, with total throughput capacity of
approximately 44,600 bpd, and 149 Company-operated branded retail facilities in
New Mexico, Arizona, Colorado, and Utah. In May and June 1997, Giant acquired
through two separate transactions 96 of these service station/convenience stores
and Phoenix Fuel, Arizona's largest independent distributor of petroleum
products. On a pro forma basis for 1996, the Company's retail operations
marketed a volume of refined products equal to approximately 32% of its
refineries' sales volume. On a pro forma basis for 1996, the Company achieved
consolidated revenues of $785.8 million and EBITDA of $77.6 million. See
"Financial Performance" on page 3.
REFINING
Giant's refineries, separated by 120 miles, are operated in an integrated
manner and are the only active refineries in the Four Corners region. Management
believes that the technical capabilities of these two cracking refineries in
conjunction with high quality locally-available crude oil and NGL feedstock
result in refinery yields of high-value products comparable to those achieved by
larger, more complex refineries located outside this region. The Company
believes that its refined products meet all federally-mandated standards,
including 100% low sulfur diesel fuel, in all markets where it sells such
products. The refineries' yield of gasoline, diesel fuel and jet fuel has
exceeded 91% in each of the last five years. The Company's refineries have
achieved an average capacity utilization rate of approximately 94% over the last
five years.
The Four Corners region is characterized by long distances between
metropolitan areas, making transportation and terminalling costs a significant
competitive factor. The nearest competing refineries are located near El Paso,
Texas, Artesia, New Mexico and Amarillo, Texas, which are approximately 360, 370
and 400 miles, respectively, from the Company's refineries. As a result, Giant
has benefited from higher refining margins than those experienced by refiners in
the West Coast and Gulf Coast regions of the United States. Giant markets
substantially all of its refined products within a radius of approximately 150
miles from its refineries.
MARKETING AND DISTRIBUTION
The Company has been active in retail marketing in the Four Corners for
over two decades. In 1996, the Company's modern high-volume self-serve
station/convenience stores significantly exceeded national industry averages in
a number of operating and profitability measures, scoring above the top quartile
average in several of these performance measures. Approximately half of such
units were constructed since 1990. In 1996, Giant's service station/convenience
stores averaged monthly gasoline sales of 137,000 gallons, compared to a
national average of 82,000 gallons and a top quartile average of 106,000
gallons. Giant's higher sales volumes were achieved while maintaining fuel
margins substantially greater than industry averages. In 1996, Giant's service
station/convenience stores achieved average fuel margins of 20.1 cents per
gallon, compared to a national average of 13.1 cents per gallon and a top
quartile average of 14.5 cents per gallon. With regard to
1
<PAGE> 5
merchandise sales measures, Giant's service station/convenience stores recorded
average monthly merchandise sales of $74,000, compared to a national average of
$62,600. Management attributes this high level of performance to the Company's
focus on site location, access/design, automation, attractive merchandising and
an emphasis on value-added customer service.
For the six months ended June 30, 1997, the 96 Thriftway Stations acquired
in May 1997, which are typically smaller and located in less populated areas,
averaged monthly gasoline sales of approximately 50,000 gallons, fuel margins of
approximately 17 cents per gallon and merchandise sales margins of approximately
32%. Giant intends to implement low cost, high return store upgrades at a number
of the recently acquired locations.
Giant's retail operations provide an assured market outlet for a
significant portion of its refinery production. Retail gross profits have
increased steadily over the past five years as compared to the more volatile
refinery earnings, contributing to cash flow and earnings stability. In addition
to its retail units, Giant's marketing network includes Phoenix Fuel's wholesale
and cardlock (unmanned fleet fueling) operations. Giving pro forma effect to the
1997 Acquisitions, the percentage of the Company's 1996 EBITDA attributable to
this marketing network and long-term contracts with existing customers increased
to 28%.
SUPPLY
The Company currently obtains substantially all of its crude oil supply
from Four Corners producers. The Company believes it purchases all of the crude
oil produced in this area. The Company currently supplies all of its refineries'
crude oil requirements through its truck transports and 300-mile pipeline
gathering system. This pipeline system directly reaches local producing regions
and connects with the Four Corners and Texas-New Mexico common carrier crude oil
pipelines. The Company believes that local crude oil production currently
approximates 98% of local crude oil demand and that the supply of crude oil and
condensate in the Four Corners is improving as a result of enhanced recovery
programs and increased drilling activities by major oil companies.
BUSINESS STRATEGY AND STRENGTHS
The Company's strategy is to increase shareholder value by adhering to
three major objectives: (i) capture a significant portion of anticipated future
demand growth for refined products in its targeted markets; (ii) increase
efficiency and profitability through the sale of a greater portion of the
Company's refined products by its retail network; and (iii) expand its overall
market presence through selective acquisitions in contiguous markets and other
markets with attractive supply and demand characteristics.
The Company believes it is well-positioned to execute its strategy as a
result of the following factors:
Attractive Markets. The Company's two refineries serve the Four Corners
market. The Company's refining margins have historically been higher than West
and Gulf Coast margins as a result of several factors, including: (i) demand for
petroleum products in this market is growing faster than the national average;
(ii) Giant's refineries primarily process high quality crude oil, which has both
a high gravity and a low sulfur content, as well as condensate and NGLs, all of
which are locally available and require less processing than do lesser quality
feedstocks to produce similar yields of gasoline, diesel fuel and other high
value products; and (iii) the region has a widely-dispersed population
effectively served by Giant's truck transportation fleet, giving the Company the
flexibility to direct the sale of refined products into the highest value
markets on a daily basis. Giant believes its long history of operations in and
knowledge of this market represent competitive advantages in its efforts to
increase its retail sales in this market.
Integrated Marketing Network. The Company continues to increase its
control over refinery sales volumes by increasing the size and scope of its
retail network (which includes Phoenix Fuel's cardlock operations) through
acquisition, construction and upgrading, and by entering into longer-term supply
arrangements with existing wholesale and exchange customers. The 1997
Acquisitions increased the Company's percentage of refined products sold through
its retail network as compared to refinery sales volumes from 18% for 1996 to
32% for 1996 on a pro forma basis. The Company's long-term goal is to
2
<PAGE> 6
distribute a volume of refined products equal to approximately 50% of its
refineries' sales volume through its retail network.
Efficient Refining Operations. The Company acquired the Bloomfield
refinery and Meridian crude oil gathering operations in late 1995. Integrating
these acquisitions into the Company's existing refining operations has resulted
in production improvements and administrative, raw material, labor and
transportation cost reductions on a per barrel basis. As a result of the
increased configuration flexibility afforded by owning two refineries, the
Company also has been able to identify and implement cost-effective capital
projects to debottleneck refinery units, thus improving capacity, yields and
profit margins.
Demonstrated Acquisition Record. Since January 1, 1995, the Company has
consummated three substantial acquisitions in its core businesses. Each of these
acquisitions has been consistent with the Company's previously stated strategy
and has been accretive to earnings and cash flow on a pro forma basis in the
year in which such acquisition was made and in subsequent financial periods. As
a result of these acquisitions, the Company's total assets increased from $279.4
million at December 31, 1994 to $434.4 million at June 30, 1997. EBITDA
increased from $34.1 million in 1994 to $77.6 million on a pro forma basis in
1996. While the Company incurred debt to finance these acquisitions, management
demonstrated its commitment to use cash flow from operations and proceeds of
non-core asset sales to subsequently reduce these debt levels.
SIGNIFICANT ACQUISITIONS
Bloomfield Refinery. In October 1995, Giant purchased the 18,000 bpd
Bloomfield refinery and related pipeline and transportation assets for $55.0
million plus approximately $7.5 million for inventory, and contingent payments
over the following six-year period with a present value of no more than $25
million. The Bloomfield refinery contributed EBITDA of $24.2 million to Giant in
1996 and $10.7 million in the first six months of 1997.
Thriftway Retail. At the end of May 1997, Giant completed the acquisition
of 96 retail service station/ convenience stores and related assets located
primarily in the Four Corners for approximately $43 million. See
"Business -- The Thriftway Acquisition." On a pro forma basis, this acquisition
contributed EBITDA of $10.4 million to Giant in 1996 and $4.8 million in the
first six months of 1997.
Phoenix Fuel. In June 1997, Giant acquired Phoenix Fuel, Arizona's largest
independent petroleum products distributor, for approximately $30 million. See
"Business -- The Phoenix Fuel Acquisition." Phoenix Fuel markets approximately
16,000 bpd of wholesale fuel and approximately 2,000 bpd of cardlock fuel, and
operates a lubricants distribution business. On a pro forma basis, Phoenix Fuel
contributed EBITDA of $6.7 million to Giant in 1996 and $3.3 million in the
first six months of 1997.
FINANCIAL PERFORMANCE
The Company believes that barrels of petroleum products sold, refinery
margin and gross profit (defined as net revenues less cost of products sold,
which excludes depreciation and amortization), rather than net revenues, are the
key indicators of performance because of distortions to net revenues caused
primarily by changes in commodity prices. The Company's total refinery
throughput, refinery margin, gross profit and EBITDA for the periods indicated
are specified below on a historical and pro forma basis.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- ---------------------------
PRO FORMA PRO FORMA
1994 1995 1996 1996 1996 1997 1997
------ ------ ------- --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Refinery throughput (mbbls/day)... 23.6 28.7 40.2 40.2 38.8 38.2 38.2
Refinery margin ($/bbl)........... $ 5.60 $ 5.13 $ 6.21 $ 6.21 $ 7.02 $ 6.46 $ 6.46
Company gross profit (millions)... $ 96.1 $ 98.6 $ 137.3 $ 189.5 $ 73.1 71.6 $ 92.8
Company EBITDA (millions)(1)...... 34.1 36.2 58.2 77.6 33.0 27.9 35.1
</TABLE>
- ---------------
(1) EBITDA for 1995 would have equaled $50.5 million had the Bloomfield refinery
acquisition been made at the beginning of 1995.
3
<PAGE> 7
THE NOTE OFFERING
The Notes.................... The Notes were sold by the Company to UBS
Securities, Donaldson Lufkin & Jenrette
Securities Corporation, BancAmerica Securities,
Inc. and Jefferies & Company, Inc. (collectively,
the "Initial Purchasers") on August 26, 1997, and
were subsequently resold to qualified
institutional buyers pursuant to Rule 144A under
the Securities Act (the "Note Offering").
Registration Rights
Agreement.................. In connection with the Note Offering, the Company
entered into the Registration Rights Agreement,
which grants holders of the Notes certain
exchange and registration rights. The Registered
Exchange Offer is intended to satisfy such
exchange and registration rights, which generally
terminate upon the consummation of the Registered
Exchange Offer.
THE REGISTERED EXCHANGE OFFER
Securities Offered........... $150,000,000 aggregate principal amount of 9%
Senior Subordinated Notes due 2007.
The Registered Exchange
Offer........................ $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of
Notes. As of the date hereof, $150,000,000
aggregate principal amount of Notes are
outstanding. The Company will issue the Exchange
Notes to holders on or promptly after the
Expiration Date. Based on interpretations by the
staff of the SEC set forth in no-action letters
issued to third parties, the Company believes
that Exchange Notes issued pursuant to the
Registered Exchange Offer in exchange for Notes
may be offered for resale, resold and otherwise
transferred by any holder thereof (other than
broker-dealers, as set forth below, and any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such holder's business and that such
holder does not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes.
Each broker-dealer that receives Exchange Notes
for its own account pursuant to the Registered
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with
resales of Exchange Notes received in exchange
for Notes where such Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities. The
Company has agreed that for a period of 180 days
after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use
in connection with any such resale.
4
<PAGE> 8
Any holder who tenders in the Registered Exchange
Offer with the intention to participate, or for
the purpose of participating, in a distribution
of the Exchange Notes cannot rely on the position
of the staff of the SEC enunciated in Exxon
Capital Holdings Corporation (available April 13,
1989), Morgan Stanley & Co., Inc. (available June
5, 1991), Shearman & Sterling (available July 2,
1993) or similar no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with the resale of the Exchange Notes. Failure to
comply with such requirements in such instance
may result in such holder incurring liability
under the Securities Act for which the holder is
not indemnified by the Company.
Expiration Date.............. 5:00 p.m., New York City time, on ,
1997, unless the Registered Exchange Offer is
extended, in which case the term "Expiration
Date" means the latest date and time to which the
Registered Exchange Offer is extended.
Conditions to the
Registered Exchange
Offer...................... The Registered Exchange Offer is subject to
certain customary conditions, which may be waived
by the Company.
Procedures for
Tendering Notes............ Each holder of Notes wishing to accept the
Registered Exchange Offer must complete, sign and
date the relevant accompanying Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Notes and any other required
documentation to the Exchange Agent at the
address set forth in the Letter of Transmittal.
By executing the Letter of Transmittal, each
holder will represent to the Company that, among
other things, the holder or the person receiving
such Exchange Notes, whether or not such person
is the holder, is acquiring the Exchange Notes in
the ordinary course of business and that neither
the holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. In lieu of physical delivery of the
certificates representing Notes, tendering
holders may transfer Notes pursuant to the
procedure for book-entry transfer as set forth
under "The Registered Exchange
Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such beneficial owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Notes, either make
appropriate arrangements to register ownership of
the Notes in such beneficial owner's name or
obtain a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time.
5
<PAGE> 9
Guaranteed Delivery
Procedures................. Holders of Notes who wish to tender their Notes
and whose Notes are not immediately available or
who cannot deliver their Notes, the Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent
(or comply with the procedures for book-entry
transfer) prior to the Expiration Date must
tender their Notes according to the guaranteed
delivery procedures set forth in "The Registered
Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights............ Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date pursuant to the procedures described under
"The Registered Exchange Offer -- Withdrawals of
Tenders."
Acceptance of Notes and
Delivery of Exchange
Notes...................... The Company will accept for exchange any and all
Notes that are properly tendered in the
Registered Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the Registered
Exchange Offer will be delivered promptly
following the Expiration Date.
Federal Income Tax
Consequences of the
Registered Exchange
Offer...................... The issuance of the Exchange Notes to holders of
the Notes pursuant to the terms set forth in this
Prospectus will not constitute an exchange for
federal income tax purposes. Consequently, no
gain or loss would be recognized by holders of
the Notes upon receipt of the Exchange Notes. See
"Certain Federal Income Tax Consequences."
Effect on Holders of
Notes...................... As a result of the making of this Registered
Exchange Offer, the Company will have fulfilled
certain of its obligations under the Registration
Rights Agreement, and holders of Notes who do not
tender their Notes will generally not have any
further registration rights under the
Registration Rights Agreement or otherwise. Such
holders will continue to hold the untendered
Notes and will be entitled to all the rights and
subject to all the limitations applicable thereto
under the Indenture, except to the extent such
rights or limitations, by their terms, terminate
or cease to have further effectiveness as a
result of the Registered Exchange Offer. All
untendered Notes will continue to be subject to
certain restrictions on transfer. Accordingly, if
any Notes are tendered and accepted in the
Registered Exchange Offer, the trading market for
the untendered Notes could be adversely affected.
Exchange Agent............... The Bank of New York (the "Exchange Agent").
THE EXCHANGE NOTES
Maturity Date................ September 1, 2007.
Interest Payment Dates....... March 1 and September 1, commencing March 1,
1998.
6
<PAGE> 10
Use of Proceeds.............. The Company will not receive any proceeds from
the Registered Exchange Offer. See "Use of
Proceeds."
Optional Redemption.......... The Exchange Notes are redeemable for cash, in
whole or in part, at the option of the Company at
any time on or after September 1, 2002, at the
redemption prices set forth herein plus accrued
and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior
to September 1, 2000, the Company may, at its
option, redeem up to 35% of the aggregate
principal amount of the Exchange Notes originally
issued with the net cash proceeds of one or more
Public Equity Offerings, at a redemption price
equal to 109% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the
date of redemption, provided that at least 65% of
the aggregate initial principal amount of the
Exchange Notes remains outstanding immediately
after giving effect to each such redemption.
Subsidiary Guarantees........ The Exchange Notes will be unconditionally
guaranteed (the "Guarantees"), jointly and
severally, on a senior subordinated basis, by
each of the Company's subsidiaries (the
"Subsidiary Guarantors"). The Guarantees will be
general unsecured subordinated obligations of the
Subsidiary Guarantors, and will rank pari passu
with all Pari Passu Indebtedness of the
Subsidiary Guarantors, including existing
guarantees of the 9 3/4% Notes. The Guarantees
may be released under certain circumstances. See
"Description of the Notes -- Subordination of
Exchange Notes; Subsidiary Guarantees."
Ranking...................... The Exchange Notes will be unsecured senior
subordinated obligations of the Company and will
rank subordinate to all existing and future
Senior Indebtedness and pari passu with all Pari
Passu Indebtedness of the Company and its
subsidiaries. As of June 30, 1997, on a pro forma
basis after giving effect to the sale of the
Notes and the application of the net proceeds
therefrom, the Company would have had
approximately $7.3 million in aggregate principal
amount of Senior Indebtedness, $150.0 million in
aggregate principal amount of the Notes and
$100.0 million in aggregate principal amount of
Pari Passu Indebtedness (consisting of the 9 3/4%
Notes) outstanding.
Change of Control............ Upon a Change of Control (as defined), the
Company will be required to offer to purchase all
of the Exchange Notes at 101% of the principal
amount thereof, plus accrued interest, if any, to
the date of purchase.
Restrictive Covenants........ The Indenture (as defined) contains certain
covenants that, among other things, restrict the
ability of the Company and its subsidiaries to
create liens, incur or guarantee debt, pay
dividends, sell certain assets or subsidiary
stock, engage in certain mergers, engage in
certain transactions with affiliates or alter the
Company's current line of business. In addition,
the Company is, subject to certain conditions,
obligated to offer to purchase a portion of the
Exchange Notes at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase, with
the net cash proceeds of certain sales or other
dispositions of assets.
Registration Rights.......... Pursuant to a registration rights agreement
relating to the Notes and the Guarantees (the
"Registration Rights Agreement") by and among the
Company, the Subsidiary Guarantors and the
Initial
7
<PAGE> 11
Purchasers, the Company and the Subsidiary
Guarantors have agreed to use their best efforts
to (i) file within 60 days, and cause to become
effective within 120 days, of the date of
original issuance of the Notes, the Registration
Statement of which this Prospectus is a part
relating to the Registered Exchange Offer and
(ii) cause the Registered Exchange Offer to be
consummated within 150 days of the original
issuance of the Notes.
Under current interpretations of applicable law
by the staff of the SEC, holders of Exchange
Notes will be permitted to resell such securities
into the public market without further
registration or delivery of a prospectus, except
that any such holder who is a broker or dealer
would be required to deliver a copy of this
Prospectus in connection with any such resale.
The Company has agreed to keep such prospectus
current so as to enable brokers and dealers to
effect these resales for a period of 180 days
following completion of the Registered Exchange
Offer. Certain holders who participate in the
Registered Exchange Offer will not be permitted
to rely on the interpretations of the SEC staff.
For a discussion of the requirements that must be
met in order to rely on the interpretations, see
"Registration Rights."
In the event that any changes in law or the
applicable interpretations of the staff of the
SEC do not permit the Company and the Subsidiary
Guarantors to effect the Registered Exchange
Offer, or if the Registration Statement of which
this Prospectus is a part is not declared
effective within 120 days or consummated within
150 days following the original issue of the
Notes, or upon the request of any of the Initial
Purchasers, or if any holder of the Notes is not
permitted by applicable law to participate in the
Registered Exchange Offer or elects to
participate in the Registered Exchange Offer but
does not receive fully tradable Exchange Notes
pursuant to the Registered Exchange Offer, the
Company and the Subsidiary Guarantors will use
their best efforts to cause a shelf registration
statement with respect to the resale of the Notes
( the "Shelf Registration Statement") to become
effective within 150 days following the original
issue of the Notes (or within 30 days of the
request of any Initial Purchaser) and to keep the
Shelf Registration Statement effective for up to
two years from the date the Shelf Registration
Statement is declared effective by the SEC. In
such event, holders with Notes or Exchange Notes
registered under the Shelf Registration Statement
would be permitted to resell their Notes or
Exchange Notes into the public market, but only
if they delivered a copy of the prospectus
included in the Shelf Registration Statement in
connection with such resales.
The interest rate on the Notes is subject to
increase under certain circumstances if the
Company and the Subsidiary Guarantors are not in
compliance with their obligations under the
Registration Rights Agreement. See "Registration
Rights."
Absence of Public Market
for the Exchange Notes..... There is no public trading market for the
Exchange Notes and the Company does not intend to
apply for listing of the Exchange Notes on any
national securities exchange or for quotation of
the Exchange Notes on any automated dealer
quotation system. The Company has
8
<PAGE> 12
been advised by the Initial Purchasers that they
have acted as market makers for the Notes and
presently intend to make a market in the Exchange
Notes, although they are under no obligation to
do so and may discontinue any market-making
activities at any time without notice. Although
it is expected that the Exchange Notes will be
eligible for trading in the PORTAL market, no
assurance can be given as to the liquidity of the
trading market for the Exchange Notes or that an
active public market for the Exchange Notes will
develop. If an active trading market for the
Exchange Notes does not develop, the market price
and liquidity of the Exchange Notes may be
adversely affected. If the Exchange Notes are
traded, they may trade at a discount from the
initial offering price of the Notes, depending on
prevailing interest rates, the market for similar
securities, the performance of the Company and
other factors. See "Risk Factors -- Absence of
Public Market for the Notes."
RISK FACTORS
See "Risk Factors," beginning on page 13, for a discussion of some of the
factors that should be considered by prospective investors in evaluating an
investment in the Exchange Notes.
9
<PAGE> 13
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary historical financial information presented below under Earnings
Statement Data, for each of the three years in the period ended December 31,
1996, has been derived from the historical audited consolidated financial
statements of the Company, which have been audited by Deloitte & Touche LLP,
independent auditors. The historical information for the six months ended June
30, 1996 and 1997 is unaudited. The unaudited information is taken from
unaudited financial statements that include all adjustments, which are only of a
normal recurring nature, which the Company considers necessary for a fair
presentation of the results of operations for these periods. Operating results
for the six months ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 1997. The
information presented below should be read in conjunction with the Consolidated
Financial Statements and related notes thereto included elsewhere in this
Prospectus, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Unaudited Pro Forma Combined Financial Information" and
other financial information included herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,(2)
------------------------------------- ---------------------------
PRO PRO
FORMA FORMA
1994 1995 1996 1996(8) 1996 1997 1997(8)
------ ------ ------ ------- ------ ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA(1):
Net revenues........................... $291.6 $332.9 $499.2 $785.8 $239.7 $270.3 $403.2
Cost of products sold(3)............... 195.5 234.3 361.9 596.3 166.6 198.7 310.4
------ ------ ------ ------ ------ ------ ------
Gross profit........................... 96.1 98.6 137.3 189.5 73.1 71.6 92.8
Operating and selling, general and
administrative expenses.............. 63.8 64.7 79.9 115.0 40.3 43.9 59.1
Depreciation and amortization.......... 12.2 13.3 17.7 24.1 8.4 10.6 13.4
------ ------ ------ ------ ------ ------ ------
Operating income....................... 20.1 20.6 39.7 50.4 24.4 17.1 20.3
Interest expense(9).................... 11.8 11.5 12.3 23.4 6.6 6.0 12.1
Interest income........................ 1.8 2.3 0.8 3.1 0.2 0.2 1.4
------ ------ ------ ------ ------ ------ ------
Earnings from continuing operations
before income taxes.................. 10.1 11.4 28.2 30.1 18.0 11.3 9.6
Provision for income taxes............. 2.6 3.7 11.1 11.9 7.0 4.5 3.9
------ ------ ------ ------ ------ ------ ------
Earnings from continuing operations.... $ 7.5 $ 7.7 $ 17.1 $ 18.2 $ 11.0 $ 6.8 $ 5.7
====== ====== ====== ====== ====== ====== ======
OTHER FINANCIAL DATA(1):
EBITDA(4)(5)........................... $ 34.1 $ 36.2 $ 58.2 $ 77.6 $ 33.0 $ 27.9 $ 35.1
Capital expenditures(6)................ 19.9 75.1 36.2 18.0 84.5
Ratio of EBITDA to interest
expense(9)........................... 2.9x 3.1x 4.7x 3.3x 5.0x 4.7x 2.9x
Ratio of earnings to fixed
charges(7)........................... 1.7x 1.8x 3.0x 2.1x 3.3x 2.7x 1.7x
OPERATING DATA:(1)
Refining Division
Refinery throughput (mbbls/day)........ 23.6 28.7 40.2 40.2 38.8 38.2 38.2
Rated crude oil capacity utilized(2)... 92% 88% 90% 90% 86% 84% 84%
Refinery margin (dollars/bbl).......... $ 5.60 $ 5.13 $ 6.21 $ 6.21 $ 7.02 $ 6.46 $ 6.46
Retail Division(10)
Number of outlets at period end........ 51 52 53 149 55 149 149
Volume (million gallons)............... 115.9 107.4 105.8 146.3 50.1 56.9 80.7
Gross fuel margin (cents/gallon)....... 17.8 17.7 18.5 20.3 18.5 18.6 17.8
Merchandise sales...................... $ 42.7 $ 45.7 $ 49.1 $ 89.8 $ 23.9 $ 28.2 $ 46.9
Merchandise margins.................... 33% 33% 32% 32% 32% 32% 30%
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
--------------------------
ACTUAL AS ADJUSTED(11)
------ ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and marketable securities......................... $ 7.1 $ 53.7
Total assets................................................................ 434.4 484.2
Total long-term debt........................................................ 207.5 257.3
Stockholders' equity........................................................ 126.7 126.7
Net debt to net capitalization(12).......................................... 61.3% 61.6%
</TABLE>
- ---------------
(1) In October 1995, the Company acquired the Bloomfield refinery using the
purchase method of accounting. Earnings statement data and other financial
data as presented include the results of operations for the Company from
the date of acquisition forward. In May 1997 and June 1997, the Company
acquired the Thriftway Stations and Phoenix Fuel, respectively, using the
purchase method of accounting.
(2) Financial results for the first six months of 1997 were negatively impacted
by factors including a scheduled four week major maintenance turnaround at
the Bloomfield refinery and a decline in the West Coast product prices.
Financial results for the first six months of 1996 were positively impacted
by an attractive supply/demand situation as a result of introduction of a
new specification of gasoline in California, offset somewhat by reduced
sales volumes due to turnarounds on selected units at both of the Company's
refineries.
(3) Cost of products sold and operating expenses, as presented here, exclude
depreciation and amortization.
(4) Defined as earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA"). EBITDA is not intended to represent cash flow or
any other measure of financial performance in accordance with generally
accepted accounting principles. EBITDA is included herein because
management believes EBITDA provides additional information for measuring
the Company's ability to service debt and because the Indenture contains
certain covenants based on EBITDA. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a discussion
of measures of financial performance in accordance with generally accepted
accounting principles.
(5) EBITDA for 1995 would have equaled $50.5 million had the Bloomfield
refinery acquisition been made at the beginning of the year.
(6) Capital expenditures include approximately $55 million for the purchase of
the Bloomfield refinery in 1995, $14 million for the construction,
remodeling or acquisition of 37 retail stations in 1996, $43 million for
the purchase of the Thriftway Stations in May 1997 and $30 million for the
purchase of Phoenix Fuel in June 1997.
(7) The ratio of earnings to fixed charges is computed by dividing (i) earnings
before income taxes plus fixed charges by (ii) fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issue costs,
capitalized interest and the estimated interest component (one-third) of
rental and lease expense.
(8) The unaudited pro forma information for the year ended December 31, 1996
and the six months ended June 30, 1997 reflect the sale of $150.0 million
of the Notes at an interest rate of 9.0% and the application of the
estimated net proceeds therefrom, as well as the impact of the 1997
Acquisitions, as if the transactions had occurred at the beginning of 1996.
See "Use of Proceeds," "Capitalization" and "Unaudited Pro Forma Combined
Financial Information."
(9) Pro forma interest expense assumes (i) repayment of debt, as described in
"Use of Proceeds," had occurred at the beginning of 1996; (ii) issuance of
the Notes at a 9.0% interest rate; (iii) amortization of capitalized
issuance and related costs of approximately $3.2 million on a straight-line
basis over ten years; and (iv) the 1997 Acquisitions as if they had
occurred at the beginning of the period.
(10) Includes Travel Center.
11
<PAGE> 15
(11) As adjusted to give effect to the sale of $150.0 million of the Notes, the
application of the estimated net proceeds therefrom, and capitalization of
issuance and related costs of approximately $3.2 million, as if such events
had occurred on June 30, 1997. See "Use of Proceeds" and "Capitalization."
(12) Net debt as a percentage of net capitalization has been computed by
dividing net debt (total debt less cash and cash equivalents and marketable
securities) by net capitalization (total capitalization less cash and cash
equivalents and marketable securities).
12
<PAGE> 16
RISK FACTORS
In addition to the other information contained in this Prospectus, holders
of the Notes should carefully consider, among other things, the following
factors before making any decision regarding tendering their Notes pursuant to
the Registered Exchange Offer and receiving Exchange Notes.
SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE DEBT
The Company has substantial indebtedness with significant debt service
requirements. At June 30, 1997, as adjusted to give effect to the sale of $150.0
million of the Notes and the application of the estimated net proceeds therefrom
as described in "Use of Proceeds," the Company's total debt was $257.3 million
and stockholders' equity was $126.7 million. The degree to which the Company is
leveraged has important consequences to holders of the Exchange Notes, including
the following: (i) the Company's ability to obtain additional financing in the
future, whether for working capital, capital expenditures, acquisitions or other
purposes, may be impaired; (ii) a substantial portion of the Company's cash flow
from operations is required to be dedicated to the payment of interest on its
debt, thereby reducing funds available to the Company for other purposes; (iii)
the Company's flexibility in planning for or reacting to changes in market
conditions may be limited; (iv) the Company may be more vulnerable in the event
of a downturn in its business; and (v) to the extent of the Company's
outstanding debt under its Credit Agreement, the Company will be vulnerable to
increases in interest rates.
The ability of the Company to meet its debt service obligations, including
with respect to the Exchange Notes, will depend on the future operating
performance and financial results of the Company, which will be subject in part
to factors beyond the control of the Company. Although the Company believes that
its cash flow will be adequate to meet its interest payments, there can be no
assurance that the Company will continue to generate earnings in the future
sufficient to cover its fixed charges. If the Company is unable to generate
earnings in the future sufficient to cover its fixed charges and is unable to
borrow sufficient funds under either the Credit Agreement or from other sources,
it may be required to refinance all or a portion of its existing debt or to sell
all or a portion of its assets. There can be no assurance that a refinancing
would be possible, nor can there be any assurance as to the timing of any asset
sales or the proceeds which the Company could realize therefrom. In addition,
the terms of certain of the Company's debt restrict its ability to sell assets
and the Company's use of the proceeds therefrom.
COMPETITION
The industry in which the Company is engaged is highly competitive. Many of
the Company's competitors are large, integrated, major or independent oil
companies which, because of their more diverse operations, larger refineries,
stronger capitalization and better brand name recognition, may be better able
than the Company to withstand volatile industry conditions, including shortages
or excesses of crude oil or refined products or intense price competition at the
wholesale and retail level. Many of these competitors have financial and other
resources substantially greater than those of Giant. In addition, the Company
has benefitted in the past from the absence of product pipelines connecting
competing refineries into areas immediately adjacent to the Company's
refineries. The Company is aware of a number of proposals or industry
discussions regarding product pipeline projects that if or when undertaken and
completed could impact portions of its marketing areas. One of these projects,
the expansion of the ATA Line (formerly called the Emerald Line) into
Albuquerque, is being implemented and is reportedly scheduled for completion in
1997. Another of these announced projects, which would result in a refined
products pipeline from southeastern New Mexico to the Four Corners market, is
reportedly scheduled for completion in 1998. The various proposed projects
involve new construction of connecting pipelines and in some cases the reversal
of existing crude oil or NGL pipelines. The completion of some or all of these
projects would result in increased competition by increasing the amount of
refined products available in the Four Corners market areas. See
"Business -- Other Matters -- Competitive Conditions."
13
<PAGE> 17
RAW MATERIAL SUPPLY
The Company's refineries primarily process a mixture of crude oil,
condensate and NGLs. The locally produced, high quality crude oil known as Four
Corners Sweet is the primary feedstock for the refineries. Local supply is
primarily dependent on the level and success of exploration and drilling
activity in the Four Corners and Paradox Basin areas. Although the Company
currently obtains substantially all of its crude oil supply from the Four
Corners area, the refineries supplement their supply of crude oil with Alaska
North Slope ("ANS") crude oil, transported from the West Coast through the
Company's gathering system's interconnection with the Four Corners and Texas-New
Mexico pipeline systems, which together can transport approximately 65,000 bpd.
The Ciniza refinery also has access to West Texas Intermediate and other crude
oils by rail.
The Company believes that local crude oil production currently approximates
98% of aggregate local crude oil demand. The Company also believes that the
production of crude oil and condensate in the Four Corners is increasing as a
result of enhanced recovery programs and increased drilling activities by major
oil companies. Based on projections of local crude oil availability from the
field and current levels of usage of ANS (which are limited to approximately
1,500 bpd by the refineries' configurations), the Company believes an adequate
supply of crude oil and other feedstocks will be available from local producers,
crude oil sourced through common carrier pipelines and other sources to sustain
refinery operations for the foreseeable future at substantially the levels
currently being experienced. However, there is no assurance that this situation
will continue.
The Company continues to evaluate other supplemental crude oil supply
alternatives for its refineries on both a short-term and long-term basis. The
Company has considered making additional equipment modifications to increase its
ability to use alternative crude oils and NGLs and can install additional rail
facilities to enable the Company to access incremental crude and intermediate
feedstocks to supplement local supply sources. The Company understands that
production of ANS is declining and is aware of proposals that would, at some
time in the future, eliminate the shipping of ANS through the Four Corners
pipeline system. In such event, the Company has identified potential
opportunities to access other supplemental crude oil supplies via this pipeline.
In addition, the Four Corners area produces significant amounts of NGLs, most of
which are currently shipped out of the area by pipeline. The Company is
undertaking several projects at its refineries in 1997 to increase its ability
to process NGLs, which historically have been lower cost feedstocks than crude
oil. These 1997 projects should increase the amount of natural gasoline used by
the Company's refineries by approximately 2,500 barrels per day and will result
in the production of an equivalent number of barrels per day of additional
gasoline. Any significant long-term interruption in crude oil supply or the
crude oil transportation system, however, would have an adverse effect on
Giant's operations. See "Business -- Raw Material Supply."
If additional supplemental crude oil becomes necessary, the Company intends
to implement then available alternatives as necessary and as is most
advantageous under then prevailing conditions. The Company currently believes
that the most desirable strategy to supplement local crude oil supplies, on a
long-term basis, would be the delivery of supplemental crude oil from outside of
the Four Corners area by pipeline. Such crude oil may be of lesser quality than
locally available crude oils, and the Company believes such crude oil will
generally have a delivered cost greater than that of locally available crude
oil. Implementation of supplemental supply alternatives may result in additional
raw materials costs, operating costs, capital costs, or a combination thereof in
amounts which are not presently ascertainable by the Company but which will vary
depending on factors such as the specific alternative implemented, the quantity
of supplemental feedstocks required, and the date of implementation.
Implementation of some supply alternatives requires the consent or cooperation
of third parties and other considerations beyond the control of the Company.
VOLATILITY OF CRUDE OIL PRICES AND REFINING MARGINS
Although the 1997 Acquisitions are anticipated to increase the amount of
cash flow generated by the Company's retail operations, the Company's cash flow
from operations will continue to be primarily dependent upon producing and
selling quantities of refined products at refinery margins sufficient to cover
fixed and
14
<PAGE> 18
variable expenses. In recent years, crude oil costs and prices of refined
products have fluctuated substantially. These costs and prices depend on
numerous factors, including the demand for crude oil, gasoline and other refined
products, which in turn depend on, among other factors, changes in the economy,
the level of foreign and domestic production of crude oil and refined products,
the availability of imports of crude oil and refined products, the marketing of
alternative and competing fuels and the extent of government regulation.
Giant's crude oil requirements are supplied from sources which include
major oil companies, large independent producers and smaller local producers.
Crude oil supply contracts are generally relatively short-term contracts with
market-responsive pricing provisions. The prices received by Giant for its
refined products are affected by additional local factors such as product
pipeline capacity, local market conditions and the level of operations of West
Texas and New Mexico refineries. A large rapid increase in crude oil prices
would adversely affect the Company's operating margins if the increased cost of
raw materials could not be passed along to the Company's customers. The Company
generally does not hedge a significant portion of its refined product prices.
CONCENTRATION OF REFINERIES
All refining activities currently are conducted at the Company's two
refinery locations. The refineries are two of Giant's principal operating
assets. As a result, the operations of Giant, and its ability to service the
Exchange Notes, are subject to significant interruption if either or both of the
refineries were to experience a major accident, be damaged by severe weather or
other natural disaster, or otherwise be forced to shut down. Although Giant
maintains business interruption insurance against some types of risks in amounts
which Giant believes to be economically prudent, if the refineries were to
experience an interruption in supply or operations, Giant's business could be
materially adversely affected.
GOVERNMENT REGULATIONS, ENVIRONMENTAL RISKS AND TAXES
The Company's operations are subject to a variety of federal, state and
local environmental laws and regulations governing the discharge of pollutants
into the air and water, product specifications and the generation, treatment,
storage, transportation and disposal of solid and hazardous waste and materials.
Environmental laws and regulations which affect the Company's operations,
processes and margins have become and are becoming increasingly stringent.
Examples are the Clean Air Act Amendments and the additional environmental
regulations adopted by the United States Environmental Protection Agency ("EPA")
and state and local environmental agencies to implement the Clean Air Act
Amendments. Although the Company believes its refineries are able to process
currently used feedstocks at full capacity in substantial compliance with
existing environmental laws and regulations, the Company cannot predict the
nature, scope or effect of legislation or regulatory requirements that could be
imposed or how existing or future laws or regulations will be administered or
interpreted with respect to products or activities to which they have not been
previously applied. Compliance with more stringent laws or regulations, as well
as more vigorous enforcement policies of the regulatory agencies, could
adversely affect the financial position and the results of operations of the
Company and could require substantial expenditures by the Company. See
"Business -- Other Matters."
Also, the Company's operations are inherently subject to accidental spills,
discharges or other releases of petroleum or hazardous substances which may give
rise to liability to governmental entities or private parties under federal,
state or local environmental laws, as well as under common law. Accidental
discharges of contaminants have occurred from time to time during the normal
course of the Company's operations, including discharges associated with the
Company's refineries, pipeline and trucking operations, as well as discharges at
gasoline service stations and other petroleum product distribution facilities
currently and formerly operated by the Company. The Company has undertaken,
intends to undertake or has completed all investigative or remedial work thus
far requested by governmental agencies to address potential contamination by the
Company. Although the Company has invested substantial resources to prevent
future accidental discharges and to remediate contamination resulting from prior
discharges, there can be no assurance that accidental discharges will not occur
in the future, that future action will not be taken in connection with past
discharges, that governmental agencies will not assess penalties against the
Company in connection with any
15
<PAGE> 19
past or future contamination, or that third parties will not assert claims
against the Company for damages allegedly arising out of any past or future
contamination. See "Business -- Other Matters."
Giant and its operations and products are subject to taxes imposed by
federal, state, local and Native American governments. These taxes have
generally increased over time. There can be no certainty of the effect that
increases in these taxes, or the imposition of new taxes, could have on Giant,
or whether such taxes could be passed on to Giant's customers. The Company has
received several tax notifications and assessments from the Navajo Nation
relating to crude oil removed from properties located outside the boundaries of
the Navajo Reservation in an area of disputed jurisdiction, including a $1.8
million severance tax assessment issued to a subsidiary of Giant in November
1991. The Company has invoked its appeal rights. The Company may receive further
tax assessments before resolution of the Nation's taxing authority. See
"Business -- Other Matters."
CONTROLLING STOCKHOLDER
James E. Acridge, Chairman of the Board, President and Chief Executive
Officer of the Company, owns approximately 23% of the outstanding Company Common
Stock. Mr. Acridge has a substantial ability to control the Company and direct
its policies. Mr. Acridge has pledged substantially all of his shares of Common
Stock to various financial institutions as security for personal loans, the
proceeds of which were used for general purposes and not to finance the
acquisition of Company Common Stock. Mr. Acridge retains the right to direct the
voting and, subject to certain margin requirements, disposition of such shares
and the right to receive all dividends, subject to standard default provisions.
SUBORDINATION OF EXCHANGE NOTES
The payment of principal, interest and premium, if any, on the Exchange
Notes will be subordinated in right of payment to the prior payment in full of
all Senior Indebtedness, whether outstanding at the date of the Indenture or
later incurred. In addition, such Senior Indebtedness may be secured by liens on
the Company's assets. In the event of a default in the payment of principal or
interest with respect to any Senior Indebtedness, the Indenture will prohibit
the Company and the Subsidiary Guarantors from making any payment with respect
to the principal of, premium, if any, interest on or other amounts owing on the
Exchange Notes unless and until such default has been cured or waived. In
addition, in the event of any other default permitting the acceleration of the
payment of Senior Indebtedness where notice of such default has been given to
the Company, the Indenture will prohibit the Company and the Subsidiary
Guarantors from making any payment with respect to the principal of, premium, if
any, interest on or other amounts owing on the Exchange Notes unless and until
such default has been cured or waived; provided, however, that under the
Indenture such other default will not prevent the making of payments on the
Exchange Notes for more than 179 days after notice of such default has been
given to the Company.
Upon any payment or distribution of the Company's assets to creditors upon
any dissolution, winding up, liquidation, reorganization, bankruptcy,
insolvency, receivership or other proceedings relating to the Company, whether
voluntary or involuntary, the holders of Senior Indebtedness will be entitled to
receive payment in full of all amounts due thereon before the holders of the
Exchange Notes will be entitled to receive any payment upon the principal of,
premium, if any, interest on or other amounts owing on the Exchange Notes. By
reason of such subordination, in the event of the insolvency of the Company,
holders of the Exchange Notes may recover less, ratably, than holders of Senior
Indebtedness and other creditors of the Company or may recover nothing.
The Company's operating income is generated by its subsidiaries. As a
result, funds necessary to meet the Company's debt service obligations,
including the payment of principal and interest on the Exchange Notes, are
provided by distributions or advances from its subsidiaries. Should the Company
fail to satisfy any payment obligation under the Exchange Notes, the holders
would have a direct claim therefor against the Subsidiary Guarantors pursuant to
the Guarantees. However, the Indenture will permit the Subsidiary Guarantors to
pledge their assets in order to secure Senior Indebtedness of the Company or
such Subsidiary Guarantor and to agree with lenders under any Bank Credit
Facility (as defined) or under Senior
16
<PAGE> 20
Indebtedness in effect on the date of issuance of the Exchange Notes to
restrictions on repurchases of the Exchange Notes and on the ability of the
Subsidiary Guarantors to make distributions, loans, other payments or asset
transfers to the Company or a Restricted Subsidiary. In addition, the Indenture,
subject to certain restrictions, permits the Subsidiary Guarantors to incur
additional Senior Indebtedness, which is senior to the Exchange Notes and the
obligations of the Subsidiary Guarantors under the Guarantees, as well as other
indebtedness which is pari passu with or subordinated to the Exchange Notes. As
a result, the payment of the Exchange Notes will be effectively (i) subordinated
to the Senior Indebtedness of the Company and the Subsidiary Guarantors and (ii)
pari passu with all Pari Passu Indebtedness of the Company and the Subsidiary
Guarantors, including the 9 3/4% Notes, and (iii) pari passu with certain other
liabilities of the Company and the Subsidiary Guarantors, including claims of
trade creditors and tort claimants. In addition, if the Guarantees were avoided
under fraudulent conveyance laws or other legal principles or, by the terms of
such Guarantees, the obligations thereunder were reduced as necessary to prevent
such avoidance, or the Guarantees were released, the claims of other creditors
of the Subsidiary Guarantors, including trade creditors, would to such extent
have priority as to the assets of such Subsidiary Guarantors over the claims of
the holders of the Exchange Notes. See "Description of the Exchange
Notes -- Subordination of Notes; Subsidiary Guarantees."
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the Subsidiary Guarantors' issuance of the Guarantees. To the
extent that a court were to find that the issuance or performance of a Guarantee
was a fraudulent conveyance for reasons that could include (x) that a Guarantee
was incurred by a Subsidiary Guarantor with intent to hinder, delay or defraud
any present or future creditor or the Subsidiary Guarantor contemplated
insolvency with a design to prefer one of more creditors to the exclusion in
whole or in part of others, or (y) such Subsidiary Guarantor did not receive
fair consideration or reasonable equivalent value for issuing its Guarantee and
such Subsidiary Guarantor (i) was insolvent, (ii) was rendered insolvent by
reason of the issuance of such Guarantee, (iii) was engaged or about to engage
in a business or transaction for which the remaining assets of such Subsidiary
Guarantor constituted unreasonably small capital to carry on its business, or
(iv) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, the court could avoid or subordinate
such Guarantee in favor of the Subsidiary Guarantor's creditors. Among other
things, a legal challenge of a Guarantee on fraudulent conveyance grounds may
focus on the benefits, if any, realized by the Subsidiary Guarantor as a result
of the issuance by the Company of the Exchange Notes. To the extent any
Guarantees were avoided as a fraudulent conveyance or held unenforceable for any
other reason, holders of the Exchange Notes would cease to have any claim in
respect of such Subsidiary Guarantor and would be creditors solely of the
Company and any Subsidiary Guarantor whose Guarantee was not avoided or held
unenforceable. In such event, the claims of the holders of the Exchange Notes
against the issuer of an invalid Guarantee would be subject to the prior payment
of all liabilities of such Subsidiary Guarantor. There can be no assurance that,
after providing for all prior claims, there would be sufficient assets to
satisfy the claims of the holders of the Exchange Notes relating to any voided
portions of any of the Guarantees.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally, however,
the Guarantors may be considered insolvent if the sum of their debts, including
contingent liabilities, were greater than the fair market value of all of their
assets or if the present fair market value of their assets were less than the
amount that would be required to pay their probable liability on their existing
debts, including contingent liabilities, as they become absolute and mature.
Based upon financial and other information, the Company believes that the
Exchange Notes and the Guarantees are being incurred for proper purposes and in
good faith and that the Company and each Subsidiary Guarantor is solvent and
will be solvent upon issuing the Exchange Notes or its Guarantee, as the case
may be, will have sufficient capital for carrying on their business after such
issuance, and will be able to pay or refinance their debts as they mature. There
can be no assurance, however, that a court passing on such standards would agree
with the Company. See "Management's Discussion and Analysis of Financial
17
<PAGE> 21
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Description of the Exchange Notes."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes will be new securities for which there currently is no
established trading market. The Company does not intend to apply for listing of
the Exchange Notes on any national securities exchange or for quotation of the
Exchange Notes on any automated dealer quotation system. Although the Initial
Purchasers have informed the Company that they have acted as market makers for
the Notes and presently intend to make a market in the Exchange Notes, the
Initial Purchasers are not obligated to do so, and any such market making may be
discontinued at any time without notice. The liquidity of any market for the
Exchange Notes will depend upon the number of holders of the Exchange Notes, the
interest of securities dealers in making a market in the Exchange Notes and
other factors. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Notes. If an active trading market for
the Exchange Notes does not develop, the market price and liquidity of the
Exchange Notes may be adversely affected. If the Exchange Notes are traded, they
may trade at a discount from the initial offering price of the Notes, depending
upon prevailing interest rates, the market for similar securities, the
performance of the Company and certain other factors. The liquidity of, and
trading markets for, the Exchange Notes also may be adversely affected by
general declines in the market for non-investment grade debt. Such declines may
adversely affect the liquidity of, and trading markets for, the Exchange Notes,
independent of the financial performance of or prospects for the Company.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Exchange Notes. There can be no assurance that the market, if
any, for the Exchange Notes will not be subject to similar disruptions. Any such
disruptions may have an adverse effect on the holders of the Exchange Notes.
ADVERSE CONSEQUENCES OF FAILURE TO ADHERE TO REGISTERED EXCHANGE OFFER
PROCEDURES
Issuance of the Exchange Notes in exchange for Notes pursuant to the
Registered Exchange Offer will be made only after a timely receipt by the
Exchange Agent of such Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of Notes
desiring to tender such Notes in exchange for Exchange Notes should allow
sufficient time to ensure timely delivery. Neither the Company nor the Exchange
Agent is under any duty to give notification of defects or irregularities with
respect to the tenders of Notes for exchange. Notes that are not tendered or are
tendered but not accepted will, following the consummation of the Registered
Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Registered Exchange Offer,
certain registration rights under the Registration Rights Agreement will
terminate. See "The Registered Exchange Offer -- Consequences of Failure to
Exchange."
RECEIPT OF RESTRICTED SECURITIES UNDER CERTAIN CIRCUMSTANCES
Any holder of Notes who tenders in the Registered Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. See "The Registered Exchange
Offer -- Consequences of Failure to Exchange."
ADVERSE EFFECT ON MARKET FOR NOTES
To the extent that Notes are tendered and accepted in the Registered
Exchange Offer, the liquidity of the market for the untendered and tendered but
unaccepted Notes could be substantially limited. See "The Registered Exchange
Offer -- Purposes of the Registered Exchange Offer."
18
<PAGE> 22
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain statements that are "forward-looking"
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. All statements other than statements of historical
facts included in this Prospectus, including without limitation statements that
use terminology such as "estimate," "expect," "intend," "anticipate," "believe,"
"may," "will," "continue" and similar expressions, are forward-looking
statements. These forward-looking statements include, among other things, the
discussions of the Company's business strategy (including its intention to open
more service station/convenience stores) and expectations concerning the
Company's market position, future operations, margins, profitability, liquidity
and capital resources, expenditures for capital projects, attempts to reduce
costs, and integration of the 1997 Acquisitions. Although the Company believes
that the assumptions upon which the forward-looking statements contained in this
Prospectus are based are reasonable, any of the assumptions could prove to be
inaccurate and, as a result, the forward-looking statements based on those
assumptions also could be incorrect. All phases of the operations of the Company
involve risks and uncertainties, many of which are outside the control of the
Company and any one of which, or a combination of which, could materially affect
the results of the Company's operations and whether the forward-looking
statements ultimately prove to be correct. Important factors that could cause
actual results to differ materially from the Company's expectations include, but
are not limited to: (i) continued or increased competitive pressures from
existing competitors and new entrants, including price-cutting strategies; (ii)
unanticipated costs related to the Company's growth and operating strategy;
(iii) loss or retirement of one or more key members of management; (iv)
inability to negotiate favorable terms with suppliers; (v) increases in interest
rates or the Company's cost of borrowing or a default under any material debt
agreements; (vi) inability to develop new service station/convenience stores in
advantageous locations; (vii) deterioration in general or regional economic
conditions; (viii) adverse state or federal legislation or regulation that
increases the costs of regulatory compliance, or adverse findings by a regulator
with respect to existing operations; (ix) adverse determinations in connection
with pending or future litigation or other material claims and judgments against
the Company; (x) inability to achieve profitable future sales levels or other
operating results; (xi) the unavailability of funds for capital expenditures;
(xii) governmental factors affecting the Company's operations, markets,
products, services and prices; (xiii) the impact of the mandated use of specific
formulations of gasolines on the Company's operations; (xiv) the adequacy of raw
material supplies; (xv) the ability of the Company to successfully abate various
tax assessments; (xvi) the potential effects of various pipeline projects as
they relate to the Company's market areas and future profitability; (xvii) the
performance of the businesses acquired in the 1997 Acquisitions; and (xviii)
other risks discussed in this Prospectus or detailed from time to time in the
Company's filings with the SEC.
19
<PAGE> 23
USE OF PROCEEDS
The Company will not receive any proceeds from the Registered Exchange
Offer. The net proceeds from the sale of the Notes (after deducting the expenses
of the Note Offering, including the Initial Purchasers' discount) were
approximately $146.8 million, and have been or will be used substantially as
follows:
(i) Approximately $92.5 million have been or will be used to repay
indebtedness ($73.6 million) and purchase service station/convenience
stores currently subject to capital lease obligations ($18.9 million),
which indebtedness and capital lease obligations have an average blended
interest rate of approximately 7.5% at June 30, 1997.
(ii) The remaining proceeds of approximately $54.3 million will be
used for general corporate purposes.
The indebtedness repaid consisted of approximately $66.0 million under the
Company's bank credit agreement and approximately $7.6 million of miscellaneous
obligations. These amounts reflect balances that were outstanding when the
proceeds of the Notes were received and reflect all payments to be made in
accordance with the terms of the respective loans and purchase options.
Pending application for such respective purposes, such proceeds may be
invested in "Permitted Financial Investments" as defined in "Description of the
Exchange Notes." For a description of the terms of indebtedness and capital
lease obligations repaid with proceeds from the sale of the Notes, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
20
<PAGE> 24
CAPITALIZATION
The following table sets forth the historical unaudited consolidated
capitalization of the Company as of June 30, 1997, and the as adjusted
consolidated capitalization which gives effect to the sale of $150.0 million of
the Notes and the application of the estimated net proceeds therefrom as
described under "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents and marketable securities............. $ 7.1 $ 53.7
====== ======
Total debt:
Credit Agreement.............................................. $ 74.0 $ --
Capital lease obligations..................................... 22.9 4.0
9 3/4% Notes.................................................. 100.0 100.0
9% Senior Subordinated Notes.................................. -- 150.0
Other debt.................................................... 10.6 3.3
------ ------
Total debt................................................. 207.5 257.3
------ ------
Total common stockholders' equity............................... 126.7 126.7
------ ------
Total capitalization.................................. $334.2 $ 384.0
====== ======
</TABLE>
21
<PAGE> 25
SELECTED FINANCIAL DATA
The selected financial information presented below under Earnings Statement
Data and Balance Sheet Data for each of the three years in the period ended
December 31, 1996, has been derived from the historical audited consolidated
financial statements of the Company, which have been audited by Deloitte &
Touche LLP, independent auditors, and for each of the two years in the period
ended December 31, 1993, has been derived from the historical audited
consolidated financial statements of the Company. The information for the six
months ended June 30, 1996 and 1997 is unaudited. The unaudited information is
taken from unaudited financial statements that include all adjustments, which
are only of a normal recurring nature, which the Company considers necessary for
a fair presentation of the results of operations for these periods. Operating
results for the six months ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 1997.
The information presented below should be read in conjunction with the
Consolidated Financial Statements and related notes thereto included elsewhere
in this Prospectus, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and other financial information included herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,(2)
---------------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA(1):
Net revenues............................. $301.7 $313.2 $291.6 $332.9 $499.2 $239.7 $270.3
Cost of products sold(3)................. 220.3 209.8 195.5 234.3 361.9 166.6 198.7
------ ------ ------ ------ ------ ------ ------
Gross profit............................. 81.4 103.4 96.1 98.6 137.3 73.1 71.6
Operating and selling, general and
administrative expenses................ 53.5 60.6 63.8 64.7 79.9 40.3 43.9
Depreciation and amortization............ 12.6 11.4 12.2 13.3 17.7 8.4 10.6
------ ------ ------ ------ ------ ------ ------
Operating income......................... 15.3 31.4 20.1 20.6 39.7 24.4 17.1
Interest expense......................... 7.7 5.8 11.8 11.5 12.3 6.6 6.0
Interest income.......................... 0.6 1.5 1.8 2.3 0.8 0.2 0.2
------ ------ ------ ------ ------ ------ ------
Earning from continuing operations before
income taxes........................... 8.2 27.1 10.1 11.4 28.2 18.0 11.3
Provision for income taxes............... 1.1 9.6 2.6 3.7 11.1 7.0 4.5
------ ------ ------ ------ ------ ------ ------
Earnings from continuing operations...... $ 7.1 $ 17.5 $ 7.5 $ 7.7 $ 17.1 $ 11.0 $ 6.8
====== ====== ====== ====== ====== ====== ======
Earnings per common share from continuing
operations............................. $ 0.58 $ 1.43 $ 0.61 $ 0.68 $ 1.52 $ 0.98 $ 0.61
Cash dividends per common share.......... 0.20 0.20 0.10 0.10
BALANCE SHEET DATA:
Total assets............................. $233.3 $274.4 $279.4 $324.9 $324.0 $333.9 $434.4
Long-term debt........................... 86.9 117.3 116.1 142.7 113.1 130.5 202.4
Stockholders' equity..................... 98.6 105.9 109.7 109.7 122.1 119.8 126.7
Other Financial Data(1):
EBITDA(4)................................ $ 28.5 $ 44.3 $ 34.1 $ 36.2 $ 58.2 $ 33.0 $ 27.9
Capital expenditures(5).................. 8.3 9.3 19.9 75.1 36.2 18.0 84.5
Ratio of EBITDA to interest expense...... 3.7x 7.6x 2.9x 3.1x 4.7x 5.0x 4.7x
Ratio of earnings to fixed charges(6).... 1.8x 4.0x 1.7x 1.8x 3.0x 3.3x 2.7x
OPERATING DATA:
Refining Division
Refinery throughput (mbbls/day).......... 25.6 25.3 23.6 28.7 40.2 38.8 38.2
Rated crude oil capacity utilized(2)..... 101% 98% 92% 88% 90% 86% 84%
Refinery margin (dollars/bbl)............ $ 4.77 $ 6.69 $ 5.60 $ 5.13 $ 6.21 $ 7.02 $ 6.46
Retail Division(7)
Number of outlets at period end.......... 43 52 51 52 53 55 149
Volume (millions of gallons)............. 106.1 103.3 115.9 107.4 105.8 50.1 56.9
Gross fuel margin (cents/gallon)......... 14.1 16.7 17.8 17.7 18.5 18.5 18.6
Merchandise sales........................ $ 28.2 $ 32.5 $ 42.7 $ 45.7 $ 49.1 $ 23.9 $ 28.2
Merchandise margins...................... 34% 33% 33% 33% 32% 32% 32%
</TABLE>
22
<PAGE> 26
- ---------------
(1) In October 1995, the Company acquired the Bloomfield refinery. Earnings
statement data and other financial data as presented here for the
pre-acquisition periods of 1992 through September 1995 exclude the
operations of the Bloomfield refinery. In May 1997 and June 1997, the
Company acquired the Thriftway Stations and Phoenix Fuel, respectively.
(2) Financial results for the first six months of 1997 were negatively impacted
by factors including a scheduled four week major maintenance turnaround at
the Bloomfield refinery and a decline in West Coast product prices.
Financial results for the first six months of 1996 were positively impacted
by an attractive supply/demand situation as a result of introduction of a
new specification of gasoline in California, offset somewhat by reduced
sales volumes due to turnarounds on selected units at both of the Company's
refineries.
(3) Cost of products sold and operating expenses, as presented here, exclude
depreciation and amortization.
(4) Defined as earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA"). EBITDA is not intended to represent cash flow or
any other measure of financial performance in accordance with generally
accepted accounting principles. EBITDA is included herein because management
believes EBITDA provides additional information for measuring the Company's
ability to service debt and because the Indenture contains certain covenants
based on EBITDA. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of measures of
financial performance in accordance with generally accepted accounting
principles.
(5) Capital expenditures include approximately $55 million for the purchase of
the Bloomfield refinery in 1995, $14 million for the construction,
remodeling or acquisition of 37 retail stations in 1996, $43 million for the
purchase of the Thriftway Stations in May 1997 and $30 million for the
purchase of Phoenix Fuel in June 1997.
(6) The ratio of earnings to fixed charges is computed by dividing (i) earnings
before income taxes plus fixed charges by (ii) fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issue costs,
capitalized interest and the estimated interest component (one-third) of
rental and lease expense.
(7) Includes Travel Center.
23
<PAGE> 27
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Over the period May 28, 1997 to May 31, 1997, the Company acquired 96
retail service station/ convenience stores, seven additional retail locations
for future development, certain petroleum transportation and maintenance assets,
options to acquire service station/convenience stores and other related assets.
On June 3, 1997, the Company acquired Phoenix Fuel.
The historical financial statements of the Thriftway Stations include the
results of operations for the 96 retail service station/convenience stores
acquired, the petroleum transportation and maintenance assets, and other related
assets acquired.
The historical financial statements for Giant, the Thriftway Stations and
Phoenix Fuel reflect fiscal years ending December 31. The following unaudited
pro forma combined condensed statements of earnings for the year ended December
31, 1996 and for the six months ended June 30, 1997 combine the historical
financial information for all three companies assuming the acquisitions were
consummated at the beginning of the earliest period presented, as well as the
sale of $150.0 million of the Notes at an interest rate of 9.0% and the
application of the estimated net proceeds therefrom as described in "Use of
Proceeds" assuming such transactions had occurred at the beginning of such
period. The following unaudited pro forma combined condensed statement of
earnings for the six months ended June 30, 1997 combines historical financial
information of the Thriftway Stations and Phoenix Fuel for the five months ended
May 31, 1997. The Company's historical financial information for the six months
ended June 30, 1997 includes the results of operations of the Thriftway Stations
and Phoenix Fuel for the month of June 1997.
The detailed assumptions used to prepare the unaudited pro forma combined
financial information are contained in the notes to unaudited pro forma combined
condensed statements of earnings. The unaudited pro forma combined financial
information reflects the use of the purchase method of accounting for the
acquisitions.
The unaudited pro forma combined financial information does not purport to
represent the results of operations that actually would have resulted had the
purchases occurred on January 1, 1996, nor should it be taken as indicative of
the future results of operations. The unaudited pro forma combined financial
information should be read in conjunction with the notes to unaudited pro forma
combined financial information and the separate historical financial statements
and notes thereto of the Company which are contained elsewhere herein.
24
<PAGE> 28
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
THRIFTWAY PHOENIX PRO FORMA PRO FORMA
GIANT STATIONS FUEL ADJUSTMENTS COMBINED
----------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................... $ 499,184 $ 140,434 $253,654 $ (36,596)(4) $ 785,756
(70,920)(5)
Cost of products sold.......... 361,864 110,637 231,259 (36,596)(4) 596,244
(70,920)(5)
----------- -------- -------- -------- -----------
Gross margin................... 137,320 29,797 22,395 189,512
----------- -------- -------- -------- -----------
Operating expenses............. 64,315 16,779 12,412 (762)(6) 93,881
1,137(3)
Depreciation and
amortization................. 17,673 2,488 1,145 820(8) 24,142
1,696(2)
320(10)
Selling, general and
administrative expenses...... 15,602 4,862 3,762 (3,112)(7) 21,114
----------- -------- -------- -------- -----------
Operating income............... 39,730 5,668 5,076 (99) 50,375
----------- -------- -------- -------- -----------
Interest expense............... (12,318) (527) (374) 3,279(1) (23,440)
(13,500)(10)
Interest and investment
income....................... 771 2,330(10) 3,101
----------- -------- -------- -------- -----------
Earnings from continuing
operations before income
taxes........................ 28,183 5,141 4,702 (7,990) 30,036
Provision for income taxes..... 11,132 732(9) 11,864
----------- -------- -------- -------- -----------
Earnings from continuing
operations................... $ 17,051 $ 5,141 $ 4,702 $ (8,722) $ 18,172
=========== ======== ======== ======== ===========
Earnings per common share...... $ 1.52 $ 1.62
=========== ===========
Weighted average number of
shares outstanding........... 11,220,380 11,220,380
=========== ===========
</TABLE>
25
<PAGE> 29
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
THRIFTWAY PHOENIX PRO FORMA PRO FORMA
GIANT STATIONS FUEL ADJUSTMENTS COMBINED
----------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues....................... $ 270,261 $56,995 $121,441 $ (18,686)(4) $ 403,167
(26,844)(5)
Cost of products sold.............. 198,645 45,826 111,430 (18,686)(4) 310,371
(26,844)(5)
----------- ------- -------- -------- -----------
Gross margin....................... 71,616 11,169 10,011 92,796
----------- ------- -------- -------- -----------
Operating expenses................. 34,129 6,676 5,300 (392)(6) 46,187
474(3)
Depreciation and amortization...... 10,571 1,072 588 328(8) 13,390
671(2)
160(10)
Selling, general and administrative
expenses......................... 9,808 1,846 1,936 (680)(7) 12,910
----------- ------- -------- -------- -----------
Operating income................... 17,108 1,575 2,187 (561) 20,309
----------- ------- -------- -------- -----------
Interest expense................... (6,005) (255) (226) 1,122(1) (12,114)
(6,750)(10)
Interest and investment income..... 232 1,165(10) 1,397
----------- ------- -------- -------- -----------
Earnings before income taxes....... 11,335 1,320 1,961 (5,024) 9,592
Provision for income taxes......... 4,536 (688)(9) 3,848
----------- ------- -------- -------- -----------
Net earnings....................... $ 6,799 $ 1,320 $ 1,961 $ (4,336) $ 5,744
=========== ======= ======== ======== ===========
Earnings per common share.......... $ 0.61 $ .52
=========== ===========
Weighted average number of shares
outstanding...................... 11,084,336 11,084,336
=========== ===========
</TABLE>
26
<PAGE> 30
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF EARNINGS
The following is a summary of the assumptions, reclassifications and
adjustments reflected in the Unaudited Pro Forma Combined Condensed Statements
of Earnings:
(1) Represents the decrease in interest expense based on the repayment of
long-term debt of $54.0 million and capital leases of $18.9 million at an
average interest rate of 7.7% for the acquisition of the Thriftway Stations
and Phoenix Fuel.
(2) Represents the reversal of historical depreciation expense for the
Thriftway Stations and Phoenix Fuel and the recognition of depreciation
expense arising from purchase accounting adjustments as if the acquisitions
had occurred at the beginning of the earliest period presented.
(3) Represents consignment fees paid for fuel sales at certain Thriftway
service station/convenience store locations. Gross profit for these fuel
sales are included in the Thriftway Stations' historical financial
information.
(4) Represents the reclassification of federal excise taxes included in Phoenix
Fuel's revenues and cost of sales to conform with the Company's policy of
not recording such taxes in revenues.
(5) Represents the elimination of intercompany sales between the Company, the
Thriftway Stations and Phoenix Fuel.
(6) Represents the elimination of intercompany lease payments between the
Thriftway Stations and related entities that were not acquired.
(7) Represents the elimination of certain historical selling, general and
administrative corporate expense allocations related to the Thriftway
Stations not considered attributable to operations purchased and certain
Phoenix Fuel shareholder expenses attributable to its former shareholders.
(8) Represents amortization of an estimated $1 million of goodwill over twenty
years, an estimated $15 million of goodwill over thirty years and
amortization of $0.2 million of debt issuance costs over three years, the
term of the loan.
(9) Represents the income tax effect of the pro forma adjustments and the
income taxes on historical earnings of the Thriftway Stations and Phoenix
Fuel based upon the statutory rate of 39.5% which was in effect for the
periods shown.
(10) Represents interest expense on the Notes and Exchange Notes at an annual
rate of 9.0%, amortization of the issuance costs on the Notes, and interest
income on the remaining proceeds.
27
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The profitability of the Company as a whole is primarily dependent on
producing and selling quantities of refined products at sufficient margins to
cover fixed and variable expenses. Purchases of crude oil supply are typically
made pursuant to relatively short-term, renewable contracts with numerous major
and independent oil producers, generally containing market-responsive pricing
provisions. The Company sells refined products directly to retail consumers
through the Company's network of retail units and to wholesale and commercial/
industrial customers. The Company's results of operations have not been
significantly impacted by seasonality of demand for refined products as (i)
seasonal decreases in demand for gasoline in the Company's primary market area
are generally offset by increases in demand in its secondary markets and (ii)
demand for diesel fuel in the Company's market area generally remains constant
throughout the year. The Company's results of operations are affected, however,
by regular maintenance and repair turnarounds at its two refineries. Such
turnarounds generally result in lower volumes of refined products produced
during the period in which a turnaround occurs. See "Business -- Refining and
Marketing -- Refining."
Outlook. Through the acquisition of the Bloomfield refinery and Meridian
crude gathering operations in late 1995 and the integration of these
acquisitions into the Company's existing refining operations, the Company has
improved production and reduced administrative, raw material, labor and
transportation expenses on a per barrel basis. Through the 1997 Acquisitions in
the second quarter of 1997, the Company has substantially increased its retail
operations and has continued to increase its control over refinery sales volumes
in its primary market area. The Company's future results of operations are
primarily dependent on producing and selling sufficient quantities of refined
products at margins sufficient to cover fixed and variable expenses.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
Earnings from Continuing Operations Before Income Taxes. For the six
months ended June 30, 1997, earnings from continuing operations before income
taxes were $11.3 million, a decrease of $6.6 million from the $17.9 million
reported in the comparable 1996 period. The decrease is primarily the result of
a decline in refinery margins, partially attributable to a decline in West Coast
product prices, and higher depreciation and amortization costs in the 1997
period. In addition, 1997 earnings were negatively impacted by a major
maintenance turnaround at the Bloomfield refinery in the spring of 1997, which
curtailed production and reduced Bloomfield refinery sales volumes by 9% for the
six months. See "Business -- Refining." These decreases were offset in part by
contributions from the 1997 Acquisitions in the second quarter of 1997.
Revenues. Revenues for the six months ended June 30, 1997, increased
approximately $30.6 million or 13% to $270.3 million from $239.7 million in the
comparable 1996 period. The increase is primarily due to the 1997 Acquisitions
and a 2% increase in refinery weighted average selling prices, offset in part by
a 1% decline in refinery finished product sales volumes.
The volumes of refined products sold through the Company's retail units
increased approximately 14% during the first six months of 1997 primarily due to
the acquisition of the Thriftway Stations and a 2% increase in the volume of
finished product sold from the Company's other service station/convenience
stores. These increases were offset in part by a 5% decline in volumes from the
Company's travel center. See "Business -- Marketing and
Distribution -- Marketing."
Cost of Products Sold. For the six months ended June 30, 1997, cost of
products sold increased $31.9 million or 19% to $198.6 million from $166.7
million in the corresponding 1996 period. The increase is primarily due to the
1997 Acquisitions, along with a 6% increase in average crude oil costs, offset
in part by a 1% decline in refinery finished product sales volumes. In addition,
the liquidation of certain lower cost crude oil LIFO inventory layers in the
first quarter of 1996 reduced 1996 cost of products sold by approximately $2.1
million. There were no similar liquidations in 1997.
28
<PAGE> 32
Operating Expenses. For the six months ended June 30, 1997, operating
expenses increased approximately $2.8 million or 9% to $34.1 million from $31.3
million in the six months ended June 30, 1996. Approximately 73% of the increase
is due to the 1997 Acquisitions. The remaining increases are due to increases in
payroll and related costs, higher refinery fuel costs and increased retail
advertising costs. These increases were offset in part by a reduction in
refinery contract labor expenditures and utility costs.
Depreciation and Amortization. For the six months ended June 30, 1997,
depreciation and amortization increased approximately $2.2 million or 26% to
$10.6 million from $8.4 million in the same 1996 period. Approximately 21% of
the increase is due to the 1997 Acquisitions. The remaining increases are
primarily related to 1996 acquisitions, construction, remodeling and upgrades in
retail and refinery operations, along with the amortization of certain 1996
refinery unit turnaround costs.
Selling, General and Administrative Expenses. For the six months ended
June 30, 1997, selling, general and administrative expenses increased
approximately $0.8 million or 8% to $9.8 million from $9.0 million in the
corresponding 1996 period. The increase is primarily the result of higher
payroll and related costs, due in part to planning for and in anticipation of
future growth, and additional selling, general and administrative expenses
related to Phoenix Fuel. The increase was offset in part by higher 1996 expenses
relating to accruals for estimated severance tax assessments and environmental
liabilities.
Interest Expense, Net. For the six months ended June 30, 1997, net
interest expense (interest expense less interest income) decreased approximately
$0.6 million or 9% to $5.8 million from $6.4 million in the comparable 1996
period. The decrease is primarily due to a reduction in interest expense related
to the payment of approximately $32.0 million of long-term debt in 1996 from
operating cash flow and the sale of the Company's oil and gas operations, offset
in part by an increase in interest expense due to the increase in long-term debt
related to the 1997 Acquisitions.
Income Taxes. Income taxes for the six months ended June 30, 1997 and 1996
were computed in accordance with Statement of Financial Accounting Standards No.
109, resulting in effective tax rates of approximately 40% and 39%,
respectively.
Discontinued Operations. Substantially all of the Company's oil and gas
assets were sold in August 1996.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
The primary factors affecting the results of the Company's 1996 continuing
operations as compared to its 1995 continuing operations were the acquisition of
the Bloomfield refinery in the beginning of the fourth quarter of 1995, an
increase in 1996 refinery margins and the suspension of operations at the
Company's ethanol production plant during 1996.
In early 1996, the Company approved a plan of disposition for its oil and
gas assets. In August 1996, the Company completed the sale of substantially all
of these assets. The operations connected with these assets are classified as
discontinued operations in the Company's consolidated financial statements for
all years presented.
Earnings from Continuing Operations Before Income Taxes. Earnings from
continuing operations before income taxes were $28.2 million for the year ended
December 31, 1996, an increase of approximately $16.8 million from $11.4 million
for the year ended December 31, 1995. The increase was primarily the result of
the acquisition of the Bloomfield refinery and increases in average refinery
margins of approximately 21%. These increases were partially offset by increases
in operating and administrative costs.
Revenues. Revenues for the year ended December 31, 1996 increased $166.3
million or 50% to $499.2 million from $332.9 million in 1995. Finished product
sales of $130.3 million from the Bloomfield refinery accounted for approximately
78% of the increase. In addition, a 19% increase in Ciniza refinery weighted
average selling prices and a 10% increase in service station merchandise sales
contributed to increased revenues. Offsetting these increases was a decline in
third party sales from the Company's ethanol plant due to a temporary suspension
of operations during 1996.
29
<PAGE> 33
The increase in service station merchandise sales was the result of a 9%
increase in same store volumes and a net increase in sales during the year from
fourteen units that were acquired or constructed in the last 24 months over 13
units that were disposed of during the same period.
The volumes of refined products sold through retail units decreased
approximately 1% from 1995 levels due to a 15% decline in volumes sold from the
Company's travel center, offset in part by a 2% increase in service station
volumes. Management believes that travel center volumes declined because of
increased local competition due to the construction of several new truck stops
in the Company's market area in the past several years. Service station volumes
increased due to a net increase in sales volumes during the year from the 14
units that were acquired or constructed in the last 24 months over the 13 units
that were disposed of during the same period. This increase was offset by a
slight decline in same store volumes resulting from increased competition.
Average monthly sales volumes during the last two years for the 14 units
acquired or constructed was approximately 151,000 gallons per month compared to
104,000 gallons per month for the 13 units that have been disposed of.
Cost of Products Sold. For the year ended December 31, 1996, cost of
products sold increased $127.6 million or 54% to $361.9 million from $234.3
million in 1995. Cost of products sold of $101.0 million relating to the
Bloomfield refinery accounted for approximately 79% of the increase. Also
contributing to increased costs were an 18% increase in average crude oil costs
and a 12% increase in the cost of merchandise sales from the service stations.
These increases were partially offset by a decrease in costs relating to the
suspension of operations at the Company's ethanol plant and the liquidation of
certain lower cost crude oil LIFO inventory layers which resulted in a reduction
in cost of products sold of approximately $2.8 million in 1996 compared to a
similar reduction of approximately $0.5 million in 1995.
Operating Expenses. For the year ended December 31, 1996, operating
expenses increased $12.4 million or 24% to $64.3 million from $51.9 million in
1995. Operating expenses increased due to the acquisition of the Bloomfield
refinery (18%) and for other operations (12%). The 12% increase for other
operations was due to increases in payroll and related costs (6%), higher fuel
costs at the Ciniza refinery (1%) and various other expense increases (5%).
Partially offsetting these increases was a decrease of 6% due to the temporary
suspension of operations at the ethanol plant. Payroll and other costs increased
due to annual wage increases and, in the retail operations, due to expanded
programs such as twenty-four hour operations, the fuel pump island attendant
program, the pay at the pump program, deli operations, and store remodeling and
expansion.
Depreciation and Amortization. For the year ended December 31, 1996,
depreciation and amortization increased approximately $4.3 million or 32% to
$17.6 million from $13.3 million in 1995. The increase was primarily the result
of the acquisition of the Bloomfield refinery, along with the addition of
service station and transportation assets.
Selling, General and Administrative Expenses. For the year ended December
31, 1996, selling, general and administrative expenses increased approximately
$2.8 million or 22% to $15.6 million from $12.8 million in 1995. The increase
was primarily the result of expense accruals for incentive bonus plans (14%),
increases in payroll and related costs (5%), expense accruals for estimated
severance tax assessments (2%) and increases in various other general expense
categories (10%). These increases were partially offset by 1996 expense
reductions for decreases in estimated liabilities for self insured workers'
compensation and property and casualty claims and other items (9%).
Interest Expense (Income). For the year ended December 31, 1996, interest
expense increased approximately $0.8 million or 7% to $12.3 million from $11.5
million in 1995. The increase was primarily related to the addition of certain
variable rate long-term debt incurred to finance the acquisition of the
Bloomfield refinery, offset in part by a reduction in other long-term debt.
For the year ended December 31, 1996, interest and investment income
decreased approximately $1.4 million or 66% to $0.8 million from $2.2 million in
1995. The decrease was primarily due to a decrease in excess funds available for
investment related to the acquisition of the Bloomfield refinery in October 1995
and, in 1996, to the use of operating cash flows and the proceeds from the sale
of the Company's oil and gas assets for the payment of long-term debt and
capital expenditures.
30
<PAGE> 34
Income Taxes. Income taxes for the years ended December 31, 1996 and 1995
were computed in accordance with Statement of Financial Accounting Standards
("SFAS") No. 109, resulting in effective tax rates of approximately 39% and 32%,
respectively. The difference in the two rates was primarily due to alcohol fuel
tax credits generated from the operation of the Company's ethanol plant, which
suspended operations in October 1995, as well as coal seam gas tax credits in
1995.
Discontinued Operations. On August 30, 1996, the Company completed the
sale of substantially all of its oil and gas assets for $25.5 million. The
transaction was structured so that the Company retained only the oil and gas
properties that will generate future coal seam gas tax credits under Section 29
of the Internal Revenue Code. The reserves related to these properties will be
produced by the buyer and tax credits will be realized by the Company. The net
asset value assigned to these properties is approximately $4.3 million and is
included in other assets and liabilities in the accompanying Consolidated
Balance Sheet. The Company also retained an office building and some equipment.
Future coal seam gas tax credits, when earned, will be used to offset income
taxes payable.
Loss on the disposal of the oil and gas segment for 1996 is a loss on the
sale of the oil and gas properties of approximately $18,000, including a
provision for income taxes of $53,000, offset by earnings from operations of
approximately $5,000, including income tax benefits of $861,000. For 1995 and
1994, earnings (loss) from operations were $143,000, net of income taxes of
$154,000, and $(2,934,000), net of income tax benefit of $1,351,000,
respectively. A pre-tax charge for a reduction of the carrying value of crude
oil and natural gas properties of $3,395,000 was recorded in 1994.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
The primary factors affecting the results of the Company's 1995 continuing
operations as compared to its 1994 continuing operations were the acquisition of
the Bloomfield refinery in the beginning of the fourth quarter of 1995, a
decline in refinery margins, an increase in refinery sourced sales volumes from
the Ciniza refinery and the temporary suspension of operations at the Company's
ethanol production plant in October 1995.
Earnings from Continuing Operations Before Income Taxes. Earnings from
continuing operations before income taxes were $11.4 million for the year ended
December 31, 1995, an increase of $1.3 million from $10.1 million for the year
ended December 31, 1994. The increase was primarily the result of the
acquisition of the Bloomfield refinery, a 5% increase in Ciniza refinery
finished product sales volumes and a 16% increase in service station merchandise
sales. These increases were partially offset by a 10% decrease in Ciniza
refinery average margins and a decrease in third party sales volumes from the
ethanol plant.
Revenues. Revenues for the year ended December 31, 1995 increased $41.3
million or 14% to $332.9 million from $291.6 million in 1994. Finished product
sales of $29.5 million from the Bloomfield refinery accounted for approximately
71% of the increase. In addition, a 5% increase in Ciniza refinery finished
product sales volumes, a 4% increase in Ciniza refinery weighted average selling
prices and a 16% increase in service station merchandise sales contributed to
increased revenues. Offsetting these increases were a decline in third party
sales from the ethanol plant and an overall decline in other revenues from
retail operations.
The increase in Ciniza refinery finished product sales volumes in 1995 was
partially the result of a scheduled major maintenance turnaround started in
March and completed in April 1994 and an accident at the refinery in July 1994
that reduced production for a period of approximately 60 days. The increase in
service station merchandise sales was the result of increased same store sales
and the addition of six units. The overall decline in other revenues from retail
operations was primarily related to the sale of the Giant Express travel center
in November 1994.
The volumes of refined products sold through retail outlets decreased
approximately 7% from 1994 levels due to a 29% decrease in volumes sold from the
travel centers, primarily related to the sale of the Giant Express, and a slight
increase in service station volumes resulting in part from the addition of six
new units, offset by reduced volumes at some units due to increased competition
and the sale or remodeling of several units.
31
<PAGE> 35
Cost of Products Sold. For the year ended December 31, 1995, cost of
products sold increased $38.8 million or 20% to $234.3 million from $195.5
million for 1994. Cost of products sold of $22.4 million relating to the
Bloomfield refinery accounted for approximately 58% of the increase. Also
contributing to increased costs was an 8% increase in average crude oil costs
and a 5% increase in the volume of finished products sold from the Ciniza
refinery, along with a 15% increase in the cost of merchandise sales from the
service stations. The increase was partially offset by a decrease in costs
relating to the temporary suspension of operations at the ethanol plant and a
decrease in merchandise sales from the travel centers.
Operating Expenses. For the year ended December 31, 1995, operating
expenses increased approximately $0.1 million to $51.9 million from $51.8
million in 1994. Operating expenses increased approximately 5% due to the
acquisition of the Bloomfield refinery and 5% due to payroll and related costs
for other continuing operations. Partially offsetting these increases were
declines of approximately 4% due to the sale of the Giant Express, 2% due to the
temporary suspension of operations at the ethanol plant, 1% due to lower
purchased fuel costs for the Ciniza refinery and 3% due to various other expense
decreases.
Depreciation and Amortization. For the year ended December 31, 1995,
depreciation and amortization increased $1.1 million or 9% to $13.3 million from
$12.2 million in the corresponding 1994 period. The increase was primarily
related to the acquisition of the Bloomfield refinery and the separate purchase
of crude oil gathering operations in September 1995.
Selling, General and Administrative Expenses. For the year ended December
31, 1995, selling, general and administrative expense increased approximately
$0.9 million or 7% to $12.8 million from $11.9 million in 1994. The increase was
primarily the result of a reduction in 1994 first quarter expenses from the
recording of a $1.0 million insurance settlement relating to environmental costs
incurred in prior years and higher payroll costs in the 1995 period. Offsetting
these items was a reduction in expenses from no management incentive bonus being
accrued in 1995 and reductions in 1995 expenses for a decrease in the estimated
liability for self insured workers' compensation claims and an adjustment in the
estimated allowance for doubtful accounts.
Interest Expense (Income). For the year ended December 31, 1995, interest
expense decreased approximately $0.3 million or 3% to $11.5 million from $11.8
million in 1994. The decrease was primarily related to the reduction of certain
fixed rate long-term debt and the capitalization of interest in the 1995 period,
offset in part by the addition of certain variable rate long-term debt incurred
in part to finance the acquisition of the Bloomfield refinery.
For the year ended December 31, 1995, interest and investment income
increased approximately $0.5 million or 29% to $2.2 million from $1.7 million in
1994. The increase was primarily due to interest received on the refund of
income taxes paid in prior periods and higher interest rates. These increases
were partially offset by a decrease due to a decline in the amount of excess
funds available for investment.
Income Taxes. Income taxes for the years ended December 31, 1995 and 1994
were computed in accordance with SFAS No. 109, resulting in effective tax rates
of approximately 32% and 26%, respectively. The difference in rates was due in
part to the amounts of alcohol fuel tax credits generated in 1994 compared to
1995, relating to the temporary suspension of operations at the Company's
ethanol plant, as well as coal seam gas tax credits generated in each year, as
they relate to varying amounts of annual income.
Discontinued Operations. For the years ended December 31, 1995 and 1994,
the Company's oil and gas operations ("Giant E&P") recorded net earnings of $0.1
million and a net loss of $2.9 million, respectively. The improvement was
primarily due to a writedown in the carrying value of crude oil and natural gas
properties in the third quarter of 1994, and in 1995, to increases in crude oil
and natural gas production, along with an increase in crude oil selling prices,
offset in part by a decline in natural gas selling prices.
Revenues, including intercompany revenues of $5.3 million in 1995 and $4.1
million in 1994, totaled $8.4 million for the year ended December 31, 1995, an
increase of $2.4 million or 40% from the $6.0 million reported for the
comparable 1994 period. This increase is due to a 51% increase in crude oil
production, an 8% increase in average crude oil selling prices and a 15%
increase in natural gas production. These increases were offset in part by a 24%
decline in average natural gas selling prices.
32
<PAGE> 36
The increase in crude oil production was primarily the result of the
acquisition of various crude oil producing reserves during 1995. The increase in
natural gas production was due to a favorable 1994 year end adjustment of coal
seam gas reserves sold in 1992, determined pursuant to an annual redetermination
clause contained in the 1992 purchase and sale agreement, which resulted in the
addition of approximately 1,018 million cubic feet of natural gas reserves.
For the year ended December 31, 1995, operating costs and expenses
increased $1.2 million or 18% to $8.1 million from $6.9 million in 1994,
primarily due to increases in production.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATIONS
Operating cash flows for the first six months of 1997 decreased compared to
the first six months of 1996, primarily as the result of the differences in the
net changes in working capital items in each period and lower net earnings in
the first six months of 1997. Net cash provided by operating activities of
continuing operations totaled $6.5 million for the six months ended June 30,
1997, compared to $23.1 million for the comparable 1996 period.
WORKING CAPITAL
Working capital at June 30, 1997 consisted of current assets of $121.9
million and current liabilities of $79.9 million, or a current ratio of 1.53:1.
At December 31, 1996, the current ratio was 1.33:1 with current assets of $86.5
million and current liabilities of $65.0 million.
Current assets have increased since December 31, 1996, primarily due to
increases in accounts receivable, inventories and prepaid items, offset in part
by a decrease in cash and cash equivalents. Accounts receivable and prepaid
items have increased primarily as the result of the 1997 Acquisitions.
Inventories have increased due to the 1997 Acquisitions and a 78% increase in
crude oil inventory volumes. Current liabilities have increased due to an
increase in note payable and the current portion of long-term debt and accounts
payable, offset in part by a decrease in accrued expenses. Note payable and the
current portion of long-term debt have increased as a result of the acquisition
of Phoenix Fuel. Accounts payable have increased primarily as the result of the
1997 Acquisitions, offset in part by a decline in the cost of raw materials.
Accrued expenses have declined primarily due to the payment of a contingent
liability related to the Bloomfield refinery acquisition, offset in part by
increases resulting from the 1997 Acquisitions.
CAPITAL EXPENDITURES AND RESOURCES
Net cash used in investing activities for the purchase of property, plant
and equipment and other assets totaled approximately $18.5 million for the first
six months of 1997, including capacity enhancement projects, facility upgrades
and turnaround expenditures at the refineries; major remodeling expenditures at
two retail units, the acquisition of land for future retail operations and
continuing retail equipment and system upgrades; and transportation equipment
and facility upgrades.
During the second quarter of 1997, the Bloomfield refinery completed a
major, every four year, maintenance turnaround including certain debottlenecking
procedures that increased reformer capacity by approximately 500 bbls per day.
In March 1997, the Ciniza refinery completed a reformer and isomerization
unit turnaround including certain debottlenecking procedures that increased
reformer capacity by approximately 700 bbls per day and isomerization capacity
by approximately 1,000 bbls per day.
Over the period May 28, 1997 to May 31, 1997, the Company completed the
acquisition of 96 retail service station/convenience stores, seven additional
retail locations for future development, certain petroleum transportation and
maintenance assets, options to acquire service station/convenience stores and
other related assets.
33
<PAGE> 37
The consideration paid by the Company for 32 service station/convenience
stores, the seven retail locations for future development, the transportation
and maintenance assets, the options to acquire service station/convenience
stores and other related assets was approximately $19.1 million in cash, an
office building with a net book value of approximately $0.8 million and a truck
maintenance shop with a net book value of approximately $0.5 million. The
Company leased the remaining 64 service station/convenience stores and related
assets for a period of ten years and intends to purchase them pursuant to
options to purchase during the ten year period for approximately $22.9 million
in the aggregate. The leased service station/convenience stores are being
accounted for as capital leases and initially require annual lease payments of
approximately $2.6 million. These lease payments will be reduced as the
individual service station/convenience stores are purchased pursuant to the
options. The Company intends to use approximately $18.9 million of the net
proceeds from the offering of the Notes to purchase service station/convenience
stores pursuant to the exercise of these options. As a result of such purchases,
the annual lease payment will be reduced to approximately $0.5 million. In
addition, the Company has one-year options to purchase 45 additional units that
are located in Wyoming, Texas and Montana. See "Business -- The Thriftway
Acquisition."
In connection with the acquisition of the Thriftway Stations, the Company
entered into a consignment agreement to supply refined products to 16 service
station/convenience stores operated by Thriftway which are located in the Four
Corners area. The Company has options to purchase these service
station/convenience stores. The Company also entered into other long-term supply
arrangements to provide refined products to other service stations in the area
that will continue to be operated by Thriftway Marketing Corp.
On June 3, 1997, the Company acquired Phoenix Fuel, an independent
industrial/commercial petroleum products distributor, for approximately $30
million. Phoenix Fuel sells gasoline, diesel fuel, burner fuel, jet fuel,
aviation fuel and kerosene. In addition, Phoenix Fuel sells oils and lubricants
such as motor oil, hydraulic oil, gear oil, cutting oil and grease.
The Company funded the 1997 Acquisitions with $54.0 million of indebtedness
incurred under the Company's Credit Agreement, as more fully described below.
On a pro forma basis, assuming the 1997 Acquisitions occurred on January 1,
1996 and assuming the sale of $150.0 million of the Notes at an interest rate of
9.0% and the application of the net proceeds therefrom as described in "Use of
Proceeds," the Company's net revenues would have been $785.8 million and $403.2
million, net earnings from continuing operations would have been $18.2 million
and $5.7 million, and earnings from continuing operations per common share would
have been $1.62 and $0.52 for the year ended December 31, 1996 and the six
months ended June 30, 1997, respectively. This unaudited pro forma financial
information does not purport to represent the results of operations that
actually would have resulted had the purchase occurred on the date specified,
nor should it be taken as indicative of the future results of operations.
The Company continues to investigate other strategic acquisitions as well
as capital improvements to its existing facilities. The Company is also actively
pursuing the possible sale or exchange of non-strategic or underperforming
assets.
Working capital, including that necessary for capital expenditures and debt
service, will be funded through cash generated from operating activities,
existing cash balances and, if necessary, future borrowings. Future liquidity,
both short and long-term, will continue to be primarily dependent on producing
and selling sufficient quantities of refined products at margins sufficient to
cover fixed and variable expenses.
CAPITAL STRUCTURE
At June 30, 1997 and December 31, 1996, the Company's long-term debt was
61.5% and 48.1% of total capital, respectively. The increase is primarily due to
an increase in long-term debt resulting from the 1997 Acquisitions and
borrowings under the Company's working capital facility, offset in part by an
increase in stockholders' equity due to net earnings which were offset in part
by the acquisition of shares of the Company's common stock accounted for as
treasury shares. The Company's net debt (long-term debt less cash and cash
equivalents) to total capitalization percentages were 60.6% and 45.1% at June
30, 1997 and December 31, 1996, respectively.
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The Company's capital structure includes $100.0 million in aggregate
principal amount of the 9 3/4% Notes that mature in 2003. Repayment of the
9 3/4% Notes is jointly and severally guaranteed on an unconditional basis by
the Company's direct and indirect wholly-owned subsidiaries, subject to a
limitation designed to ensure that such guarantees do not constitute a
fraudulent conveyance. Except as otherwise allowed in the Indenture pursuant to
which the 9 3/4% Notes were issued, there are no restrictions on the ability of
such subsidiaries to transfer funds to the Company in the form of cash
dividends, loans or advances. General provisions of applicable state law,
however, may limit the ability of any subsidiary to pay dividends or make
distributions to the Company in certain circumstances.
In October 1995, the Company entered into a Credit Agreement with a group
of banks under which $30.0 million was borrowed pursuant to a three-year
unsecured revolving term facility to provide financing for the purchase of the
Bloomfield refinery. This revolving term facility was repaid from cash on hand
and proceeds from the sale of the Company's oil and gas assets. The Credit
Agreement was amended effective May 23, 1997 to increase the borrowing
commitment under the unsecured capital expenditure facility portion of the
Credit Agreement to $70.0 million from $30.0 million and to extend the due date
to May 23, 2000 from October 4, 1998, for both the unsecured capital expenditure
facility and the unsecured working capital facility. The Company borrowed $54.0
million under this capital expenditure facility to fund the amounts paid with
respect to the 1997 Acquisitions. Additional borrowings under the capital
expenditure facility can be used to repurchase shares of the Company's common
stock and for acquisitions, capital expenditures and general corporate purposes,
but not for working capital expenditures. On May 23, 1999, the borrowing
commitment under the capital expenditure facility is required to be reduced by
$20.0 million. At June 30, 1997, direct borrowings under this facility were
$60.0 million. This facility has a floating interest rate that is tied to
various short-term indices. At June 30, 1997, this rate was approximately 6.5%
per annum. The Company has used $60.0 million of net proceeds from the offering
of the Notes to repay all outstanding indebtedness under this facility.
In addition, the Credit Agreement contains a three-year unsecured working
capital facility to provide working capital and letters of credit in the
ordinary course of business. The availability under this working capital
facility is the lesser of (i) $40.0 million, or (ii) the amount determined under
a borrowing base calculation tied to eligible accounts receivable and
inventories as defined in the Credit Agreement. At June 30, 1997, the lesser
amount was $40.0 million. This facility has a floating interest rate that is
tied to various short-term indices. At June 30, 1997, this rate was
approximately 6.5% per annum. Direct borrowings under this arrangement were
$14.0 million at June 30, 1997, and there were approximately $15.9 million of
irrevocable letters of credit outstanding, primarily to secure purchases of raw
materials. Borrowings under this facility are generally higher at month end due
to payments for raw materials and various taxes. The Company has used
approximately $6.0 million of net proceeds from the offering of the Notes to
repay all outstanding indebtedness under this facility.
The Credit Agreement contains certain covenants and restrictions which
require the Company to, among other things, maintain a minimum consolidated net
worth; minimum fixed charge coverage ratio; minimum funded debt to total
capitalization percentage; and places limits on investments, prepayment of
senior subordinated debt, guarantees, liens and restricted payments. The Credit
Agreement is guaranteed by substantially all of the Company's direct and
indirect wholly-owned subsidiaries. The Company is required to pay a quarterly
commitment fee based on the unused amount of each facility.
The Company's Board of Directors has authorized the repurchase of up to
1,500,000 shares of the Company's common stock. During the first six months of
1997, the Company repurchased 75,300 shares of its common stock at a weighted
average price of $14.40 per share including commissions. From the inception of
the stock repurchase plan, the Company has repurchased 1,198,800 shares at a
weighted average cost of $9.90.
On May 7, 1997, the Company's Board of Directors declared a cash dividend
on common stock of $0.05 per share payable to stockholders of record on July 24,
1997. This dividend was paid on August 6, 1997. Future dividends, if any, are
subject to the results of the Company's operations, existing debt covenants and
declaration by the Company's Board of Directors.
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<PAGE> 39
THE REGISTERED EXCHANGE OFFER
PURPOSE OF THE REGISTERED EXCHANGE OFFER
The Notes were sold by the Company on August 26, 1997, and were
subsequently resold to qualified institutional buyers pursuant to Rule 144A
under the Securities Act. In connection with the Note Offering, the Company
entered into the Registration Rights Agreement which requires, among other
things, that the Company will, at its cost, (i) by October 27, 1997, file a
registration statement (the "Registered Exchange Offer Registration Statement")
with the SEC with respect to the Registered Exchange Offer to exchange the Notes
for the Exchange Notes, which will have terms substantially identical in all
material respects to the Notes (except that the Exchange Notes will not contain
terms with respect to transfer restrictions and with respect to the payment of
additional interest under circumstances relating to breaches of the Registration
Rights Agreement by the Company and the Subsidiary Guarantors), and (ii) use its
best efforts to cause the Registered Exchange Offer Registration Statement to be
declared effective under the Securities Act by December 24, 1997. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The term "holder" with respect to
the Registered Exchange Offer means any person in whose name the Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder.
Because the Registered Exchange Offer is for any and all Notes, the number
of Notes tendered and exchanged in the Registered Exchange Offer will reduce the
principal amount of Notes outstanding. Following the consummation of the
Registered Exchange Offer, holders of the Notes who did not tender their Notes
generally will not have any further registration rights under the Registration
Rights Agreement, and such Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for such
Notes could be adversely affected. The Notes are currently eligible for sale
pursuant to Rule 144A through the PORTAL System of the National Association of
Securities Dealers, Inc. Because the Company anticipates that most holders of
Notes will elect to exchange such Notes for Exchange Notes due to the absence of
restrictions on the resale of Exchange Notes under the Securities Act, the
Company anticipates that the liquidity of the market for any Notes remaining
after the consummation of the Registered Exchange Offer may be substantially
limited.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
TERMS OF THE REGISTERED EXCHANGE OFFER
This Prospectus, together with the Letter of Transmittal, is first being
sent on or about , 1997, to all holders of Notes known to the Company.
Upon the terms and subject to the conditions set forth in this Prospectus and in
the Letter of Transmittal, the Company will accept any and all Notes validly
tendered and not withdrawn prior to 5:00 p.m. New York City time on the
Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Notes accepted
in the Registered Exchange Offer. Holders may tender some or all of their Notes
pursuant to the Registered Exchange Offer. However, Notes may be tendered only
in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same in all material
respects as the form and terms of the Notes except that the Exchange Notes will
not contain terms with respect to transfer restrictions or with respect to the
payment of additional interest under circumstances relating to breaches of the
Registration Rights Agreement by the Company and the Subsidiary Guarantors. The
Exchange Notes will evidence the same debt as the Notes and will be entitled to
the benefits of the Indenture.
Holders of Notes do not have any appraisal or dissenter's rights under the
General Corporation Law of Delaware or the Indenture in connection with the
Registered Exchange Offer. The Company intends to conduct the Registered
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the SEC thereunder, including Rule 14e-1
thereunder.
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<PAGE> 40
The Company shall be deemed to have accepted validly tendered Notes when,
as and if the Company has given written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering Holders for the purpose
of receiving the Exchange Notes from the Company.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Notes in the Registered Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Notes
pursuant to the Registered Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Registered Exchange Offer. See " -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Registered Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date and time to which the Registered Exchange Offer is extended.
To extend the Registered Exchange Offer, the Company will notify the
Exchange Agent of any extension by oral or written notice, followed by a public
announcement thereof no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
The Company reserves the right, in its reasonable judgment, (i) to delay
accepting any Notes, to extend the Registered Exchange Offer or to terminate the
Registered Exchange Offer if any of the conditions set forth below under
" -- Conditions" shall not have been satisfied, by giving oral or written notice
of such delay, extension or termination to the Exchange Agent, or (ii) to amend
the terms of the Registered Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by a public announcement thereof. If the Registered Exchange Offer
is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and,
depending upon the significance of the amendment and the manner of disclosure to
the registered holders, the Company will extend the Registered Exchange Offer
for a period of five to ten business days if the Registered Exchange Offer would
otherwise expire during such five to ten business-day period.
If the Company does not consummate the Registered Exchange Offer, or, in
lieu thereof, the Company does not file and cause to become effective the Shelf
Registration Statement within the time periods set forth herein, liquidated
damages will accrue and be payable on the Notes either temporarily or
permanently. See "Registration Rights."
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Registered
Exchange Offer, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to Business Wire.
REGISTERED EXCHANGE OFFER PROCEDURES
Only a holder of Notes may tender such Notes in the Registered Exchange
Offer. To tender in the Registered Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Notes and any other required documents, to the Exchange Agent so as to be
received by the Exchange Agent at the address set forth below prior to 5:00
p.m., New York City time, on the Expiration Date. Delivery of the Notes may be
made by book-entry transfer in accordance with the procedures described below.
Confirmation of such book-entry transfer must be received by the Exchange Agent
prior to the Expiration Date.
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<PAGE> 41
By executing the Letter of Transmittal, each holder will make to the
Company the representation set forth below in the second paragraph under the
heading " -- Resale of Exchange Notes."
The tender by a holder and the acceptance thereof by the Company will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal,
or (ii) for the account of an Eligible Institution. In the event that signatures
on a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Notes listed therein, such Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Notes with the signature
thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or
any Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority to so act must be submitted with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Notes at the Depositary for the purpose of facilitating the Registered
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Depositary's system may make book-entry
delivery of the Notes by causing the Depositary to transfer such Notes into the
Exchange Agent's account with respect to the Notes in accordance with the
Depositary's procedures for such transfer. Although delivery of the Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Depositary, an appropriate Letter of Transmittal properly completed and duly
executed with any required signature guarantee and all other required documents
must in each case be transmitted to and received or confirmed by the Exchange
Agent at its address set forth below on or prior to the Expiration Date, or, if
the guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures. Delivery of documents to the
Depositary does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Notes
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<PAGE> 42
not properly tendered or any Notes the Company's acceptance of which would, in
the opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any defects, irregularities or conditions of tender as to
particular Notes. The Company's interpretation of the terms and conditions of
the Registered Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of Notes,
none of the Company, the Exchange Agent or any other person shall incur any
liability for failure to give such notification. Tenders of Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent, or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Notes and the principal amount of Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof), together with the certificate(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Depositary) and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at the Depository) and all
other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Registered Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of Notes transferred by
book-entry transfer, the name and number of the account at the Depositary to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Notes register the
transfer of such Notes into the name of the person withdrawing the tender, and
(iv) specify the name in which any such Notes are to be registered, if
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<PAGE> 43
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time or receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Notes so withdrawn will be deemed not to have been validly tendered for purposes
of the Registered Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Notes so withdrawn are validly retendered. Any Notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Registered Exchange Offer. Properly withdrawn Notes may be retendered by
following one of the procedures described above under " -- Registered Exchange
Offer Procedures" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Registered Exchange Offer, the
Company shall not be required to accept for exchange, or to exchange Exchange
Notes for, any Notes, and may terminate or amend the Registered Exchange Offer
as provided herein before the acceptance of such Notes, if:
(a) any law, statute, rule, regulation or interpretation by the staff
of the SEC is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Registered Exchange Offer or materially impair the
contemplated benefits of the Registered Exchange Offer to the Company; or
(b) any governmental approval has not been obtained, which approval
the Company shall, in its reasonable judgment, deem necessary for the
consummation of the Registered Exchange Offer as contemplated hereby.
If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Notes and
return all tendered Notes to the tendering holders, (ii) extend the Registered
Exchange Offer and retain all Notes tendered prior to the expiration of the
Registered Exchange Offer, subject, however, to the rights of Holders to
withdraw such Notes (see " -- Withdrawals of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Registered Exchange Offer and accept
all properly tendered Notes which have not been withdrawn. If such waiver
constitutes a material change to the Registered Exchange Offer, the Company will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and, depending upon the significance of
the waiver and the manner of disclosure to the registered holders, the Company
will extend the Registered Exchange Offer for a period of five to ten business
days if the Registered Exchange Offer would otherwise expire during such five to
ten business-day period.
EXCHANGE AGENT
The Bank of New York will act as Exchange Agent for the Registered Exchange
Offer.
All executed Letters of Transmittal should be directed to the Exchange
Agent at one of the addresses set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal for the Notes and requests for copies of Notice of Guaranteed
Delivery should be directed to the Exchange Agent, addressed as follows:
By mail:
The Bank of New York
101 Barclay Street, Floor 7 East
New York, New York 10286
Attn: Arwin Gibbons, Reorganization Section
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<PAGE> 44
By hand/overnight courier:
The Bank of New York
Corporate Trust Services Window, Street Level
101 Barclay Street
New York, New York 10286
Attn: Arwin Gibbons, Reorganization Section
By facsimile (eligible institutions only):
(212) 815-6339
For telephone inquiries:
(212) 815-5920
DELIVERY OF THE NOTES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of the Registered Exchange Offer will be borne by the Company.
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone, facsimile or in person by
officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Registered Exchange Offer and will not make any payments to brokers or other
persons soliciting acceptances of the Registered Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith and pay other registration expenses, including fees and
expenses of the Trustee, filing fees and printing and distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Registered Exchange Offer. If, however,
certificates representing the Exchange Notes or the Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the Notes
tendered, or if tendered Notes are registered in the name of any person other
than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of the Notes pursuant to the
Registered Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other person) will be payable by the
tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Notes, as reflected in the Company's accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized in
connection with the Registered Exchange Offer. The expenses of the Registered
Exchange Offer will be amortized over the term of the Exchange Notes.
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, the Company believes that Exchange Notes issued
pursuant to the Registered Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by any holder of such Exchange
Notes (other than broker-dealers, as set forth below, and any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and
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<PAGE> 45
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of such
Exchange Notes. Any holder who tenders in the Registered Exchange Offer with the
intention to participate, or for the purpose of participating, in a distribution
of the Exchange Notes may not rely on the position of the staff of the SEC
enunciated in Exxon Capital Holdings Corporation (available April 13, 1989),
Morgan Stanley & Co., Incorporated (available June 5, 1991), Shearman & Sterling
(available July 2, 1993) or similar no-action letters, but rather must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. In addition, any such resale
transaction should be covered by an effective registration statement containing
the selling security holders information required by Item 507 of Regulation S-K
of the Securities Act. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. See
"Plan of Distribution."
By tendering in the Registered Exchange Offer, each holder will represent
to the Company that, among other things, (i) the Exchange Notes acquired
pursuant to the Registered Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is a holder, (ii) neither the holder nor any such other person has
an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, and (iii) the holder and such other person
acknowledge that if they participate in the Registered Exchange Offer for the
purpose of distributing the Exchange Notes, (a) they must, in the absence of an
exemption therefrom, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Exchange
Notes and cannot rely on the no-action letters referenced above, and (b) failure
to comply with such requirements in such instance could result in such holder
incurring liability under the Securities Act for which such holder is not
indemnified by the Company. Further, by tendering in the Registered Exchange
Offer, each holder that may be deemed an "affiliate" (as defined under Rule 405
of the Securities Act) of the Company will represent to the Company that such
holder understands and acknowledges that the Exchange Notes may not be offered
for resale, resold or otherwise transferred by that holder without registration
under the Securities Act or an exemption therefrom.
As set forth above, affiliates of the Company are not entitled to rely on
the foregoing interpretations of the staff of the SEC with respect to resales of
the Exchange Notes without compliance with the registration and prospectus
delivery requirements of the Securities Act.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of making this Registered Exchange Offer, the Company will have
fulfilled one of its obligations under the Registration Rights Agreement, and
holders of Notes who do not tender their Notes generally will not have any
further registration rights under the Registration Rights Agreement or
otherwise. Accordingly, any holder of Notes that does not exchange that holder's
Notes for Exchange Notes will continue to hold the untendered Notes and will be
entitled to all the rights and limitations applicable thereto under the
Indenture, except to the extent that such rights or limitations, by their terms,
terminate or cease to have further effectiveness as a result of the Registered
Exchange Offer.
The Notes that are not exchanged for Exchange Notes pursuant to the
Registered Exchange Offer will remain restricted securities. Accordingly, such
Notes may be offered, resold, pledged or otherwise transferred only (i) to the
Company (upon redemption thereof or otherwise), (ii) pursuant to an effective
registration statement under the Securities Act, (iii) inside the United States
to a person whom the seller reasonably believes is a qualified institutional
buyer (as defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A, (iv) outside the United States in an
offshore transaction in accordance with Rule 904 under the Securities Act, or
(v) pursuant to an exemption from registration under the Securities Act provided
by Rule 144 thereunder (if available), in each case in accordance with any
applicable securities laws of any state of the United States.
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OTHER
Participation in the Registered Exchange Offer is voluntary and holders
should carefully consider whether to accept. Holders of the Notes are urged to
consult their financial and tax advisors in making their own decision on what
action to take.
The Company may in the future seek to acquire untendered Notes in open
market or privately negotiated transactions, through subsequent Registered
Exchange Offers or otherwise. The Company has no present plans to acquire any
Notes that are not tendered in the Registered Exchange Offer or to file a
registration statement to permit resales of any untendered Notes.
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<PAGE> 47
BUSINESS
GENERAL
Giant Industries, Inc., a Delaware corporation ("Giant" or the "Company"),
through its wholly-owned subsidiary Giant Industries Arizona, Inc. ("Giant
Arizona"), is engaged in the refining and marketing of high quality petroleum
products. The Company is the leading refiner and one of the largest marketers of
petroleum products with operations in the fast-growing Four Corners area of the
southwestern United States where New Mexico, Arizona, Colorado and Utah join.
The Company sells refined products directly to retail consumers through the
Company's network of retail units and to wholesale and commercial/industrial
customers.
The Company owns and operates two high-conversion crude oil refineries in
northwestern New Mexico, Ciniza and Bloomfield, a 300-mile crude oil gathering
pipeline system based in Farmington, New Mexico, a finished product terminal in
Albuquerque, New Mexico, a fleet of crude oil and finished product truck
transports, a travel center on I-40 east of Gallup, New Mexico, and a chain of
148 retail service station/convenience stores in New Mexico, Colorado, Utah and
Arizona. It also owns and operates 9 bulk petroleum distribution plants, 22
cardlock fueling operations, and a lubricant storage and distribution facility.
In early 1996, the Company approved a plan of disposition for its oil and
gas operations. The decision was based upon management's review of the prospects
for this operation, which indicated that substantial new capital would be
necessary to further develop this business and reach an acceptable level of
profitability and integration. On August 30, 1996, the Company completed the
sale of substantially all of its oil and gas assets for $25.5 million. Certain
oil and gas assets with a net asset value of approximately $4.3 million
including a production payment, were retained by the Company. These assets
consist primarily of a working interest in certain natural gas properties that
qualify for the coal seam gas tax credits under Section 29 of the Internal
Revenue Code, an office building and some equipment.
BUSINESS STRATEGY AND STRENGTHS
The Company's strategy is to manage shareholder value by adhering to three
major objectives: (i) capture a significant portion of anticipated future demand
growth for refined products in its targeted markets; (ii) increase efficiency
and profitability through the sale of a greater portion of the Company's refined
products by the Company's retail network; (iii) expand its overall market
presence through selective acquisitions in contiguous markets and other markets
with attractive supply and demand characteristics.
THE THRIFTWAY ACQUISITION
At the end of May 1997, Giant acquired 96 retail service
station/convenience stores, seven additional retail locations for future
development, certain petroleum transportation and maintenance assets, options to
acquire service station/convenience stores and other related assets. These
assets were acquired from Thriftway Marketing Corp. ("Thriftway"), Clayton
Investment Company, and various related entities. The consideration paid by the
Company for the 32 service station/convenience stores, the seven retail
locations for future development, the transportation and maintenance assets, the
options to acquire service station/convenience stores and other related assets
was $19.1 million in cash, an office building with a net book value of
approximately $0.8 million and a truck maintenance shop with a net book value of
approximately $0.5 million. The Company leased the remaining 64 service
station/convenience stores and related assets for a period of 10 years and
intends to purchase them pursuant to options to purchase during this period for
approximately $22.9 million in the aggregate. The leased service
station/convenience stores are being accounted for as capital leases and
initially require annual lease payments of approximately $2.6 million, which
payments will be reduced as the individual service station/convenience stores
are purchased pursuant to the options. The Company intends to use approximately
$18.9 million of the net proceeds from the offering of the Notes to purchase
service station/convenience stores pursuant to the exercise of these options. As
a result of such purchase, the annual lease payment will be reduced to
approximately $0.5 million. In addition, Giant paid additional amounts for
finished product, merchandise and supply inventories associated with the service
stations acquired, which amounts approximated the sellers' cost of such
inventories.
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The Thriftway Stations sell various grades of gasoline, diesel fuel and
merchandise to the general public and are located in New Mexico, Arizona,
Colorado and Utah, in or adjacent to the Company's primary market area. In 1996,
the Thriftway Stations had fuel sales of approximately 41 million gallons and
merchandise sales of approximately $41 million (as compared to fuel sales of
approximately 106 million gallons and merchandise sales of approximately $49
million in the Company's existing retail operations). The service stations have
margins above national averages. In addition, through the acquisition of the
Thriftway Stations the Company added approximately 700 new employees. Giant is
using substantially all of the assets acquired in a manner consistent with their
previous operation. However, a small number of the service station/convenience
stores may be converted to cardlock operations or targeted for disposal.
Giant also entered into a consignment agreement with Thriftway to supply
finished product to 16 service station/convenience stores that Thriftway
operates on the Navajo, Ute and Zuni Reservations. Under this agreement, Giant
will receive the profits from the finished product sales and will pay Thriftway
annual consignment fees. Giant has options to purchase these service
station/convenience stores until May 2007. The Company also entered into
long-term supply arrangements with Thriftway to provide gasoline and diesel fuel
to other service stations in the area that Thriftway will continue to operate.
In addition, the Company has one-year options to purchase 45 additional
units from Thriftway that are located in Wyoming, Texas and Montana.
THE PHOENIX FUEL ACQUISITION
In June 1997, Giant acquired Phoenix Fuel for approximately $30 million.
Phoenix Fuel is Arizona's largest independent petroleum products distributor and
sells gasoline, diesel fuel, burner fuel, jet fuel, aviation fuel and kerosene.
In addition, it distributes oils and lubricants such as motor oil, hydraulic
oil, gear oil, cutting oil and grease.
Phoenix Fuel has nine bulk petroleum distribution plants, 22 cardlock
fueling operations, a lubricant storage and distribution facility, and a fleet
of 40 finished product truck transports. These assets are located throughout
Arizona. In 1996, Phoenix Fuel had sales of approximately $254 million and
EBITDA of more than $6 million. Phoenix Fuel's wholesale fuel volumes exceeded
200 million gallons, sales from its cardlock facilities were approximately 28
million gallons, and its lubricant sales were approximately 5 million gallons in
1996. Phoenix Fuel employs approximately 200 people. Giant operates Phoenix Fuel
as a wholly-owned subsidiary and in a manner consistent with its previous
operation.
REFINING
Giant owns and operates the only active refineries in the Four Corners. The
Ciniza refinery is located on 880 acres near Gallup, New Mexico and the
Bloomfield refinery is located on 285 acres near Farmington, New Mexico. The
refineries are separated by 120 miles in northwestern New Mexico and are
operated in an integrated fashion. The Four Corners area serves as the Company's
primary market for its refined products and as the primary source of its crude
oil and NGLs supplies.
Management believes that the technical capabilities of these two cracking
refineries in conjunction with high quality locally-available crude oil and NGL
feedstocks result in refinery yields of high-value products comparable to those
achieved by larger, more complex refineries located outside of the area. Both
refineries are equipped with fluid catalytic cracking, naphtha hydrotreating,
reforming, and LPG recovery units, as well as diesel hydrotreating and sulfur
recovery units to manufacture low sulfur diesel fuel. The Ciniza refinery
utilizes an alkylation process to manufacture high octane gasoline from its
catalytic cracking unit olefins. The Bloomfield refinery accomplishes this using
a catalytic polymerization unit. The Ciniza refinery also is equipped with
isomerization and cogeneration facilities. The Company believes that its refined
products meet all federally-mandated standards, including 100% low sulfur diesel
fuel, in all markets where it sells such products. The refineries' yield
gasoline, diesel fuel and jet fuel has exceeded 91% in each of the last five
years. With total feedstock capacity of 44,600 bpd, the Company's refineries
have achieved an average capacity utilization rate of approximately 94% over the
last five years.
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Set forth below is data with respect to refinery operations and the primary
refined products produced during the indicated periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1992 1993 1994 1995(1) 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Feedstock throughput:(2)
Crude oil.............................. 20,800 20,300 19,100 23,700 34,800
NGLs and oxygenates.................... 4,800 5,000 4,500 5,000 5,400
------- ------- ------- ------- -------
Total.......................... 25,600 25,300 23,600 28,700 40,200
======= ======= ======= ======= =======
Crude oil throughput (as a % of total)... 81% 80% 81% 83% 87%
Rated crude oil capacity utilized........ 101% 98% 92% 88% 90%
Refinery margin ($/bbl).................. $ 4.77 $ 6.69 $ 5.60 $ 5.13 $ 6.21
Products:(2)
Gasoline............................... 16,100 16,300 15,200 18,500 24,900
Diesel fuel............................ 5,400 5,400 5,200 7,200 10,900
Jet fuel............................... 2,000 1,800 1,300 900 1,100
Other.................................. 2,100 1,800 1,900 2,100 3,300
------- ------- ------- ------- -------
Total.......................... 25,600 25,300 23,600 28,700 40,200
======= ======= ======= ======= =======
High Value Products:
Gasoline............................... 63% 65% 64% 65% 62%
Diesel fuel............................ 21% 21% 22% 25% 27%
Jet fuel............................... 8% 7% 6% 3% 3%
------- ------- ------- ------- -------
Total............................... 92% 93% 92% 93% 92%
======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) The 1995 operating data reflects the operations of the Bloomfield refinery
effective October 4, 1995.
(2) Average barrels per day
Each refinery operating unit requires regular maintenance and repair
shutdowns (referred to as "turnarounds") during which it is not in operation.
Turnaround cycles vary for different units. In general, refinery turnarounds are
managed so that some units continue to operate while others are down for
scheduled maintenance. Maintenance turnarounds are implemented using refinery
personnel as well as some additional contract labor. Turnaround work proceeds on
a continuous 24-hour basis to minimize unit down time. Giant has historically
expensed current maintenance charges and capitalized turnaround costs which are
then amortized over the estimated period until the next turnaround which is
generally 24 to 48 months depending on the unit involved.
In general, a major refinery turnaround is scheduled every four years. The
most recent major turnaround at the Ciniza refinery occurred during March and
April 1994, and the next major turnaround is scheduled for early in the second
quarter of 1998. A four-week major turnaround was completed at the Bloomfield
refinery during the second quarter of 1997. Unscheduled maintenance shutdowns
also occur, but the Company believes that the record of both refineries with
respect to unscheduled maintenance shutdowns is generally good compared with the
industry as a whole.
RAW MATERIAL SUPPLY
The Company's refineries primarily process a mixture of high gravity, low
sulfur crude oil, condensate and NGLs. The locally produced, high quality crude
oil known as Four Corners Sweet is the primary feedstock for the refineries.
Although the Company currently obtains substantially all of its crude oil supply
from the Four Corners area, the refineries supplement their supply of crude oil
with ANS crude oil, transported from the West Coast through the Company's
gathering system's interconnection with the Four Corners and Texas-New Mexico
pipeline systems, which together can transport approximately 65,000 barrels
46
<PAGE> 50
per day. The Ciniza refinery also has access to West Texas Intermediate and
other lesser known crude oils by rail, should the need arise and should economic
conditions allow the use of such alternate crude oils.
The Company believes that local crude oil production currently approximates
98% of aggregate local crude oil demand and that the supply of crude oil and
condensate in the Four Corners is improving as a result of enhanced recovery
programs and increased drilling activities by major oil companies in the area.
Based on projections of local crude oil availability from the field and current
levels of usage of ANS (which are limited to 1,500 bpd by the refineries'
configurations), the Company believes an adequate supply of crude oil and other
feedstocks will be available from local producers, crude oil sourced through
common carrier pipelines and other sources to sustain refinery operations for
the foreseeable future at substantially the levels currently being experienced.
However, there is no assurance that this situation will continue.
The Company continues to evaluate other supplemental crude oil supply
alternatives for its refineries on both a short-term and long-term basis. Among
other alternatives, the Company has considered making additional equipment
modifications to increase its ability to use alternative crude oils and NGLs and
can install additional rail facilities to enable the Company to provide
incremental crude oil and other intermediate feedstocks to supplement local
supply sources in the most cost effective manner. The Company understands that
production of ANS is declining and is aware of proposals that would, at some
time in the future, eliminate the shipping of ANS through the Four Corners
pipeline system. In such event, the Company has identified potential
opportunities for accessing other supplemental crude oil supplies via this
pipeline. In addition, the Four Corners area produces significant amounts of
NGLs, most of which are currently shipped out of the area by pipeline. The
Company is undertaking several projects at its refineries in 1997 to increase
its ability to utilize NGLs, which historically have been lower cost feedstocks
than crude oil. These 1997 projects should increase the amount of natural
gasoline used by the Company's refineries by approximately 2,500 barrels per day
and should result in the production of an equivalent number of barrels per day
of additional gasoline. Any significant long-term interruption in crude oil
supply or the crude oil transportation system, however, would have an adverse
effect on Giant's operations.
If additional supplemental crude oil becomes necessary, the Company intends
to implement then available alternatives as necessary and as is most
advantageous under then prevailing conditions. The Company currently believes
that the most desirable strategy to supplement local crude oil supplies, on a
long-term basis, would be the delivery of supplemental crude oil from outside of
the Four Corners area by pipeline. Such crude oil may be of lesser quality than
locally available crude oils, and the Company believes such crude oil will
generally have a delivered cost greater than that of locally available crude
oil. Implementation of supplemental supply alternatives may result in additional
raw material costs, operating costs, capital costs, or a combination thereof in
amounts which are not presently ascertainable by the Company but which will vary
depending on factors such as the specific alternative implemented, the quantity
of supplemental feedstocks required, and the date of implementation.
Implementation of some supply alternatives requires the consent or cooperation
of third parties and other considerations beyond the control of the Company.
Crude oil is acquired from a number of sources, including major oil
companies and large and small independent producers, under arrangements which
contain market-responsive pricing provisions. Many of these arrangements are
subject to cancellation by either party or have terms that are not in excess of
one year. In addition, these arrangements are subject to periodic renegotiation.
A portion of the refineries' purchases are structured as exchange agreements. In
such exchanges, purchases are made in conjunction with matching sales to the
supplier at other domestic locations, as may be negotiated periodically. The
effect of such arrangements is to make a portion of the cost of the refineries'
supply dependent upon market conditions in other locations, which may differ
from those pertaining to the Four Corners area.
In addition to crude oil, the Ciniza refinery currently can process
approximately 5,200 barrels per day of NGLs, consisting of natural gasoline,
normal butane and isobutane. NGLs are used as gasoline blending components and
to supply the isomerization and alkylation units. NGLs increase the percentage
of gasoline and the octane levels that the refinery can produce, which typically
increase the Company's refining margins. NGLs further enhance refinery margins
because the Company has historically been able to purchase NGLs at lower costs
per barrel than crude oil.
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An adequate supply of NGLs is available for delivery to the Ciniza
refinery, primarily through a Company-owned pipeline connecting the Ciniza
refinery to NGL fractionation plants operated by third parties. NGLs can also be
transported to the Ciniza refinery by rail or transport truck. The Company
currently acquires substantially all of its NGL feedstocks pursuant to two
long-term agreements with suppliers under which NGLs are made available to the
Company at the fractionation plants. These agreements contain market sensitive
pricing arrangements under which prices are adjusted on a monthly basis.
OXYGENATES
The Company owns a dry mill ethanol processing plant in Portales, New
Mexico. The ethanol plant has the capacity to produce approximately 14.0 million
gallons of ethanol per year, 137,000 tons of protein-enriched cattlefeed and
beverage quality carbon dioxide. Ethanol is an oxygenate which can be used as a
gasoline blending component. Oxygenates are oxygen-containing compounds that can
be used as a motor vehicle fuel supplement to reduce motor vehicle carbon
monoxide emissions. The use of gasoline containing oxygenates has been
government-mandated in a number of metropolitan areas near Giant's operations.
On October 2, 1995, the Company announced the suspension of operations at
the Portales facility due to high grain costs. The Company anticipates that it
will be able to purchase sufficient quantities of oxygenates from third parties
at acceptable prices during the period the plant's operations are suspended. The
Company is currently evaluating when to reopen the plant.
TRANSPORTATION
The Company currently supplies all of the refineries' crude oil
requirements through its truck transports and 300-mile pipeline gathering
system, which directly reaches local producing regions and connects with the
Four Corners and Texas-New Mexico common carrier crude oil pipelines. Access to
the common carrier pipelines reduces the potential impact of any local crude oil
supply interruption. The Ciniza refinery receives NGLs through a 13-mile Company
owned pipeline connected to a natural gas liquids fractionation plant.
MARKETING AND DISTRIBUTION
The Four Corners Market. The Company has been active in retail marketing
in the Four Corners for over two decades. This region is characterized by long
distances between metropolitan areas, making transportation and terminalling
costs a significant competitive factor. As a result of this transportation
advantage, Giant has benefited from higher refining margins than those
experienced in the West Coast and Gulf Coast regions of the United States. Giant
markets substantially all of its refined products within a radius of
approximately 150 miles from its refineries. The nearest competing refineries
are located near El Paso, Texas, Artesia, New Mexico and Amarillo, Texas, which
are approximately 360, 370 and 400 miles, respectively, from the Company's
refineries. Substantially all of the Company's products are distributed by
truck. The Company estimates that, during 1996, its gasoline production was
distributed 57% in New Mexico, 28% in Arizona, 10% in Colorado and 5% in Utah;
and its diesel production was distributed 56% in New Mexico, 29% in Arizona, 11%
in Colorado and 4% in Utah. The Company's truck transports support refinery
sales in its primary market as well as its secondary markets. These vehicles
hauled approximately 40% of the refineries' sales barrels in 1996.
Refined Product Sales. During 1996, the Company sold approximately 9.2
million barrels of gasoline and 3.9 million barrels of diesel fuel from its
refineries. The 1997 Acquisitions increased the Company's percentage of refined
products sold through its retail network as compared to refinery sales volumes
from 18% for 1996 to 32% for 1996 on a pro forma basis. In 1996, gasoline and
diesel deliveries made through product exchanges with large oil companies
accounted for approximately 24% of the volume sold by the refineries. The
remaining gasoline and diesel sales were made to wholesalers, retailers and
industrial/commercial customers. Supplementing sales barrels sourced from both
refineries were periodic purchases, for resale, of gasoline and diesel from
other sources. Specific economic and/or market conditions are the major factors
affecting the timing and volume of these resale transactions.
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<PAGE> 52
The Company's other refined products, including military jet fuels, are
marketed to various third party customers.
Marketing. At December 31, 1996, the Company operated 52 service
station/convenience stores located in New Mexico (36), Arizona (15) and Colorado
(1), and a Travel Center located on I-40 adjacent to the Ciniza refinery near
Gallup, New Mexico. These retail units sold approximately 105.8 million gallons
of gasoline and diesel fuel in 1996 compared to approximately 107.4 million
gallons in 1995, a 1 1/2% decrease. Merchandise sales increased approximately 7%
in 1996, to $49.1 million from $45.7 million. This increase was primarily due to
an aggressive remodeling program, improved merchandising and the addition of
higher volume units with increased merchandising capacity, which replaced lower
volume, underperforming units, which were sold.
Through the acquisition of the Thriftway Stations, the Company acquired an
additional 96 service station/convenience stores located in New Mexico (64),
Arizona (11), Colorado (19) and Utah (2). In 1996, the units acquired had fuel
sales of approximately 73 million gallons and merchandise sales of approximately
$57 million. The Company also acquired seven additional retail locations for
future development, options to purchase 16 service station/convenience stores on
the Navajo, Ute and Zuni Reservations until May 2007, and one-year options to
purchase 45 additional units that are located in Wyoming, Texas and Montana.
In addition, the Company expects to acquire other sites during 1997 to
continue the Company's retail expansion in areas that are consistent with its
strategic refining and marketing objectives. The Company also expects to rebuild
or remodel several stations in 1997.
In 1996, the Company's retail network consisted primarily of modern
high-volume self-serve station/ convenience stores that significantly exceeded
national industry averages in a number of operating and profitability measures,
scoring above the top quartile average in several of these performance measures.
Approximately half of such units were constructed since 1990. In 1996, Giant's
service station/convenience stores averaged monthly gasoline sales of 137,000
gallons, compared to a national average of 82,000 gallons and a top quartile
average of 106,100 gallons. Giant's higher sales volumes were achieved while
maintaining fuel margins substantially greater than industry averages. In 1996,
Giant's service station/convenience stores achieved average fuel margins of 20.1
cents per gallon, compared to a national average of 13.1 cents per gallon and a
top quartile average of 14.5 cents per gallon. With regard to merchandise sales
measures, Giant's service station/convenience stores recorded average monthly
merchandise sales of $74,000, compared to a national average of $62,600.
Management attributes this high level of performance to the Company's focus on
site location, access/design, automation, attractive merchandising and an
emphasis on value-added customer service. During 1996, the Company remodeled 28
units and continued its program to install credit card readers in dispensers at
its higher volume units. Card readers were installed at eight units and new
product dispensers were installed at two units. In addition, the Company
installed state-of-the-art integrated point of sale equipment at 19 units. The
program to upgrade dispensers and card readers is expected to continue during
1997.
The Company's service stations are augmented with convenience stores at
many locations, which provide items such as general merchandise, beverages, fast
foods, health and beauty aids and automotive products. In 1996, the Retail
Division expanded its proprietary fast food operations in three of its newly
constructed and remodeled units. "The Deli at Giant", now in eight stores,
offers a full-scale deli and fast food menu.
For the six months ended June 30, 1997, the Thriftway Stations, which are
typically smaller and located in less populous areas, averaged monthly gasoline
sales of approximately 50,000 gallons, fuel margins of approximately 17 cents
per gallon and merchandise sales margins of approximately 32%. Giant intends to
implement low cost, high return store upgrades at a number of the recently
acquired locations and to consolidate the eight existing brand names used at
these stores.
Through the acquisition of Phoenix Fuel, the Company acquired Arizona's
largest independent petroleum products distributor. Phoenix Fuel markets
approximately 16,000 bpd of wholesale fuel and approximately 2,000 bpd of
cardlock sales and operates a lubricants distribution business.
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The Company also owns and operates a Travel Center adjacent to the Ciniza
refinery on I-40. The Travel Center provides a direct market for a portion of
the Ciniza refinery's diesel production and allows diesel fuel to be sold at
virtually no incremental transportation cost. In the twelve months ended
December 31, 1996, the Company sold approximately 15.4 million gallons of diesel
fuel at the Travel Center (approximately 18% of the Ciniza refinery's total
diesel production). The Travel Center facility includes 18 high volume diesel
fuel islands, a large truck repair facility and a 29,000 square foot shopping
mall. It also contains a 265 seat full service restaurant, two large convenience
stores, a fast food diner, a 24-hour movie theater, a gift shop, a western wear
and boot shop, a hair salon and other accommodations such as showers, laundry,
security and lighted parking.
EMPLOYEES
The Company and its subsidiaries employed approximately 2,356 persons on
June 30, 1997, including approximately 2,093 full-time and approximately 263
part-time employees. Of these employees, approximately 447 were employed in the
Company's refining and wholesale marketing operations, 1,569 in retail
operations, 210 in Phoenix Fuel's operations, and 130 in
corporate/administrative operations. The Company currently has no labor union
employees.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings. The
Company is a party to ordinary routine litigation incidental to its business.
For additional information see Note 15 to the Consolidated Financial Statements
regarding contingencies and the discussion of certain contingencies contained
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources -- Other."
OTHER MATTERS
COMPETITIVE CONDITIONS
The industry in which the Company is engaged is highly competitive. Many of
the Company's competitors are large, integrated oil companies which, because of
their more diverse operations, larger refineries, stronger capitalization and
better brand name recognition, may be better able than the Company to withstand
volatile industry conditions, including shortages or excesses of crude oil or
refined products or intense price competition at the wholesale and retail level.
Many of these competitors have financial and other resources substantially
greater than those of Giant.
The principal competitive factors affecting the Company's refining and
marketing operations are the quality, quantity and delivered costs of crude oil,
NGLs and other refinery feedstocks, refinery processing efficiencies, refined
product mix, refined product selling prices and the cost of delivering refined
products to markets. Other competitive factors include the ability of
competitors to deliver refined products into the Company's primary market area
by pipeline. The Company's larger competitors have refineries which are located
outside the Four Corners area but which are larger and more efficient than the
Company's refineries and, as a result, have lower per barrel of crude oil
refinery processing costs. In addition to the major and larger integrated oil
companies, the Company competes with independent refiners in Southeastern New
Mexico, West Texas, the Texas Panhandle, Utah, Colorado and Southern California
for selling refined products. Refined products from the Texas and Southeastern
New Mexico refineries can be shipped to Albuquerque, New Mexico, primarily
through two common carrier pipelines, one originating in El Paso, Texas and the
second originating in Amarillo, Texas.
The Company is aware of a number of proposals or industry discussions
regarding product pipeline projects that if and when undertaken and completed
could impact portions of its marketing areas. One of these projects, the
expansion of the ATA Line (formerly called the Emerald Line) into Albuquerque,
is being implemented and is reportedly scheduled for completion in 1997. Another
of these announced projects, which would result in a refined products pipeline
from Southeastern New Mexico to the Four Corners market, is reportedly scheduled
for completion in 1998. The various proposed projects involve new construction
of
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connecting pipelines and in some cases the reversal of existing crude oil or
natural gas liquids pipelines. The completion of some or all of these projects
would result in increased competition by increasing the amount of refined
products available in the Four Corners market areas.
The principal competitive factors affecting the Company's retail marketing
business are location of service stations, product price, product quality,
appearance and cleanliness of service stations, and brand identification.
REGULATORY, ENVIRONMENTAL AND OTHER MATTERS AFFECTING REFINING AND MARKETING
General. The Company's refining and marketing operations are subject to a
variety of federal, state and local health and environmental laws and
regulations governing the discharge of pollutants into the air and water,
product specifications, and the generation, treatment, storage, transportation
and disposal of solid and hazardous waste and materials. The Company believes
its refineries are able to process currently used feedstocks in substantial
compliance with existing environmental laws and regulations. Environmental laws
and regulations have become and are becoming increasingly stringent, and the
Company is aware of regulations which will become effective in the future which
may affect the refining and marketing industry. The following currently appear
to be the most significant of such laws and regulations as they relate to the
Company's operations. Where possible, the Company has attempted to estimate a
range of its costs of compliance based upon its current understanding of such
laws and regulations. The current estimates of costs provided are preliminary
only and actual costs may differ significantly from these estimates.
The Company will be subject to additional environmental regulations adopted
by the Environmental Protection Agency ("EPA") and state and local environmental
agencies to implement the Clean Air Act Amendments of 1990 (the "Amendments").
Among other things, the Amendments require all major sources of hazardous air
pollutants, as well as certain other sources of air pollutants, to obtain state
operating permits. The permits must contain applicable federal and state
emission limitations and standards as well as satisfy other statutory
requirements. All sources subject to the permit program must pay an annual
permit fee. The Company believes that operating permits will be required at both
of its refineries and that it will be able to obtain these permits. Although
additional costs will be incurred in connection with these permits, the Company
does not believe these costs will be material.
The Amendments also require EPA to adopt emission standards for categories
of hazardous air pollutant sources. In accordance with this directive, EPA has
adopted emission standards that apply to hazardous air pollutants emitted by
petroleum refineries. The standards are applicable to emissions from, among
other things, process vents, storage vessels, equipment leaks, wastewater
operations and gasoline loading racks. The Company believes its compliance costs
may be approximately $3.0 million to $3.5 million, which will be incurred over a
period of approximately five years beginning in 1997.
EPA has adopted regulations requiring underground storage tanks that were
installed before December 1988 to be in compliance with specified standards by
December 1998. In particular, steel tanks, and associated steel piping, must be
protected against corrosion and devices must be in place to prevent tank spills
and overfills. Underground storage tanks that were installed after December 1988
already are subject to these requirements. The underground storage tanks at
approximately 40 sites (the majority of which were acquired in the 1997
Acquisitions) do not satisfy the 1998 standards. The Company anticipates that
necessary modifications will cost approximately $600,000, and that it will be in
compliance with the 1998 standards by their effective date (December 22, 1998).
The Arizona Legislature has mandated the use of reformulated gasolines in
Maricopa County, Arizona effective July 1997. The Company currently owns and
operates six service station/convenience stores in Maricopa County and, with the
Phoenix Fuel Acquisition, has acquired other retail/wholesale marketing
operations, some of which also are located in Maricopa County. The Company does
not currently manufacture reformulated gasoline because it is not mandated in
its primary market area. The Company could manufacture reformulated gasoline by
making certain capital improvements at its refineries. The Company does not
believe the mandate will have a material impact on current or future operations.
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The Company from time to time needs to obtain new environmental permits or
modifications to existing permits. Although there can be no assurance that the
Company will be able to obtain all required permits and permit modifications,
the Company does not presently anticipate any unusual problems in obtaining the
necessary permits and permit modifications, nor does it anticipate any
significant problems in connection with the renewal of existing permits prior to
their expiration.
Rules and regulations implementing federal, state and local laws relating
to health and the environment will continue to affect operations of the Company.
The Company cannot predict what additional health and environmental legislation
or regulations will be enacted or become effective in the future or how existing
or future laws or regulations will be administered or interpreted with respect
to products or activities to which they have not been applied previously.
Compliance with more stringent laws or regulations, as well as more vigorous
enforcement policies of regulatory agencies, could have an adverse effect on the
financial position and the results of operations of the Company and could
require substantial expenditures by the Company for the installation and
operation of pollution control or other environmental systems and equipment not
currently possessed by the Company.
As is the case with all companies engaged in similar industries, the
Company faces significant exposure from actual or potential claims and lawsuits
involving environmental matters. These matters include soil and water
contamination, air pollution and personal injuries or property damage allegedly
caused by substances manufactured, handled, used, released or disposed of by the
Company. Future expenditures related to health and environmental matters cannot
be reasonably quantified in many circumstances for various reasons, including
the speculative nature of remediation and cleanup cost estimates and methods,
imprecise and conflicting data regarding the hazardous nature of various types
of substances, the number of other potentially responsible parties involved,
various defenses which may be available to the Company and changing
environmental laws and interpretations of environment laws.
Notices of Violations. Notices of Violations and similar governmental
notices ("NOVs") are issued by governmental authorities and may allege
violations of environmental requirements. The Company has received a NOV, dated
February 9, 1993, from the New Mexico Environment Department ("NMED") alleging
that the Company failed to comply with certain notification requirements
contained in one of the permits applicable to the Ciniza refinery's land
treatment facility. As a result, the Company has submitted a proposal for
closure of the land treatment facility. Although there can be no assurance that
such will be the case, the Company anticipates that NMED will approve the
proposal later this year. NMED has indicated that it probably will not require
the Company to undertake any cleanup activities if the land treatment facility
is closed, although periodic monitoring and site maintenance could be required.
The Company has not disposed of any hazardous waste at the land treatment
facility since 1990.
The Company has received other NOVs from time to time. The Company has
responded or intends to respond to all such matters. The Company does not
believe any such matters to be material.
Discharges and Releases. Refining, pipeline, trucking and marketing
operations are inherently subject to accidental spills, discharges or other
releases of petroleum or hazardous substances which may give rise to liability
to governmental entities or private parties under federal, state or local
environmental laws, as well as under common law. Accidental discharges of
contaminants have occurred from time to time during the normal course of the
Company's operations, including discharges associated with the Company's
refineries, pipeline and trucking operations. The Company has undertaken,
intends to undertake or has completed all investigative or remedial work thus
far required by governmental agencies to address potential contamination by the
Company.
The Company anticipates that it will incur remediation costs from time to
time in connection with current and former gasoline service stations and other
petroleum product distribution facilities operated by the Company. The Company's
experience has been that such costs generally do not exceed $100,000 per
location, and a portion of such costs may be subject to reimbursement from state
underground storage tank funds.
The Company has discovered hydrocarbon contamination adjacent to a 55,000
barrel crude oil storage tank that was located in Bloomfield, New Mexico. The
Company believes that all or a portion of the tank and
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the 5.5 acres owned by the Company on which the tank was located may have been a
part of a refinery owned by various other parties that ceased operations
approximately thirty-five years ago. The Company completed a site investigation
in 1995, which indicates that contaminated groundwater may extend approximately
300 feet south of the property boundary. Without admitting liability for the
contamination, the Company intends to conduct remediation activities under the
oversight of the New Mexico Oil Conservation Division ("OCD"). The Company has
approximately $250,000 accrued as an environmental reserve in relation to this
site, of which approximately $200,000 still remains.
Although the Company has invested substantial resources to prevent future
accidental discharges and to remediate contamination resulting from prior
discharges, there can be no assurance that accidental discharges will not occur
in the future, that future action will not be taken in connection with past
discharges, that governmental agencies will not assess penalties against the
Company in connection with any past or future contamination, or that third
parties will not assert claims against the Company for damages allegedly arising
out of any past or future contamination.
Farmington Property/Lee Acres Landfill. In 1973, the Company constructed
the Farmington refinery which was operated until 1982. The Company became aware
of soil and shallow groundwater contamination at this facility in 1985. The
Company hired environmental consulting firms to investigate the contamination
and undertake remedial action. The consultants identified several areas of
contamination in the soils and shallow groundwater underlying the Farmington
property. A consultant to the Company has indicated that contamination
attributable to past operations at the Farmington property has migrated off the
refinery property, including a hydrocarbon plume that appears to extend no more
than 1,800 feet south of the refinery property. Remediation activities are
ongoing by the Company under OCD's supervision. The Company has reserved
approximately $1 million for possible environmental expenditures relating to its
Farmington property, of which approximately $700,000 still remains.
The Farmington property is located adjacent to the Lee Acres Landfill (the
"Landfill"), a closed landfill formerly operated by San Juan County which is
situated on lands owned by the United States Bureau of Land Management ("BLM").
Industrial and municipal wastes were disposed of in the Landfill by numerous
sources. During the period that it was operational, the Company disposed of
office trash, maintenance shop trash, used tires and water from the Farmington
refinery's evaporation pond at the Landfill.
The Lee Acres Landfill was added to the National Priorities List as a
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
Superfund site in 1990. In connection with this listing, EPA defined the site as
the Landfill and the Landfill's associated groundwater plume. EPA excluded any
releases from the Farmington refinery itself from the definition of the site. In
May 1991, EPA notified the Company that it may be a potentially responsible
party under CERCLA for the release or threatened release of hazardous
substances, pollutants or contaminants at the Landfill.
In September 1996, BLM made its proposed plan of action for the Landfill
available to the public. Remediation alternatives examined by BLM in connection
with the development of its proposed plan ranged in projected cost from no cost
to approximately $14.5 million. BLM is proposing the adoption of a remedial
action alternative that it believes would cost approximately $3.9 million to
implement. BLM's $3.9 million cost estimate is based on certain assumptions
which may or may not prove to be correct and is contingent on confirmation that
remedial actions, once implemented, are adequately addressing Landfill
contamination. BLM has received public comment on its proposed plan. The Company
understands that BLM, EPA and NMED intend to consult to select the final remedy
for the site.
Based on current information, the Company does not believe it needs to
record a liability in relation to the BLM's proposed plan. In 1989, a consultant
to the Company estimated, based on various assumptions, that the Company's
potential liability could be approximately $1.2 million. This figure was based
upon estimated Landfill remediation costs significantly higher than those being
proposed by BLM. The figure also was based on the consultant's evaluation of
such factors as available clean-up technology, BLM's involvement at the site and
the number of other entities that may have had involvement at the site. The
consultant, however, did not conduct an analysis of any potential legal defenses
and arguments including possible setoff rights. Potentially responsible party
liability is joint and several, such that a responsible party may be liable for
all of the clean-up
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costs of a site even though the party was responsible for only a small part of
such costs. Actual liability, if any, may differ significantly from the
consultant's estimate.
BLM may assert claims against the Company and others for reimbursement of
investigative, cleanup and other costs incurred by BLM in connection with the
Landfill and surrounding areas. It is also possible that the Company will assert
claims against BLM in connection with contamination that may be originating from
the Landfill. Private parties and other governmental entities may also assert
claims against BLM, the Company and others for property damage, personal injury
and other damages allegedly arising out of any contamination originating from
the Landfill and the Farmington property. Parties also may request judicial
determination of their rights and responsibilities, and the rights and
responsibilities of others, in connection with the Landfill and the Farmington
property. Currently, however, there is no outstanding litigation against the
Company by BLM or any other party.
Bloomfield Refinery. In connection with the acquisition of the Bloomfield
refinery, the Company assumed certain environmental obligations, including
Bloomfield Refining Company's ("BRC") obligations under an Administrative Order
issued by EPA in 1992 pursuant to RCRA (the "Order"). The Order required BRC to
investigate and propose measures for correcting any releases of hazardous waste
or hazardous constituents at or from the Bloomfield refinery. The Company has
established an environmental reserve of $2.25 million in connection with this
matter, of which approximately $2.0 million remains.
Rights-Of-Way. Certain irregularities in title may exist with respect to a
limited number of the Company's rights-of-way or franchises for its crude oil
pipeline gathering system. The Company, however, has continued its use of the
entirety of its pipeline gathering system. As of this date, no claim stemming
from any right-of-way or franchise matter has been asserted against the Company.
The Company does not believe that its use or enjoyment of the pipeline gathering
system will be adversely affected by any such right-of-way matters or
irregularities in title.
Taxes. The Company is subject, on an ongoing basis, to audit of various
federal, state, local and tribal taxes. These audits may result in assessments
or refunds along with interest and penalties. In some cases the jurisdictional
basis of the taxing authority is in dispute and is the subject of litigation or
administrative appeals. In one such case, the Company has produced crude oil and
natural gas, or purchases crude oil as a first purchaser, from properties
located in a geographic area outside the boundaries of the Navajo Indian
Reservation in which the Navajo Nation has asserted the right to impose
severance and other taxes. A portion of the Company's pipeline gathering system
also is located in this geographic area. The extent of the Nation's taxing
authority in the geographic area is subject to doubt. The Company has received
several tax assessments from the Nation pertaining to the geographic area,
including a $1.8 million severance tax assessment issued in November 1991. The
Company has invoked its appeal rights with the Nation's Tax Commission in
connection with these matters and intends to oppose the severance tax
assessment. The Company believes that it is in substantial compliance with the
laws applicable to the disputed area and, therefore, it has accrued a liability
in regards thereto for substantially less than the amount of the original
assessment. It is possible that the Company's assessments will have to be
litigated by the Company before final resolution. The Company also may receive
further tax assessments. The Company intends to continue purchasing activities
in the geographic area.
DISCONTINUED OIL AND GAS OPERATIONS
In early 1996, the Company approved a plan of disposition for its oil and
gas operations. The decision was based upon management's review of the prospects
for this operation, which indicated that substantial new capital would be
necessary to further develop this business and reach an acceptable level of
profitability and integration. On August 30, 1996, the Company sold
substantially all of its oil and gas assets to Central Resources, Inc. ("CRI"),
a privately owned oil and gas company based in Denver, Colorado, for $25.5
million. The Company retained its ownership in natural gas wells located in San
Juan County, New Mexico which qualified for federal coal seam gas tax credits
under Section 29 of the Internal Revenue Code. Future Section 29 tax credits,
estimated to be approximately $3.2 million, generated from natural gas
production will be realized by the Company and, when earned, will be used to
offset income taxes payable through the year
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2002. These wells are subject to a production payment to CRI, under which the
natural gas reserves related to these wells will be produced for the benefit of
CRI, as well as a "suboperating" agreement under which CRI assumes substantially
all of the responsibilities and risks of operation of the wells. Additionally,
the Company retained an office building located at 2200 Bloomfield Highway,
Farmington, New Mexico.
DESCRIPTION OF THE 9 3/4% NOTES
The following summary of certain provisions of the indenture (the "1993
Indenture") relating to the 9 3/4% Notes is qualified in its entirety by
reference to the 1993 Indenture, a copy of which is available upon request to
the Company. Capitalized terms used below and not defined have the meanings
assigned to them in the 1993 Indenture.
In November 1993, the Company issued $100 million aggregate principal
amount of 9 3/4% Notes under the 1993 Indenture. The 9 3/4% Notes are senior
subordinated unsecured obligations of the Company that rank subordinate to all
then existing and future Senior Indebtedness of the Company and its
subsidiaries. The Exchange Notes will rank pari passu with the 9 3/4% Notes. The
9 3/4% Notes are unconditionally guaranteed, jointly and severally, on a senior
subordinated basis, by each of the Company's subsidiaries. The 9 3/4% Notes
mature on November 15, 2003.
The 9 3/4% Notes are redeemable, in whole or in part, on or after November
15, 1998 at the option of the Company at the redemption prices (expressed as
percentages of the principal amount of the 9 3/4% Notes) set forth below, plus,
in each case, accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the 12-month period beginning November 15 of each of
the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
----------------------------------------------------- ---------
<S> <C>
1998................................................. 104.875%
1999................................................. 103.250%
2000................................................. 101.625%
2001 and thereafter.................................. 100.000%
</TABLE>
In addition, upon a Change of Control, the Company must offer to purchase
all of the 9 3/4% Notes at 101% of the principal amount thereof, plus accrued
interest, if any, to the date of purchase.
The 1993 Indenture contains restrictive covenants, events of default and
other provisions substantially similar to those for the Exchange Notes being
offered by this Prospectus. See "Description of the Exchange Notes."
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued pursuant to an Indenture dated as of
August 26, 1997 (the "Indenture") among the Company, the Subsidiary Guarantors
and The Bank of New York, as trustee (the "Trustee"). The following is a summary
of material provisions of the Indenture. The following summaries of certain
provisions of the Exchange Notes and the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
Exchange Notes and the Indenture, including the definitions therein of certain
capitalized terms used but not defined herein. For the definitions of certain
capitalized terms, see "Certain Definitions" below. For purposes of this
Description of the Exchange Notes, the term the "Company" means Giant
Industries, Inc., but not any of the subsidiaries, unless the context otherwise
requires. A copy of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
Each Exchange Note will mature on September 1, 2007 and will bear interest
at the rate per annum stated on the cover page hereof from September 1, 1997,
payable semiannually on March 1 and September 1 of each year, commencing March
1, 1998, to the person in whose name the Exchange Note is registered at the
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close of business on the April 15 or August 15 preceding such interest payment
date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Principal and interest will be payable at the offices of the Trustee and
the Paying Agent, provided that, at the option of the Company, payment of
interest will be made by check mailed to the address of the person entitled
thereto as it appears in the register of the Exchange Notes maintained by the
Registrar. The aggregate principal amount of the Exchange Notes that may be
issued will be limited to $150,000,000. The Exchange Notes will be transferable
and exchangeable at the office of the Registrar or any co-registrar and will be
issued in fully registered form, without coupons, in denominations of $1,000 and
any whole multiple thereof. The Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection with certain
transfers and exchanges.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes will be issued in the form of a Global Exchange Note
except as described below. The Global Exchange Note will be deposited with, or
on behalf of, the Depositary and registered in the name of the Depositary or its
nominee. Except as set forth below, the Global Exchange Note may be transferred,
in whole and not in part, only to the Depositary or another nominee of the
Depositary. Investors may hold their beneficial interests in the Global Exchange
Note directly through the Depositary if they have an account with the Depositary
or indirectly through organizations which have accounts with the Depositary.
Exchange Notes that are (i) originally issued to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) that are not qualified institutional buyers or (ii) issued as described
below under "Certificated Exchange Notes" will be issued in definitive form.
Upon the transfer of an Exchange Note in definitive form, such Exchange Note
will, unless the Global Exchange Note has previously been exchanged for Exchange
Notes in definitive form, be exchanged for an interest in the Global Exchange
Note representing the principal amount of Exchange Notes being transferred.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of institutions that have accounts
with the Depositary ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depositary's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.
Upon the issuance of the Global Exchange Note, the Depositary will credit,
on its book-entry registration and transfer system, the principal amount of the
Exchange Notes represented by such Global Exchange Note to the accounts of
participants. The accounts to be credited shall be designated by the Initial
Purchasers of such Exchange Notes. Ownership of beneficial interests in the
Global Exchange Note will be limited to participants or persons that may hold
interest through participants. Ownership of beneficial interests in the Global
Exchange Note will be shown on, and the transfer of those ownership interests
will be effected only through, records maintained by the Depositary (with
respect to participants' interests) and such participants (with respect to the
owners of beneficial interests in the Global Exchange Note other than
participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Exchange Note.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Exchange Note, the Depositary or such nominee, as the case
may be, will be considered the sole legal owner and holder of the related
Exchange Notes for all purposes of such Exchange Notes and the Indenture. Except
as set forth
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below, owners of beneficial interests in the Global Exchange Note will not be
entitled to have the Exchange Notes represented by the Global Exchange Note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated Exchange Notes in definitive form and will not be
considered to be the owners or holders of any Exchange Notes under the Global
Exchange Note. The Company understands that under existing industry practice, in
the event an owner of a beneficial interest in the Global Exchange Note desires
to take any action that the Depositary, as the holder of the Global Exchange
Note, is entitled to take, the Depositary would authorize the participants to
take such action, and that the participants would authorize beneficial owners
owning through such participants to take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Payment of principal of and interest on Exchange Notes represented by the
Global Exchange Note registered in the name of and held by the Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner and holder of the Global Exchange Note.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal of or interest on the Global Exchange Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Exchange
Note as shown on the records of the Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Exchange Note held through such participants will be governed by standing
instructions and customary practices and will be the responsibility of such
participants. The Company will not have any responsibility or liability for any
aspect of the records relating to, or payments made on account of, beneficial
ownership interests in the Global Exchange Note for any Exchange Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between the
Depositary and its participants or the relationship between such participants
and the owners of beneficial interests in the Global Exchange Note owning
through such participants.
Unless and until it is exchanged in whole or in part for certificated
Exchange Notes in definitive form, the Global Exchange Note may not be
transferred except as a whole by the Depositary to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of such
Depositary.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Exchange Note among participants
of the Depositary, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor the Company will have any responsibility for the performance by
the Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED EXCHANGE NOTES
The Exchange Notes represented by the Global Exchange Note are exchangeable
for certificated Exchange Notes in definitive form of like tenor as such
Exchange Notes in denominations of U.S. $1,000 and integral multiples thereof if
(i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Exchange Note or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange Act,
(ii) the Company in its discretion at any time determines not to have all of the
Exchange Notes represented by the Global Exchange Note, or (iii) a default
entitling the holders of the Exchange Notes to accelerate the maturity thereof
has occurred and is continuing. Any Exchange Note that is exchangeable pursuant
to the preceding sentence is exchangeable for certificated Exchange Notes
issuable in authorized denominations and registered in such names as the
Depositary shall direct. Subject to the foregoing, the Global Exchange Note is
not exchangeable, except for a Global Exchange Note of the same aggregate
denomination to be registered in the name of the Depositary or its nominee.
SUBORDINATION OF EXCHANGE NOTES; SUBSIDIARY GUARANTEES
The Indebtedness evidenced by the Exchange Notes will be subordinated to
the prior payment when due of the principal of, premium, if any, and accrued and
unpaid interest on, and all other amounts payable with
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respect to, all existing and future Senior Indebtedness of the Company and pari
passu with, or senior to, in right of payment of principal of, premium, if any,
and accrued and unpaid interest on, all existing and future subordinated
Indebtedness of the Company.
The Indenture provides that, upon any distribution of assets of the Company
in any dissolution, winding up, liquidation or reorganization of the Company,
all holders of Senior Indebtedness must be paid in full before any payment or
distribution is made with respect to the Exchange Notes (except that, subject to
applicable law, holders of Exchange Notes may receive securities that are
subordinated, at least to the same extent as the Exchange Notes, to Senior
Indebtedness and to any securities issued in exchange for any such Senior
Indebtedness). Because of these subordination provisions, unless sufficient sums
are available to pay the holders of the Exchange Notes and the holders of Senior
Indebtedness are paid in full, holders of Senior Indebtedness, as well as
certain creditors of the Company who are not holders of Senior Indebtedness, may
recover more, ratably, than the holders of the Exchange Notes.
The Indenture provides that, upon the maturity of any Senior Indebtedness
by lapse of time, acceleration or otherwise, unless and until all principal
thereof, premium, if any, and interest thereon and other amounts due thereon
shall first be paid in full, no payment shall be made by or on behalf of the
Company with respect to the principal of, premium, if any, interest on or other
amounts owing on the Exchange Notes (except in such subordinated securities, as
described above). Upon the happening of any default in the payment of any
principal of or interest on or other amounts due on any Senior Indebtedness (a
"Payment Default"), unless and until such default shall have been cured or
waived or have ceased to exist, no payment shall be made by or on behalf of the
Company or any Subsidiary Guarantor with respect to the principal of, premium,
if any, interest on or other amounts owing on the Exchange Notes. Upon the
happening of any default or event of default (other than a Payment Default)
(including any event which with the giving of notice or the lapse of time or
both would become an event of default and including any default or event of
default which would result upon any payment with respect to the Exchange Notes)
with respect to any Designated Senior Indebtedness, as such default or event of
default is defined therein or in the instrument or agreement or other document
under which it is outstanding, then upon written notice thereof given to the
Company and the Trustee by a holder or holders of any Designated Senior
Indebtedness or their Representative ("Payment Notice"), no payment shall be
made by or on behalf of the Company or any Subsidiary Guarantor with respect to
the principal of, premium, if any, interest on or other amounts owing on the
Exchange Notes, during the period (the "Payment Blockage Period") commencing on
the date of such receipt of such Payment Notice and ending on the earlier of (i)
the date, if any, on which such default is cured or waived or ceases to exist or
(ii) the date, if any, on which the Designated Senior Indebtedness to which such
default relates is discharged; provided, however, that no default or event of
default (other than a Payment Default) shall prevent the making of any payment
on the Exchange Notes for more than 179 days after the Payment Notice shall have
been given. Notwithstanding the foregoing, (i) not more than one Payment Notice
shall be given within a period of 360 consecutive days, (ii) no event of default
that existed or was continuing on the date of any Payment Notice shall be made
the basis for the giving of a subsequent Payment Notice unless all such events
of default shall have been cured or waived for a period of at least 180
consecutive days after such date, and (iii) if the Company or the Trustee
receives any Payment Notice, a similar notice relating to or arising out of the
same default or facts giving rise to such default (whether or not such default
is on the same issue of Designated Senior Indebtedness) shall not be effective
for purposes of this paragraph.
The Indenture provides that the Company or a Subsidiary Guarantor, as the
case may be, shall resume payments of principal of, premium, if any, and
interest on the Exchange Notes (i) in the case of a Payment Default, upon the
date such Payment Default is cured or waived by the holders of Senior
Indebtedness to which such Payment Default relates and (ii) in the case of a
default or event of default (other than a Payment Default) with respect to
Designated Senior Indebtedness, on the earlier of (A) the date such default or
event of default is cured or (B) the expiration of the Payment Blockage Period
with respect thereto if, in the case of this clause (B), the Indenture otherwise
does not prohibit such payment.
Each of the Company's Subsidiaries existing on the Issue Date will
unconditionally guarantee (the "Guarantees") on a joint and several basis the
Company's obligations to pay principal of, premium, if any, and interest on the
Exchange Notes. The Indenture also provides that each Person that becomes a
Restricted
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Subsidiary after the Issue Date shall guarantee the payment of the Exchange
Notes. Under the terms of the Indenture, a Subsidiary Guarantor may be released
from its Guarantee in the event of the consolidation or merger of such
Subsidiary Guarantor or in the event such Subsidiary Guarantor is sold or
disposed of by the Company, or sells or disposes of all or substantially all of
its assets, to another Person in accordance with the Indenture, as described
below.
Each Subsidiary Guarantor's Guarantee will be subordinate to Senior
Indebtedness of such Subsidiary Guarantor including such Subsidiary Guarantor's
guarantees of Senior Indebtedness of the Company, on the same basis as the
Company's obligations under the Indenture, and the Exchange Notes will be
subordinate to Senior Indebtedness of the Company. The Guarantees will, however,
rank at least on a parity with claims of all unsecured creditors, other than
holders of Senior Indebtedness, of the respective Subsidiary Guarantors;
however, because of the subordination provisions, unless sufficient sums are
available to pay the full amounts required under the Guarantees and to pay the
unsecured creditors of the respective Subsidiary Guarantors, such other
unsecured creditors of the Subsidiary Guarantors may recover more, ratably, than
the holders of the Exchange Notes would recover with respect to the Guarantees.
Each Subsidiary Guarantor will be prohibited from making payments under its
Guarantee if defaults and certain other events with respect to Senior
Indebtedness of a Subsidiary Guarantor have occurred that prohibit the
Subsidiary Guarantor from making payment on the Exchange Notes pursuant to the
Guarantees.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee or pursuant to its contribution obligations under the Indenture,
result in the obligations of such Subsidiary Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal, state
or foreign law. Each Subsidiary Guarantor that makes a payment or distribution
under a Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all of its assets to the Company or another Subsidiary Guarantor
without limitation. The Company may not sell the Capital Stock of a Subsidiary
Guarantor, and a Subsidiary Guarantor may not consolidate with or merge into or
sell all or substantially all of its assets (in a single transaction or series
of related transactions) to any Person other than the Company or another
Subsidiary Guarantor (whether or not affiliated with the Company or any
Subsidiary Guarantor), unless (i) with respect to a consolidation or merger of
such Subsidiary Guarantor, either (A)(1) the surviving entity is a Subsidiary of
the Company or, as a result of the transaction, becomes a Subsidiary of the
Company, (2) the surviving entity remains a Restricted Subsidiary of the Company
or, simultaneously with the consummation of the transaction, is designated as a
Restricted Subsidiary of the Company, (3) immediately after giving effect to
such transaction on a pro forma basis, the Consolidated Tangible Net Worth of
the surviving entity is equal to or greater than the Consolidated Tangible Net
Worth of such Subsidiary Guarantor immediately before such transaction, (4)
immediately after giving effect to such transaction on a pro forma basis, the
Company would be able to incur $1.00 of additional Indebtedness under the test
described in the first paragraph of the covenant captioned "Limitation on
Incurrence of Additional Indebtedness," (5) if the surviving entity is not the
Subsidiary Guarantor, the surviving entity agrees to assume such Subsidiary
Guarantor's Guarantee and all its obligations pursuant to the Indenture, in
accordance with the provisions of the Indenture, and (6) such transaction does
not (x) violate any covenant under the Indenture or (y) result in a Default or
Event of Default immediately thereafter that is continuing or (B)(1) such
transaction is made in accordance with the covenant captioned "Limitation on
Sale of Assets" and (2) such transaction does not (x) violate any other covenant
under the Indenture or (y) result in a Default or Event of Default immediately
thereafter that is continuing, and (ii) with respect to the sale of the Capital
Stock or all or substantially all of the assets of such Subsidiary Guarantor,
(A) such transaction is made in accordance with the covenant captioned
"Limitation on Sale of Assets" and (B) such transaction does not (x) violate any
other covenants under the Indenture or (y) result in a Default or Event of
Default immediately thereafter that is continuing. A Subsidiary Guarantor may be
released from its Guarantee and its
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related obligations under the Indenture only if (i) the Capital Stock of a
Subsidiary Guarantor is sold to another Person or if such Subsidiary Guarantor
consolidates with, merges into or sells all or substantially all of its assets
to, another Person, in accordance with the requirements of clauses (i)(B) or
(ii) of the preceding sentence or (ii) such Subsidiary Guarantor has been
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary and such designation is made in compliance with the terms of the
Indenture. Except as provided in the preceding sentences a Subsidiary Guarantor
may not otherwise be released from its Guarantee.
As of June 30, 1997, after giving pro forma effect to the sale of the Notes
and the application of the estimated net proceeds therefrom, the Company and its
Subsidiaries would have had approximately $7.3 million of Indebtedness
outstanding ranking senior to the Exchange Notes. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
OPTIONAL REDEMPTION
At any time on or after September 1, 2002, the Company may, at its option,
redeem all or any portion of the Exchange Notes at the redemption prices
(expressed as percentages of the principal amount of the Exchange Notes) set
forth below, plus, in each case, accrued interest thereon to the applicable
redemption date, if redeemed during the 12-month period beginning September 1 of
the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
----------------------------------------------- ----------
<S> <C>
2002........................................... 104.5%
2003........................................... 103.0%
2004........................................... 101.5%
2005 and thereafter............................ 100.0%
</TABLE>
In addition, at any time on or prior to September 1, 2000, the Company may,
at its option, redeem up to 35% of the aggregate principal amount of the
Exchange Notes originally issued with the net cash proceeds of one or more
Public Equity Offerings (as defined) at a redemption price equal to 109% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of redemption, provided that at least 65% of the aggregate initial principal
amount of the Exchange Notes remain outstanding after giving effect to each such
redemption. In order to effect the foregoing redemption, the Company must mail
notice of redemption no later than 60 days after the related Public Equity
Offering and must consummate such redemption within 90 days of the closing of
the Public Equity Offering.
If less than all of the Exchange Notes are to be redeemed, the Trustee
shall select pro rata or by lot the Exchange Notes to be redeemed in multiples
of $1,000. Exchange Notes in denominations larger than $1,000 may be redeemed in
part.
MANDATORY REDEMPTION
The Exchange Notes will not be entitled to the benefit of sinking fund or
other mandatory redemption provisions.
CHANGE OF CONTROL
The Indenture provides that, within 30 days following the occurrence of any
Change of Control, the Company will offer (a "Change of Control Offer") to
purchase all outstanding Exchange Notes at a purchase price equal to 101% of the
aggregate principal amount of the Exchange Notes, plus accrued and unpaid
interest to the date of purchase. The Change of Control Offer shall be deemed to
have commenced upon mailing of the notice described in the Indenture and shall
terminate 20 business days after its commencement, unless a longer offering
period is then required by law. Promptly after the termination of the Change of
Control Offer (the "Change of Control Payment Date"), the Company shall purchase
and mail or deliver payment for all Exchange Notes tendered in response to the
Change of Control Offer.
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The Company, to the extent applicable and if required by law, will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and any other federal and state
securities laws, rules and regulations which may then be applicable to any offer
by the Company to purchase the Exchange Notes at the option of the Holders upon
a Change of Control.
"Change of Control" means any event or series of events by which (i) any
"Person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act) of 50% or more of the total voting power of the Voting Stock
of the Company; (ii) the Company consolidates with or merges or amalgamates with
or into another Person or conveys, transfers, or leases all or substantially all
of its assets to any Person, or any Person consolidates with, or merges or
amalgamates with or into the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed into
or exchanged for cash, securities or other property, other than any such
transaction where (A) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving corporation which is not
Disqualified Stock and (B) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving corporation immediately after
such transaction; (iii) the stockholders of the Company approve any plan of
liquidation or dissolution of the Company; or (iv) during any period of 12
consecutive months, individuals who at the beginning of such period constituted
the Board of Directors of the Company (or whose appointment or nomination for
election by the stockholders of the Company was approved by a vote of not less
than a majority of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
It is expected that any agreements with respect to Senior Indebtedness the
Company may enter into would prohibit the repurchase of Indebtedness
subordinated to Indebtedness thereunder, which would include the Exchange Notes.
Failure of the Company to repurchase the Exchange Notes validly tendered to the
Company pursuant to a Change of Control Offer would create an Event of Default
with respect to the Exchange Notes. In addition, the subordination provisions of
the Indenture prohibit, subject to certain conditions, the repurchase or
repayment of the Exchange Notes if there is a default under Senior Indebtedness.
As a result, the Company may be prohibited from making payment upon a Change of
Control. The definition of Change of Control includes any event by which the
Company conveys, transfers or leases all or substantially all of its assets to
any Person; the phrase "all or substantially all" is subject to applicable legal
precedent and as a result in the future there may be uncertainty as to whether a
Change of Control has occurred.
CERTAIN COVENANTS
Limitation on Incurrence of Additional Indebtedness. The Indenture
provides that the Company will not, and will not permit any of its Restricted
Subsidiaries, directly or indirectly, to issue, incur, assume, guarantee, become
liable, contingently or otherwise, with respect to or otherwise become
responsible for the payment of (collectively, "incur") any Indebtedness;
provided, however, that if no Default or Event of Default shall have occurred
and be continuing at the time or as a consequence of the incurrence of such
Indebtedness, the Company or its Restricted Subsidiaries may incur Indebtedness
if, on a pro forma basis, after giving effect to such incurrence and the
application of the proceeds therefrom, the Consolidated Coverage Ratio would
have been equal to or greater than 2.0 to 1.0.
Notwithstanding the foregoing, (i) the Company may incur Indebtedness
consisting of the Notes and Exchange Notes; (ii) the Subsidiary Guarantors may
incur the Guarantees of the Notes and Exchange Notes; (iii) the Company or any
Subsidiary may incur secured or unsecured Indebtedness outstanding at any time
in an aggregate principal amount not to exceed the greater of (A) $40 million or
(B) the Borrowing Base; (iv) the Company may incur Permitted Company Refinancing
Indebtedness; (v) any Restricted Subsidiary may incur Permitted Subsidiary
Refinancing Indebtedness; and (vi) the Company may incur Indebtedness to any
Restricted Subsidiary, and any Restricted Subsidiary may incur Indebtedness to
the Company or to any Restricted Subsidiary of the Company.
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Any Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be incurred by such Restricted Subsidiary at the
time it becomes a Restricted Subsidiary.
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, make any Restricted Payment, unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(ii) at the time of and immediately after giving effect to such
Restricted Payment, the Company would be able to incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of the covenant
captioned "Limitation on Incurrence of Additional Indebtedness"; and
(iii) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made after the
Issue Date does not exceed the sum of (A) 50% of the Consolidated Net
Income of the Company and its Restricted Subsidiaries (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such deficit)
during the period (treated as one accounting period) subsequent to
September 30, 1997 and ending on the last day of the fiscal quarter
immediately preceding the date of such Restricted Payment; (B) the
aggregate Net Cash Proceeds, and the fair market value of property other
than cash (as determined in good faith by the Company's Board of Directors
and evidenced by a Board Resolution), received by the Company during such
period from any Person other than a Restricted Subsidiary of the Company as
a result of the issuance or sale of Capital Stock of the Company (other
than any Disqualified Stock), other than in connection with the conversion
of Indebtedness or Disqualified Stock; (C) the aggregate Net Cash Proceeds,
and the fair market value of property other than cash (as determined in
good faith by the Company's Board of Directors and evidenced by a Board
Resolution), received by the Company during such period from any Person
other than a Restricted Subsidiary of the Company as a result of the
issuance or sale of any Indebtedness or Disqualified Stock to the extent
that at the time the determination is made such Indebtedness or
Disqualified Stock, as the case may be, has been converted into or
exchanged for Capital Stock of the Company (other than Disqualified Stock);
(D) (1) in case any Unrestricted Subsidiary has been redesignated a
Restricted Subsidiary, an amount equal to the lesser of (x) the book value
(determined in accordance with GAAP) at the date of such redesignation of
the aggregate Investments made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary and (y) the fair market value
of such Investments in such Unrestricted Subsidiary at the time of such
redesignation, as determined in good faith by the Company's Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution; or (2) in case any Restricted Subsidiary has been redesignated
an Unrestricted Subsidiary, minus the greater of (x) the book value
(determined in accordance with GAAP) at the date of redesignation of the
aggregate Investments made by the Company and its Restricted Subsidiaries
in such Restricted Subsidiary and (y) the fair market value of such
Investments in such Restricted Subsidiary at the time of such
redesignation, as determined in good faith by the Company's Board of
Directors, whose determination shall be conclusive and evidenced by a
resolution of such Board; (E) without duplication, with respect to any
Investment (other than a Permitted Investment) of any Person which has
previously been made by the Company or any of its Restricted Subsidiaries,
the amount of any such Investment that has been fully and unconditionally
repaid to the Company or a Restricted Subsidiary, not to exceed the cash
amount received by the Company or such Restricted Subsidiary upon such
repayment, or with respect to any Indebtedness of any Person that has
previously been guaranteed by the Company or any of its Restricted
Subsidiaries (other than the Notes, the Exchange Notes or the Subsidiary
Guarantees), the amount of any such Indebtedness that has been fully and
unconditionally released from any and all further obligation or liability
with respect thereto, provided in each case that such amount shall not
exceed the aggregate amount of Restricted Payments previously taken into
account with respect to such amount for purposes of determining the
aggregate amount of all Restricted Payments declared or made after the
Issue Date pursuant to this clause(iii); and (F) $30 million.
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Notwithstanding the foregoing, the above limitations will not prevent (i)
the payment of any dividend within 60 days after the date of declaration
thereof, if at such date of declaration such payment complied with the
provisions of the Indenture; (ii) the purchase, redemption, acquisition or
retirement of any shares of Capital Stock of the Company in exchange for, or out
of the net proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, other shares of Capital Stock (other
than Disqualified Stock) of the Company; or (iii) the defeasance, redemption or
retirement of Indebtedness of the Company which is pari passu or subordinate in
right of payment to the Exchange Notes, in exchange for, by conversion into, or
out of the net proceeds of the substantially concurrent issue or sale (other
than to a Restricted Subsidiary of the Company) of Capital Stock (other than
Disqualified Stock) of the Company; provided that no Default or Event of Default
has occurred and is continuing at the time, or shall occur as a result, of any
of the actions contemplated in clause (i) above.
Limitation on Sale of Assets. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, make any Asset Sales
which, in the aggregate, have a fair market value of $10 million or more in any
12-month period unless:
(i) the Company (or its Restricted Subsidiaries, as the case may be)
receives consideration at the time of such sale or other disposition at
least equal to the fair market value thereof (as determined in good faith
by the Company's Board of Directors and evidenced by a Board Resolution in
the case of any Asset Sales or series of related Asset Sales having a fair
market value of $15 million or more);
(ii) at least 85% of the proceeds received by the Company (or its
Restricted Subsidiaries, as the case may be) from each such Asset Sale
consists of (A) cash, (B) cash equivalents which would constitute Permitted
Financial Investments, (C) Publicly Traded Stock of a Person primarily
engaged in the Principal Business or (D) any combination of the foregoing;
provided, however, that (1) the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet or
in the notes thereto) of the Company or such Restricted Subsidiary (other
than liabilities that are by their terms expressly subordinated to the
Notes and Exchange Notes or any guarantee thereof) that are assumed by the
transferee of any such assets and (y) any notes or other obligations
received by the Company or any such Restricted Subsidiary from such
transferee that, within 90 days following the closing of such sale or
disposition, are converted by the Company or such Restricted Subsidiary
into cash (to the extent of the cash received), shall be deemed to be cash
for purposes of this provision and (2) the aggregate fair market value (as
determined in good faith by the Board of Directors of the Company,
evidenced by a Board Resolution) of all consideration of the type specified
in clause (C) above received by the Company and its Restricted Subsidiaries
from all Asset Sales after the Issue Date shall not exceed 15% of
Consolidated Net Tangible Assets at the time of such Asset Sale; and
(iii) the Net Available Proceeds received by the Company (or its
Restricted Subsidiaries, as the case may be) from such Asset Sales are
applied in accordance with the two paragraphs following the succeeding
paragraph.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may dispose of property and assets of the Company or its Restricted Subsidiaries
in exchange for capital property and capital assets (i) which are directly
related to the Principal Business, (ii) which are of the same type of property
or assets, or which have the same function, as the properties or assets being
disposed of and (iii) which have an aggregate fair market value equal to or
greater than the aggregate fair market value of the property and assets being
disposed of; provided, however, that (A) in no event may the Company and its
Restricted Subsidiaries, in any 12-month period, dispose of property or assets
pursuant to this paragraph having an aggregate fair market value of $10 million
or more and (B) with respect to any property or assets being disposed of having
a fair market value of $1 million or more, the Board of Directors of the Company
shall have determined, in good faith and evidenced by a Board Resolution, that
the aggregate fair market value of the property and assets being received by the
Company and its Restricted Subsidiaries is equal to or greater than the
aggregate fair market value of the property and assets being disposed of.
The Company may, within 360 days following the receipt of Net Available
Proceeds from any Asset Sale, apply such Net Available Proceeds to: (i) the
repayment of Indebtedness of the Company under the Bank
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Credit Facility or other Senior Indebtedness of the Company or Senior
Indebtedness of a Subsidiary Guarantor that results in a permanent reduction in
the principal amount of such Senior Indebtedness in an amount equal to the
principal amount so repaid or (ii) make an investment in capital assets used in
the Principal Business.
If, upon completion of the 360-day period (the "Trigger Date"), any portion
of the Net Available Proceeds of any Asset Sale shall not have been applied by
the Company as described in clauses (i) or (ii) of the preceding paragraph and
such remaining Net Available Proceeds, together with any remaining net cash
proceeds from any prior Asset Sale (such aggregate constituting "Excess
Proceeds"), exceeds $10 million, then the Company will be obligated to make an
offer (the "Net Proceeds Offer") to purchase from all holders of the Notes and
Exchange Notes and holders of any then outstanding Pari Passu Indebtedness
required to be repurchased or repaid on a permanent basis in connection with an
Asset Sale, an aggregate principal amount of Notes and Exchange Notes and any
then outstanding Pari Passu Indebtedness equal to such Excess Proceeds as
follows:
(1) (i) the Company shall make an offer to purchase (a "Net Proceeds
Offer") from all holders of the Notes and Exchange Notes in accordance with
the procedures set forth in the Indenture the maximum principal amount
(expressed as a multiple of $1000) of Notes and Exchange Notes that may be
purchased out of an amount (the "Net Proceeds Offer Amount") equal to the
product of such Excess Proceeds multiplied by a fraction, the numerator of
which is the outstanding principal amount of the Notes and Exchange Notes
and the denominator of which is the sum of the outstanding principal amount
of the Notes and Exchange Notes and such Pari Passu Indebtedness, if any
(subject to proration in the event such amount is less than the aggregate
Offered Price (as hereinafter defined) of all Notes and Exchange Notes
tendered), and (ii) to the extent required by such Pari Passu Indebtedness
and provided there is a permanent reduction in the principal amount of such
Pari Passu Indebtedness, the Company shall make an offer to purchase such
Pari Passu Indebtedness (the "Pari Passu Offer") in an amount (the "Pari
Passu Indebtedness Amount") equal to the excess of the Excess Proceeds over
the Net Proceeds Offer Amount.
(2) The offer price for the Notes and Exchange Notes shall be payable
in cash in an amount equal to 100% of the principal amount of the Notes and
Exchange Notes tendered pursuant to a Net Proceeds Offer, plus accrued and
unpaid interest, if any, to the date such Net Proceeds Offer is consummated
(the "Offered Price"), in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate Offered Price of the Notes and
Exchange Notes tendered pursuant to a Net Proceeds Offer is less than the
Net Proceeds Offer Amount relating thereto or the aggregate amount of the
Pari Passu Indebtedness that is purchased or repaid pursuant to the Pari
Passu Offer is less than the Pari Passu Indebtedness Amount (such shortfall
constituting a "Net Proceeds Deficiency"), the Company may use such Net
Proceeds Deficiency, or a portion thereof, for general corporate purposes,
subject to the "Limitation on Restricted Payments" covenant.
(3) If the aggregate Offered Price of Notes and Exchange Notes validly
tendered and not withdrawn by holders thereof exceeds the Net Proceeds
Offer Amount, Notes and Exchange Notes to be purchased will be selected on
a pro rata basis. Upon completion of a Net Proceeds Offer and a Pari Passu
Offer, the amount of Excess Proceeds shall be reset to zero.
The Company, to the extent applicable and if required by law, will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E and any
other tender offer rules under the Exchange Act and any other federal and state
securities laws, rules and regulations which may then be applicable to any offer
by the Company to purchase the Exchange Notes at the option of the holders
pursuant to a Net Proceeds Offer.
It is expected that agreements with respect to Senior Indebtedness the
Company may enter into would prohibit the repurchase of Indebtedness
subordinated to Indebtedness thereunder, which would include the Exchange Notes.
Failure of the Company to repurchase the Exchange Notes validly tendered to the
Company pursuant to a Net Proceeds Offer would create an Event of Default with
respect to the Exchange Notes. In addition, the subordination provisions of the
Indenture prohibit, subject to certain conditions, the repurchase
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or repayment of the Exchange Notes if there is a default under Senior
Indebtedness. As a result, the Company may be prohibited from making payment
pursuant to a Net Proceeds Offer in connection with an Asset Sale.
During the period between any Asset Sale and the application of the Net
Available Proceeds therefrom in accordance with this covenant, all Net Available
Proceeds shall be invested in Permitted Financial Investments.
Limitation on Liens Securing Indebtedness. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
create, incur, assume or suffer to exist any Liens (other than Permitted Liens)
upon any of their respective properties securing (i) any Indebtedness of the
Company (other than Senior Indebtedness of the Company), unless the Notes and
Exchange Notes are equally and ratably secured or (ii) any Indebtedness of any
Subsidiary Guarantor (other than Senior Indebtedness of such Subsidiary
Guarantor), unless the Guarantees are equally and ratably secured; provided,
however, that if such Indebtedness is expressly subordinated to the Notes and
Exchange Notes or the Guarantees, the Lien securing such Indebtedness will be
subordinated and junior to any Lien securing the Notes and Exchange Notes or the
Guarantees, with the same relative priority as such subordinated Indebtedness of
the Company or subordinated Indebtedness of a Subsidiary Guarantor will have
with respect to the Notes and Exchange Notes or the Guarantees, as the case may
be.
Limitation on Payment Restrictions Affecting Restricted Subsidiaries. The
Indenture provides that the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary of the Company to (i)
pay dividends or make any other distributions on its Capital Stock or on any
other interest or participation in a Restricted Subsidiary; (ii) pay any
Indebtedness owed to the Company or a Restricted Subsidiary of the Company;
(iii) make loans or advances to the Company or a Restricted Subsidiary of the
Company; or (iv) transfer any of its properties or assets to the Company or a
Restricted Subsidiary of the Company (each, a "Payment Restriction"), except for
(A) encumbrances or restrictions with respect to Senior Indebtedness in effect
on the Issue Date; (B) encumbrances or restrictions under the Bank Credit
Facility; (C) consensual encumbrances or consensual restrictions binding upon
any Person at the time such Person becomes a Restricted Subsidiary of the
Company (unless the agreement creating such consensual encumbrance or consensual
restriction was entered into in connection with, or in contemplation of, such
entity becoming a Subsidiary); (D) customary provisions restricting subletting
or assignment of any lease governing a leasehold interest of any Restricted
Subsidiary; (E) customary restrictions in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements and
mortgages; (F) customary restrictions in purchase money obligations for property
acquired in the ordinary course of business restricting the transfer of the
property acquired thereby; (G) consensual encumbrances or consensual
restrictions under any agreement that refinances or replaces any agreement
described in clauses (A), (B), (C), (D), (E) or (F) above, provided that the
terms and conditions of any such restrictions are no less favorable to the
holders of the Notes and Exchange Notes than those under the agreement so
refinanced or replaced; and (H) any encumbrance or restriction due to applicable
law.
Limitation on Transactions with Affiliates. The Indenture provides that
neither the Company nor any of its Restricted Subsidiaries, directly or
indirectly, shall (i) sell, lease, transfer or otherwise dispose of any of its
properties, assets or securities to, (ii) purchase or lease any property, assets
or securities from, (iii) make any Investment in, or (iv) enter into or amend
any contract or agreement with or for the benefit of, either (A) an Affiliate of
any of them, (B) any Person or Person who is a member of a group (as such term
is used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), that, directly or indirectly, is the beneficial holder of 5% or
more of any class of equity securities of the Company, (C) any Person who is an
Affiliate of any such holder, or (D) any officers, directors, or employees of
any of the above (each case under (A), (B), (C) and (D), an "Affiliate
Transaction"), in one or a series of related transactions (to either party) in
excess of $1 million per Affiliate Transaction, except for transactions
evidenced by an Officers' Certificate addressed and delivered to the Trustee
stating that such Affiliate Transaction is made in good faith, the terms of
which are fair and reasonable to the Company and such Restricted Subsidiary, as
the case may be, or, with respect to Affiliate Transactions between the Company
and
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any of its Subsidiaries, to the Company; provided, that (x) transactions between
or among the Company and any of its Restricted Subsidiaries shall not be deemed
to constitute Affiliate Transactions and (y) with respect to any Affiliate
Transaction with an aggregate value (to either party) in excess of $5 million,
the Company must, prior to the consummation thereof, obtain a written favorable
opinion as to the fairness of such transaction to itself from a financial point
of view from an independent investment banking firm of national reputation.
Limitation on Future Senior Subordinated Indebtedness. The Indenture
provides that the Company will not incur any Indebtedness other than the Notes
and Exchange Notes that is subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness, by its terms, is pari
passu with or subordinated to the Notes and Exchange Notes. No Subsidiary
Guarantor shall incur any Indebtedness other than the Guarantee of such
Subsidiary Guarantor that is subordinated in right of payment to any other
Indebtedness of such Subsidiary Guarantor unless such Indebtedness, by its
terms, is pari passu with or subordinated to the Guarantee of such Subsidiary
Guarantor.
LINE OF BUSINESS
For so long as any Notes or Exchange Notes are outstanding, the Company
shall not, and shall not permit any of its Restricted Subsidiaries to, engage in
any business or activity other than the Principal Business.
LIMITATIONS ON MERGERS AND CONSOLIDATIONS
The Indenture provides that the Company will not consolidate with or merge
with any Person or convey, transfer or lease all or substantially all of its
property to any Person, unless: (i) the Company survives such merger or the
Person formed by such consolidation or into which the Company is merged or that
acquires by conveyance or transfer, or which leases, all or substantially all of
the property of the Company is a corporation organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia and expressly assumes, by supplemental indenture, the due and punctual
payment of the principal of, premium, if any, and interest on, all the Notes and
Exchange Notes and the performance of every other covenant and obligation of the
Company under the Indenture; (ii) immediately before and after giving effect to
such transaction no Default or Event of Default exists; (iii) immediately after
giving effect to such transaction on a pro forma basis, the Consolidated
Tangible Net Worth of the Company (or the surviving or transferee entity) is
equal to or greater than the Consolidated Tangible Net Worth of the Company
immediately before such transaction; and (iv) immediately after giving effect to
such transaction on a pro forma basis, the Company (or the surviving or
transferee entity) would be able to incur $1.00 of additional Indebtedness under
the tests described in the first paragraph of the covenant captioned "Limitation
on Incurrence of Additional Indebtedness." Upon any such consolidation, merger,
lease, conveyance or transfer in accordance with the foregoing, the successor
Person formed by such consolidation or into which the Company is merged or to
which such lease, conveyance or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture with the same effect as if such successor had been named as the
Company therein and thereafter (except in the case of a lease) the predecessor
corporation will be relieved of all further obligations and covenants under the
Indenture and the Exchange Notes.
CERTAIN DEFINITIONS
The following is a summary of certain defined terms used in the Indenture.
Reference is made to the Indenture for the full definition of all such terms and
for the definitions of capitalized terms used herein and not defined below.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of (i) the amount by which the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities of such Subsidiary
Guarantor, including, without limitation, contingent liabilities (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date), but excluding liabilities under the Guarantee of such Subsidiary
Guarantor at such date and (ii) the amount by which the present fair saleable
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value of the assets of such Subsidiary Guarantor at such date exceeds the amount
that will be required to pay the probable liability of such Subsidiary Guarantor
on its debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date and after giving effect to any collection from
any Subsidiary of such Subsidiary Guarantor in respect of the obligations of
such Subsidiary under the Guarantee), excluding debt in respect of the
Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Sale" means any sale, capitalized lease (within the meaning of
GAAP), transfer, exchange or other disposition (or series of related sales,
capitalized leases, transfers, exchanges or dispositions) of shares of Capital
Stock of a Subsidiary (other than directors' qualifying shares), or of property
or assets or any interests therein (each referred to for purposes of this
definition as a "disposition") by the Company or any of its Restricted
Subsidiaries, including any disposition by means of a merger, consolidation or
similar transaction (other than (i) by the Company to a Restricted Subsidiary or
by a Subsidiary to the Company or a Restricted Subsidiary, (ii) a sale of
inventory or hydrocarbons or other products (including both crude oil and
refined products), in each case in the ordinary course of business of the
Company's operations, (iii) the merger or consolidation of, or the disposition
of all or substantially all of the assets of the Company made in compliance with
the covenant captioned "Limitations on Mergers and Consolidations" and (iv) the
merger or consolidation of a Restricted Subsidiary made in compliance with
clause (i)(A) of the second sentence of the eighth paragraph under the caption
"Subordination of Exchange Notes; Subsidiary Guarantees").
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(A) the number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (B) the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means a revolving credit and/or letter of credit
and/or bankers' acceptance facility the proceeds of which are used for working
capital and other general corporate purposes existing on the Issue Date or
entered into after the Issue Date by one or more of the Company and its
Subsidiaries and one or more financial institutions, as amended, extended or
refinanced from time to time.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized to act on behalf of the Board of Directors of such
Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
85% of the book value of all accounts receivable owned by the Company and its
Restricted Subsidiaries (excluding any accounts receivable from an Affiliate of
the Company or that are more than 90 days past due, less (without duplication)
the allowance for doubtful accounts attributable to such current accounts
receivable) and (ii) 60% of the book value of all inventory owned by the Company
and its Restricted Subsidiaries as of such date, all calculated on a
consolidated basis and in accordance with GAAP. To the extent that information
is not available as to the amount of accounts receivable as of a specific date,
the Company may utilize the most recent available information for purposes of
calculating the Borrowing Base.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock or partnership interests and any and all warrants, options and rights with
respect thereto (whether or not currently exercisable), including each class of
common stock and preferred stock of such Person.
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"Capitalized Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
"Consolidated Coverage Ratio" means, for any Reference Period, the ratio on
a pro forma basis of (i) Consolidated EBITDA for the Reference Period to (ii)
Consolidated Interest Expense for such Reference Period; provided, that, in
calculating Consolidated EBITDA and Consolidated Interest Expense (A) with
respect to any acquisition which occurs during the Reference Period or
subsequent to the Reference Period and on or prior to the date of the incurrence
of Indebtedness or issuance of Disqualified Stock giving rise to the need to
calculate the Consolidated Coverage Ratio (the "Debt Incurrence Date"), such
acquisition shall be assumed to have occurred on the first day of the Reference
Period, (B) with respect to the incurrence of any Indebtedness (including the
sale of the Notes) or issuance of any Disqualified Stock during the Reference
Period or subsequent to the Reference Period and on or prior to the Debt
Incurrence Date, the incurrence of such Indebtedness or the issuance of such
Disqualified Stock shall be assumed to have occurred on the first day of such
Reference Period, (C) any Indebtedness that had been outstanding during the
Reference Period that has been repaid on or prior to the Debt Incurrence Date
shall be assumed to have been repaid as of the first day of such Reference
Period, (D) the Consolidated Interest Expense attributable to interest on any
Indebtedness or dividends on any Disqualified Stock bearing a floating interest
(or dividend) rate shall be computed on a pro forma basis as if the rate in
effect on the Debt Incurrence Date were the average rate in effect during the
entire Reference Period, and (E) in determining the amount of Indebtedness
pursuant to the covenant captioned "Limitation of Incurrence of Additional
Indebtedness," the incurrence of Indebtedness or issuance of Disqualified Stock
giving rise to the need to calculate the Consolidated Coverage Ratio and, to the
extent the net proceeds from the incurrence or issuance thereof are used to
retire Indebtedness, the application of the proceeds therefrom, shall be assumed
to have occurred on the first day of the Reference Period.
"Consolidated EBITDA" means, for any Reference Period, the Consolidated Net
Income of the Company and its Restricted Subsidiaries for such Reference Period,
increased (to the extent deducted in determining Consolidated Net Income) by the
sum of (i) all income taxes of the Company and its Restricted Subsidiaries paid
or accrued according to GAAP for such period (other than income taxes
attributable to extraordinary gains or losses), (ii) all interest expense of the
Company and its Restricted Subsidiaries paid or accrued in accordance with GAAP
for such period (including amortization of original issue discount and other
non-cash interest expense), (iii) depreciation and depletion of the Company and
its Restricted Subsidiaries, (iv) amortization of the Company and its Restricted
Subsidiaries including, without limitation, amortization of capitalized debt
issuance costs; (v) other non-recurring, non-cash charges (excluding any such
non-cash charges to the extent they require an accrual of, or a reserve for,
cash charges for any future periods) to the extent such non-cash charges are
deducted in connection with the determination of Consolidated Net Income and
(vi) extraordinary losses to the extent deducted in connection with the
determination of Consolidated Net Income.
"Consolidated Interest Expense" means, with respect to the Company and its
Restricted Subsidiaries, for any Reference Period, the aggregate amount (without
duplication) of (i) interest expensed in accordance with GAAP (including, in
accordance with the following sentence, interest attributable to Capitalized
Lease Obligations) during such period in respect of all Indebtedness of the
Company and its Restricted Subsidiaries, including (A) amortization of original
issue discount on any Indebtedness, (B) the interest portion of all deferred
payment obligations, calculated in accordance with GAAP, and (C) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptance financing and currency and interest rate swap arrangements, in each
case to the extent attributable to such Reference Period, and (ii) dividend
requirements of the Company and its Restricted Subsidiaries with respect to
Disqualified Stock of the Company or its Restricted Subsidiaries, whether in
cash or otherwise (except dividends paid solely in shares of Qualified Stock),
paid (other than to the Company or any of its Restricted Subsidiaries),
declared, accrued or accumulated during such period, divided by the difference
of one minus the applicable actual combined federal, state, local and foreign
income tax rate of the Company and its Restricted Subsidiaries (expressed as a
decimal), on a consolidated basis, for the four quarters immediately preceding
the date of the transaction
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giving rise to the need to calculate Consolidated Interest Expense, in each case
to the extent attributable to such Reference Period and excluding items
eliminated in consolidation. For purposes of this definition, (i) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (ii) interest expense
attributable to any Indebtedness represented by the guarantee by the Company or
a Subsidiary of the Company of an obligation of another Person shall be deemed
to be the interest expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP,
provided, that (i) the net income for such period of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting will be
included only to the extent of the amount of dividends, payments or
distributions actually paid to the Company or its Restricted Subsidiaries by
such other Person in such period; (ii) the net income for such period of any
Restricted Subsidiary of the Company that is subject to any Payment Restriction
will be included only to the extent of the amount of dividends, payments or
distributions which (A) are actually paid by such Restricted Subsidiary in such
period to the Company (or another Restricted Subsidiary which is not subject to
a Payment Restriction) and (B) are not in excess of the amount which such
Restricted Subsidiary would be permitted to pay to the Company (or another
Restricted Subsidiary which is not subject to a Payment Restriction) in any
future period under the Payment Restrictions applicable to such Restricted
Subsidiary, assuming that the net income of such Restricted Subsidiary in each
future period is equal to the net income for such Restricted Subsidiary for such
period; and (iii) the following will be excluded: (A) the net income (or loss)
of any other Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition, (B) any net gain on the sale or
other disposition by the Company or any of its Restricted Subsidiaries of assets
(other than a sale of inventory or hydrocarbons or other products (including
both crude oil and refined products), in each case in the ordinary course of
business of the Company's operations) and of the Capital Stock of any Restricted
Subsidiary of the Company, (C) extraordinary gains and (D) any ceiling
limitation writedown required in accordance with the full cost accounting method
rules of the SEC.
"Consolidated Net Tangible Assets" means, as of any date, the total assets
of the Company and its Restricted Subsidiaries on a consolidated basis as of
such date (less applicable reserves and other items properly deductible from
total assets) and after deducting therefrom: (i) total liabilities and total
capital items as of such date except the following: items constituting
Indebtedness, paid-in capital and retained earnings, provisions for deferred
income taxes and deferred gains, and reserves which are not reserves for any
contingencies not allocated to any particular purpose; (ii) goodwill, trade
names, trademarks, patents, unamortized debt discount and expense, and other
intangible assets; and (iii) all Investments other than Permitted Investments.
"Consolidated Tangible Net Worth" means, with respect to any Person, as at
any date of the determination, the sum of Capital Stock (other than Disqualified
Stock) and paid-in capital plus retained earnings (or minus accumulated deficit)
minus all intangible assets, including, without limitation, organization costs,
patents, trademarks, copyrights, franchise, research and development costs, and
any amount reflected in treasury stock, of such Person determined on a
consolidated basis in accordance with GAAP.
"Designated Senior Indebtedness" means (i) any Senior Indebtedness of the
Company and/or its Restricted Subsidiaries permitted under the Indenture, the
original principal amount of which is $10 million or more and (ii) the
Indebtedness and/or other obligations under the Bank Credit Facility.
"Disqualified Stock" means any Capital Stock of a Person which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event or with the passage of
time, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the Maturity Date or which is exchangeable
or convertible into debt securities of such Person or any other Person, except
to the extent that such exchange or conversion rights cannot be exercised prior
to the Maturity Date.
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"Exchange Act" means the Securities and Exchange Act of 1934, as amended,
and the rules of and regulations of the SEC thereunder.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America from time to time.
"Indebtedness" means, without duplication, with respect to any Person, (i)
all obligations of such Person (A) in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof), (B) evidenced by bonds, notes, debentures or similar
instruments, (C) representing the balance deferred and unpaid of the purchase
price of any property or services (other than accounts payable or other
obligations arising in the ordinary course of business), (D) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (E) for
the payment of money relating to a Capitalized Lease Obligation, or (F)
evidenced by a letter of credit or a reimbursement obligation of such Person
with respect to any letter of credit; (ii) all net obligations of such Person as
of the date of a required calculation under interest rate swap obligations and
foreign currency hedges; (iii) all liabilities of others of the kind described
in the preceding clauses (i) or (ii) that such Person has guaranteed or that are
otherwise its legal liability; (iv) Indebtedness (as otherwise defined in this
definition) of another Person secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person, the amount of such
obligations being deemed to be the lesser of (A) the full amount of such
obligations so secured, and (B) the fair market value of such asset, as
determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board Resolution of such Person; (v) the
liquidation preference and any mandatory redemption payment obligations in
respect of Disqualified Stock of such Person; and (vi) any and all deferrals,
renewals, extensions, refinancings and refundings (whether direct or indirect)
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii), (iii), (iv), (v), or this
clause (vi), whether or not between or among the same parties.
"Investment" of any Person means (i) all investments by such Person in any
other Person in the form of loans, advances or capital contributions (excluding
advances to employees in the ordinary course of business), (ii) all guarantees
of Indebtedness or other obligations of any other Person by such Person, (iii)
all purchases (or other acquisitions for consideration) by such Person of
Indebtedness, Capital Stock or other securities of any other Person and (iv) all
other items that would be classified as investments or advances on a balance
sheet of such Person prepared in accordance with GAAP.
"Issue Date" means the date on which the Notes were originally issued under
the Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person, and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction).
"Maturity Date" means September 1, 2007.
"Net Available Proceeds" means, with respect to any Asset Sale of any
Person, cash proceeds received (including any cash proceeds received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, and excluding any other consideration
until such time as such consideration is converted into cash) therefrom, in each
case net of all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all federal, state or local taxes required to be
accrued as a liability as a consequence of such Asset Sale, and in each case net
of all Indebtedness which is secured by such assets, in accordance with the
terms of any Lien upon or with respect to such assets, or which must, by its
terms or in order to obtain a necessary consent to such Asset Sale to prevent a
default or event of default under Senior Indebtedness or by applicable law, be
repaid out of the proceeds from such Asset Sale and which is actually so repaid.
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"Net Cash Proceeds" means, in the case of any sale by the Company of
securities pursuant to clauses (B) or (C) of Section (iii) of the covenant
captioned "Limitation on Restricted Payments," the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions, discounts and
any other transaction costs incurred in connection therewith.
"Pari Passu Indebtedness" means the 9 3/4% Notes and any other Indebtedness
of the Company that specifically provides that such Indebtedness is to rank pari
passu with the Notes and Exchange Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Permitted Business Investments" means (i) Investments by the Company or
any Restricted Subsidiary in any Person which immediately prior to the making of
such Investment is a Restricted Subsidiary; (ii) Investments in the Company by
any Restricted Subsidiary; and (iii) Investments by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (A) such Person becomes a Restricted Subsidiary of the Company or (B)
such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys all or substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary of the Company.
"Permitted Company Refinancing Indebtedness" means (i) Indebtedness of the
Company, the terms of which have been amended, modified or supplemented in a
manner that does not (A) affect the priority of such Indebtedness in right of
payment in relation to the Notes and Exchange Notes, (B) accelerate the maturity
of such Indebtedness or (C) shorten the Average Life of such Indebtedness and
(ii) Indebtedness of the Company, the net proceeds of which are used to renew,
extend, refinance, refund or repurchase outstanding Indebtedness of the Company,
provided that (A) if the Indebtedness (including the Notes and Exchange Notes)
being renewed, extended, refinanced, refunded or repurchased is pari passu with
or subordinated in right of payment to the Notes and Exchange Notes, then such
Indebtedness is pari passu with or subordinated in right of payment to, as the
case may be, the Notes and Exchange Notes at least to the same extent as the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, (B)
such Indebtedness is scheduled to mature no earlier than the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, and (C) such
Indebtedness has an Average Life at the time such Indebtedness is incurred that
is equal to or greater than the remaining Average Life of the Indebtedness being
renewed, extended, refinanced, refunded or repurchased; provided, further, that
such Indebtedness (to the extent that such Indebtedness constitutes Permitted
Company Refinancing Indebtedness) is in an aggregate principal amount (or, if
such Indebtedness is issued at a price less than the principal amount thereof,
the aggregate amount of gross proceeds therefrom is) not in excess of the
aggregate principal amount then outstanding of the Indebtedness being renewed,
extended, refinanced, refunded or repurchased (or if the Indebtedness being
renewed, extended, refinanced, refunded or repurchased was issued at a price
less than the principal amount thereof, then not in excess of the amount of
liability in respect thereof determined in accordance with GAAP).
"Permitted Financial Investments" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof, (iii) certificates
of deposit and eurodollar time deposits with maturities of 12 months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
12 months and overnight bank deposits, in each case with any lender party to the
Bank Credit Facility or with any domestic commercial bank having capital and
surplus in excess of $300 million, (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper rated at
least A-2 or the equivalent thereof at the time of purchase by Moody's Investors
Service, Inc. and Standard & Poor's Corporation, and in each case maturing
within 12 months after the date of acquisition, (vi) money market mutual or
similar funds having assets in excess of $100,000,000, and (vii) any debt
securities or adjustable rate preferred stock issued by a corporation organized
under the laws of a state of the United States of America or issued by any
state, county or municipality located within the United States of America which
is rated at least AA- or the equivalent thereof by Moody's Investors Service,
Inc. and Standard & Poor's Corporation and maturing or having a call provision
not exceeding 24 months from the date of acquisition.
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"Permitted Investments" means Permitted Business Investments and Permitted
Financial Investments.
"Permitted Liens" means (i) Liens existing on the Issue Date; (ii) Liens
now or hereafter securing Senior Indebtedness; (iii) Liens now or hereafter
securing any interest rate hedging obligations (A) that the Company is required
to enter into with respect to the Bank Credit Facility or (B) that are entered
into for the purpose of managing interest rate risk with respect to Indebtedness
of the Company and its Restricted Subsidiaries, provided that such interest rate
obligations under clauses (A) and (B) do not have an aggregate notional amount
which exceeds the aggregate principal amount of Indebtedness of the Company and
its Restricted Subsidiaries; (iv) Liens securing obligations under agreements
that the Company enters into in the ordinary course of business for the purpose
of protecting against fluctuations in oil, natural gas, refined products or
grain prices; (v) Liens securing Indebtedness, the proceeds of which are used to
refinance secured Indebtedness of the Company or its Restricted Subsidiaries;
provided, that such Liens extend to or cover only the property or assets
currently securing the Indebtedness being refinanced; (vi) Liens for taxes,
assessments and governmental charges not yet delinquent or being contested in
good faith and for which adequate reserves have been established to the extent
required by GAAP; (vii) mechanics', workmen's, materialmen's, operator's or
similar Liens arising in the ordinary course of business for sums that are not
yet delinquent or are being contested in good faith by appropriate action;
(viii) Liens in connection with workmen's compensation, unemployment insurance
or other social security, old age pension or public liability obligations not
yet due or which are being contested in good faith by appropriate action; (ix)
Liens, deposits or pledges to secure the performance of bids, tenders, contracts
(other than contracts for the payment of money), leases, public or statutory
obligations, surety, stay, appeal, indemnity, performance or other similar
bonds, or other similar obligations arising in the ordinary course of business;
(x) survey exceptions, encumbrances, easements or reservations, or rights of
others for, rights of way, zoning or other restrictions as to the use of real
properties, and minor defects in title which, in the case of any of the
foregoing, were not incurred or created to secure the payment of borrowed money
or the deferred purchase price of property or services, and in the aggregate do
not materially adversely affect the value of such properties or materially
impair use for the purposes of which such properties are held by the Company or
any Restricted Subsidiaries; (xi) Liens on, or related to, properties to secure
all or part of the costs incurred in the ordinary course of business of
exploration, drilling, development or operation thereof; (xii) Liens on pipeline
or pipeline facilities which arise out of operation of law; (xiii) judgment and
attachment Liens not giving rise to an Event of Default or Liens created by or
existing from any litigation or legal proceeding that are currently being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established to the extent required by GAAP; (xiv) (A) Liens
upon any property of any Person existing at the time of acquisition thereof by
the Company or a Subsidiary, (B) Liens upon any property of a Person existing at
the time such Person is merged or consolidated with the Company or any
Restricted Subsidiary or existing at the time of the sale or transfer of any
such property of such Person to the Company or any Restricted Subsidiary, or (C)
Liens upon any property of a Person existing at the time such Person becomes a
Restricted Subsidiary; provided, that in each case such Lien has not been
created in contemplation of such sale, merger, consolidation, transfer or
acquisition, and provided further, that in each such case no such Lien shall
extend to or cover any property of the Company or any Restricted Subsidiary
other than the property being acquired and improvements thereon; (xv) Liens on
deposits to secure public or statutory obligations or in lieu of surety or
appeal bonds entered into in the ordinary course of business; (xvi) Liens in
favor of collecting or payor banks having a right of setoff, revocation, refund
or chargeback with respect to money or instruments of the Company or any
Restricted Subsidiary on deposit with or in possession of such bank; (xvii)
purchase money Liens granted in connection with the acquisition of fixed assets
in the ordinary course of business and consistent with past practices, provided,
that (A) such Liens attach only to the property so acquired with the purchase
money indebtedness secured thereby and (B) such Liens secure only Indebtedness
that is not in excess of 100% of the purchase price of such fixed assets;
(xviii)Liens reserved in oil and gas mineral leases for bonus or rental payments
and for compliance with the terms of such leases; (xix) Liens arising under
partnership agreements, oil and gas leases, farm-out agreements, division
orders, contracts for the sale, purchase, exchange, transportation or processing
of oil, gas or other hydrocarbons, unitization and pooling declarations and
agreements, development agreements, operating agreements, area of mutual
interest agreements, and other agreements which are
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customary in the Principal Business; and (xx) other Liens provided that such
other Liens shall not secure obligations in excess of $5,000,000 in the
aggregate at any one time outstanding.
"Permitted Subsidiary Refinancing Indebtedness" means (i) Indebtedness of
any Subsidiary, the terms of which have been amended, modified or supplemented
in a manner that does not (A) affect the priority of such Indebtedness in right
of payment in relation to the Notes and Exchange Notes, (B) accelerate the
maturity of such Indebtedness or (C) shorten the Average Life of such
Indebtedness and (ii) Indebtedness of any Subsidiary, the net proceeds of which
are used to renew, extend, refinance, refund or repurchase outstanding
Indebtedness of such Subsidiary, provided that (A) if the Indebtedness
(including any guarantee thereof) being renewed, extended, refinanced, refunded
or repurchased is pari passu with or subordinated in right of payment to the
Guarantees, then such Indebtedness is pari passu with or subordinated in right
of payment to, as the case may be, the Guarantees at least to the same extent as
the Indebtedness being renewed, extended, refinanced, refunded or repurchased,
(B) such Indebtedness is scheduled to mature no earlier than the Indebtedness
being renewed, extended, refinanced, refunded or repurchased, and (C) such
Indebtedness has an Average Life at the time such Indebtedness is incurred that
is equal to or greater than the remaining Average Life of the Indebtedness being
renewed, extended, refinanced, refunded or repurchased; provided further, that
such Indebtedness (to the extent that such Indebtedness constitutes Permitted
Subsidiary Refinancing Indebtedness) is in an aggregate principal amount (or, if
such Indebtedness is issued at a price less than the principal amount thereof,
the aggregate amount of gross proceeds therefrom is) not in excess of the
aggregate principal amount then outstanding under the Indebtedness being
renewed, extended, refinanced, refunded or repurchased (or if the Indebtedness
being renewed, extended, refinanced, refunded or repurchased was issued at a
price less than the principal amount thereof, then not in excess of the amount
of liability in respect thereof determined in accordance with GAAP).
"Person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Principal Business" means (i) the business of the exploration for, and
development, acquisition, production, processing, marketing, refining, storage
and transportation of, hydrocarbons, (ii) any related energy and natural
resource business, (iii) any business currently engaged in by the Company or its
Subsidiaries, (iv) convenience stores, retail service stations, truck stops and
other public accommodations in connection therewith and (iv) any activity or
business that is a reasonable extension, development or expansion of any of the
foregoing.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act of 1933, as amended.
"Publicly Traded Stock" means, with respect to any Person, Voting Stock of
such Person which is registered under Section 12 of the Exchange Act and which
is actively traded on the New York Stock Exchange or American Stock Exchange or
quoted in the National Association of Securities Dealers Automated Quotation
System (National Market System).
"Qualified Stock" means any Capital Stock that is not Disqualified Stock.
"Reference Period" means, with respect to any Person, the four full fiscal
quarters ended immediately preceding any date upon which any determination is to
be made pursuant to the terms of the Notes and Exchange Notes or the Indenture.
"Restricted Payment" means, with respect to any Person, any of the
following: (i) any dividend or other distribution in respect of such Person's
Capital Stock (other than (A) dividends or distributions payable solely in
Capital Stock (other than Disqualified Stock) of such Person and (B) in the case
of Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Restricted Subsidiary of the Company that is a Wholly-Owned
Subsidiary); (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock, or any option, warrant, or other right to
acquire shares of Capital Stock, of the Company or any of its Restricted
Subsidiaries other than any such purchase, redemption or other acquisition or
retirement for value by the Company or any Restricted Subsidiary of the Company
that is a Wholly Owned Subsidiary of any Capital Stock, or any option, warrant
or other right to acquire shares of
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Capital Stock, of any Restricted Subsidiary with respect to such Capital Stock,
option, warrant or other right which is owned, at the time of any such
transaction, by the Company or another Restricted Subsidiary; (iii) the making
of any principal payment on, or the purchase, defeasance, repurchase, redemption
or other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Indebtedness which
is pari passu or subordinated in right of payment to the Notes and Exchange
Notes; and (iv) the making by such Person of any Investment other than a
Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary. By a Board Resolution of the Company, as evidenced by
written notice thereof delivered to the Trustee, the Company may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that,
immediately after giving effect to such designation, (i) the Company could incur
at least $1.00 in additional Indebtedness pursuant to the first paragraph of the
covenant captioned "Limitation on Incurrence of Additional Indebtedness" and
(ii) no Default or Event of Default shall have occurred and be continuing.
"Senior Indebtedness" means any Indebtedness of a Person (whether
outstanding on the date hereof or hereafter incurred), unless such Indebtedness
is stated to be pari passu with or is contractually subordinate or junior in
right of payment to the Notes and Exchange Notes.
A "subsidiary" of any Person means (i) a corporation a majority of whose
voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more subsidiaries of such Person or by such Person and one or more
subsidiaries of such Person, (ii) a partnership in which such Person or a
subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if such Person or its subsidiary is
entitled to receive more than 50% of the assets of such partnership upon its
dissolution, or (iii) any other Person (other than a corporation or partnership)
in which such Person, directly or indirectly, at the date of determination
thereof, has (A) at least a majority ownership interest or (B) the power to
elect or direct the election of a majority of the directors or other governing
body of such Person. For purposes of the foregoing definition, an arrangement by
which a Person who owns an interest in an oil and gas property is subject to a
joint operating agreement, processing agreement, net profits interest,
overriding royalty interest, farm-out agreement, development agreement, area of
mutual interest agreement, joint bidding agreement, unitization agreement,
pooling arrangement or other similar agreement or arrangement shall not, in and
of itself, cause such Person to be considered a Subsidiary.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guarantor" means (i) each of the Company's Subsidiaries in
existence on the Issue Date, (ii) each of the Subsidiaries that becomes a
guarantor of the Notes and Exchange Notes in compliance with the provisions of
Article Eleven of the Indenture and (iii) each of the Subsidiaries executing a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of the Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of an Unrestricted
Subsidiary or (ii) any Subsidiary of the Company or of a Restricted Subsidiary
that is designated as an Unrestricted Subsidiary by a Board Resolution of the
Company in accordance with the following sentence. The Company may designate any
Subsidiary of the Company or of a Restricted Subsidiary (including any
Restricted Subsidiary or any newly formed or newly acquired Subsidiary) to be an
Unrestricted Subsidiary by a Board Resolution of the Company, as evidenced by
written notice thereof delivered to the Trustee, if after giving effect to such
designation, (i) the Company could incur $1.00 of additional Indebtedness
pursuant to the first paragraph under the covenant captioned "Limitation on
Incurrence of Additional Indebtedness," (ii) the Company could make an
additional Restricted Payment of $1.00 pursuant to the first paragraph of the
covenant captioned "Limitation on Restricted Payments," (iii) such Subsidiary
does not own or hold any Capital Stock of, or any lien on any property of, the
Company or any Restricted Subsidiary and (iv) such Subsidiary is not liable,
directly or indirectly, with respect to any Indebtedness other than Unrestricted
Subsidiary Indebtedness.
"Unrestricted Subsidiary Indebtedness" of any Person means Indebtedness of
such Person (i) as to which neither the Company nor any Restricted Subsidiary is
directly or indirectly liable (by virtue of the Company's or such Restricted
Subsidiary's being the primary obligor, or guarantor of, or otherwise liable in
any respect
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on, such Indebtedness), (ii) which, with respect to Indebtedness incurred after
the date of the Indenture by the Company or any Restricted Subsidiary, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary and (iii) which is not secured by any assets of the Company or of any
Restricted Subsidiary.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable at the option of the issuer
thereof.
"U.S. Legal Tender" means such coin or currency of the United States as at
the time of payment shall be legal tender for the payment of public and private
debts.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors or other governing body of such Person.
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock (other
than directors' qualifying shares, if applicable) of which is owned by the
Company or another Wholly-Owned Subsidiary.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as being: (i) default by
the Company or any Subsidiary Guarantor in the payment of principal of or
premium, if any, on the Notes or Exchange Notes when due and payable at
maturity, upon repurchase pursuant to a Change of Control Offer or a Net
Proceeds Offer, upon acceleration or otherwise; (ii) default by the Company or
any Subsidiary Guarantor for 30 days in payment of any interest on the Notes or
Exchange Notes; (iii) default by the Company or any Subsidiary Guarantor in the
deposit of any optional redemption payment; (iv) default by the Company or any
Subsidiary Guarantor in performance or breach of any other covenant or agreement
in the Notes or Exchange Notes, the Guarantees or the Indenture which shall not
have been remedied within 60 days after written notice by the Trustee or by the
holders of at least 25% in principal amount of the Notes and Exchange Notes then
outstanding; (v) the acceleration of the maturity of any other Indebtedness of
the Company, any Subsidiary Guarantor or any Restricted Subsidiary having an
outstanding principal amount of $5.0 million or more individually or in the
aggregate; (vi) judgments or orders for the payment of money in an aggregate
amount in excess of $5.0 million (net of applicable insurance coverage which is
acknowledged in writing by the insurer) having been rendered against the
Company, any Subsidiary Guarantor or any Restricted Subsidiary and such
judgments or orders shall continue unsatisfied and unstayed for a period of 60
days; (vii) other than a release of a Guarantee pursuant to the terms of the
Indenture, any ineffectiveness of a Guarantee or any denial or disaffirmation of
a Guarantee by any Subsidiary Guarantor; or (viii) certain events involving
bankruptcy, insolvency or reorganization of the Company, any Subsidiary
Guarantor or any Restricted Subsidiary. The Indenture provides that the Trustee
may withhold notice to the holders of the Notes and Exchange Notes of any
default (except in payment of principal of, or premium, if any, or interest on
the Notes and Exchange Notes) if the Trustee considers it in the interest of the
holders of the Exchange Notes to do so.
The Indenture provides that if an Event of Default (other than with respect
to clause (viii) of the preceding paragraph) occurs and is continuing with
respect to the Indenture, the Trustee or the holders of not less than 25% in
principal amount of the Notes and Exchange Notes outstanding may declare the
principal of, premium, if any, and accrued but unpaid interest on all Notes and
Exchange Notes then outstanding to be due and payable. Upon such a declaration,
such principal, premium, if any, and interest will be due and payable
immediately. If an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of the Company or any Subsidiary occurs and is
continuing, the principal of and premium, if any, and interest on all the Notes
and Exchange Notes will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holders of the Notes
and Exchange Notes. The amount due and
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payable on the acceleration of any Note will be equal to 100% of the principal
amount of such Note, plus accrued interest to the date of payment. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes and Exchange Notes may rescind any such acceleration with respect to the
Notes and Exchange Notes and its consequences.
The Indenture provides that no holder of a Note or Exchange Note may pursue
any remedy under the Indenture unless (i) the Trustee shall have received
written notice of a continuing Event of Default from the Company or a holder of
a Note or Exchange Note, (ii) the Trustee shall have received a request from
holders of at least 25% in principal amount of the Notes and Exchange Notes to
pursue such remedy, (iii) the Trustee shall have been offered indemnity and
security reasonably satisfactory to it, and (iv) the Trustee shall have failed
to act for a period of 60 days after receipt of such notice, request and offer
of indemnity; however, such provision does not affect the right of a holder of a
Note or Exchange Note to sue for enforcement of any overdue payment thereon.
The holders of a majority in principal amount of the Notes and Exchange
Notes then outstanding will have the right, by an instrument or concurrent
instruments in writing executed and delivered to the Trustee, to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee under the Indenture or exercising any trust or power
conferred on such Trustee, subject to certain limitations specified in the
Indenture. The Indenture will require the annual filing by the Company with the
Trustee of a written statement as to compliance with the covenants contained in
the Indenture.
MODIFICATION AND WAIVER
The Indenture provides that modifications and amendments to the Indenture
or the Notes or Exchange Notes may be made by the Company, the Subsidiary
Guarantors and the Trustee with the consents of the holders of a majority in
principal amount of the Notes and Exchange Notes then outstanding; provided that
no such modification or amendment may, without the consent of the holder of each
Note or Exchange Note then outstanding affected thereby, (i) reduce the
percentage of principal amount of Notes and Exchange Notes whose holders may
consent to an amendment, supplement or waiver; (ii) reduce the rate or change
the time for payment of interest, including default interest, on any Note or
Exchange Note; (iii) reduce the principal amount of any Note or Exchange Note or
change the Maturity Date of the Notes and Exchange Notes; (iv) reduce the
redemption price, including premium, if any, payable upon redemption of any Note
or Exchange Note or change the time at which any Note or Exchange Note may or
shall be redeemed; (v) reduce the repurchase price, including premium, if any,
payable upon the repurchase of any Note or Exchange Note or change the time at
which any Note or Exchange Note may or shall be repurchased; (vi) make any Note
or Exchange Note payable in money other than that stated in the Note or Exchange
Note; (vii) impair the right to institute suit for the enforcement of any
payment of principal of, or premium, if any, or interest on, any Note or
Exchange Note; (viii) make any change in the percentage of principal amount of
Notes and Exchange Notes necessary to waive compliance with certain provisions
of the Indenture; or (ix) except as otherwise provided in the Indenture, waive a
continuing Default or Event of Default in the payment of principal of, premium,
if any, or interest on the Notes and Exchange Notes. The Indenture provides that
modifications, amendments and supplements of the Indenture may be made by the
Company, the Subsidiary Guarantors and the Trustee without notice to or consent
of any holders of Notes and Exchange Notes in certain limited circumstances,
including (i) to cure any ambiguity, omission, defect or inconsistency, (ii) to
provide for the assumption of the obligations of the Company or any Subsidiary
Guarantor under the Indenture upon the merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company or any such
Subsidiary Guarantor, (iii) to provide for uncertificated Notes or Exchange
Notes in addition to or in place of certificated Notes or Exchange Notes, (iv)
to reflect the release of any Subsidiary Guarantor from its Guarantee, or the
addition of any Subsidiary of the Company as a Subsidiary Guarantor, in the
manner provided by the Indenture, (v) to comply with any requirement of the SEC
in order to effect or maintain the qualification of the Indenture under the
Trustee Indenture Act of 1939 or (vi) to make any change that would provide any
additional benefit or rights to the holders or that does not adversely affect
the rights of any holder of Notes or Exchange Notes in any material respect.
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The Indenture provides that the holders of a majority in aggregate
principal amount of the Notes and Exchange Notes then outstanding may waive any
past default under the Indenture, except a default in the payment of principal,
premium, if any, or interest.
DISCHARGE AND TERMINATION
The Company may at any time terminate its obligation under the Notes and
Exchange Notes and the Indenture, with certain exceptions specified in the
Indenture, by irrevocably depositing in trust cash or obligations of the United
States government and its agencies for payment of principal of, premium, if any,
and interest on, the Notes and Exchange Notes to redemption or maturity, subject
to the satisfaction of certain conditions.
Subject to the conditions described below, at the Company's option, either
(i) the Company and all Subsidiary Guarantors will be deemed to have been
discharged from their respective obligations with respect to the Notes and
Exchange Notes on the 91st day after the applicable conditions set forth below
have been satisfied or (ii) the Company and all Subsidiary Guarantors will cease
to be under any obligation to comply with certain restrictive covenants,
including those described under "Certain Covenants" as well as the subordination
and guarantee provisions of the Indenture at any time after the applicable
conditions set forth below have been satisfied: (A) the Company or any
Subsidiary Guarantor has deposited or caused to be deposited irrevocably with
the Trustee as trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the holders (1) U.S. Legal Tender or (2) U.
S. Government Obligations, which through the payment of interest and principal
in respect thereof in accordance with their terms will provide (without any
reinvestment of such interest or principal), not later than one day before the
due date of any payment, U.S. Legal Tender or (3) a combination of (1) and (2),
in an amount sufficient, in the opinion (with respect to (2) and (3)) of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee at or prior to the time
of such deposit, to pay and discharge each installment of principal of, premium,
if any, and interest on, the outstanding Notes and Exchange Notes on the date
such installments are due; (B) the Company has delivered to the Trustee an
officers' certificate certifying whether the Notes and Exchange Notes are then
listed on a national securities exchange; (C) if the Notes and Exchange Notes
are then listed on a national securities exchange, the Company has delivered to
the Trustee an officers' certificate to the effect that the Company's exercise
of its option described above would not cause the Notes and Exchange Notes to be
delisted; (D) no Default or Event of Default has occurred and is continuing on
the date of such deposit or will occur as a result of such deposit and such
deposit will not result in a breach or violation of, or constitute a default
under, any other instrument to which the Company or a Subsidiary Guarantor is a
party or by which any of them is bound, as evidenced to the Trustee in an
officers' certificate delivered to the Trustee concurrently with such deposit;
(E) the Company has delivered to the Trustee an opinion of counsel (which
counsel may be an employee of the Company) to the effect that holders of the
Notes and Exchange Notes will not recognize income, gain or loss for federal
income tax purposes as a result of the Company's exercise of its option
described above and will be subject to federal income tax on the same amount and
in the same manner and at the same time as would have been the case if such
option had not been exercised, and, in the case of the Notes and Exchange Notes
being discharged, accompanied by a ruling to that effect received from or
published by the Internal Revenue Service (it being understood that (1) such
opinion will also state that such ruling is consistent with the conclusions
reached in such opinion and (2) the Trustee will be under no obligation to
investigate the basis of correctness of such ruling); (F) the Company has
delivered to the Trustee an opinion of counsel (which counsel may be an employee
of the Company) to the effect that the Company's exercise of its option
described above will not result in any of the Company, the Trustee or the trust
created by the Company's deposit of funds hereunder becoming or being deemed to
be an "investment company" under the Investment Company Act of 1940, as amended;
(G) the Company or any Subsidiary Guarantor has paid or duly provided for
payment of all amounts then due to the Trustee pursuant to the terms of the
Indenture; and (H) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel (which counsel may be an employee of the
Company), each stating that all conditions precedent provided for in the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with.
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Upon the termination of the Company's obligations under the Notes and
Exchange Notes and the Indenture, the obligations of the Subsidiary Guarantors
under the Guarantees will also terminate.
GOVERNING LAW
The Indenture provides that it will be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
THE TRUSTEE
The Bank of New York is the Trustee under the Indenture. The Company has
also appointed the Trustee as the initial Registrar and Paying Agent under the
Indenture.
The Company may maintain depository and other normal banking relationships
with the Trustee or any of its affiliates. The Trustee will be permitted to
engage in other transactions with the Company; however, the Trustee would be
required to resign within 90 days of the occurrence of a Default or an Event of
Default (without regard to the giving of notice or the passage of time) if the
Trustee then has any conflicting interest (as defined in the Trust Indenture Act
of 1939).
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Trust Indenture Act of 1939), it must eliminate such conflict or resign.
The Indenture provides that in case an Event of Default shall occur (and be
continuing), the Trustee will be required to use the degree of care and skill of
a prudent man in the conduct of his own affairs. The Trustee will be under no
obligation to exercise any of its powers under the Indenture at the request of
any of the holders of the Notes or Exchange Notes, unless such holders shall
have offered the Trustee indemnity and security reasonably satisfactory to it.
AUTHENTICATION
Two officers of the Company shall sign the Exchange Notes on behalf of the
Company, and two officers of each Subsidiary Guarantor shall sign the notation
on the Exchange Notes relating to the Guarantee of such Subsidiary Guarantor on
behalf of such Subsidiary Guarantor, in each case by manual or facsimile
signature. The Company's seal shall be reproduced on the Exchange Notes. An
Exchange Note shall not be valid until the Trustee or an authenticating agent
manually signs the certificate of authentication on the Exchange Note. Each
Exchange Note shall be dated the date of its authentication.
REGISTRATION RIGHTS
In connection with the issuance and sale of the Notes, the Company and the
Subsidiary Guarantors have agreed pursuant to a registration rights agreement
(the "Registration Rights Agreement") with the Initial Purchasers, for the
benefit of the holders of the Notes, that the Company will, at its cost, (i)
within 60 days after the date of original issue of the Notes, file the Exchange
Offer Registration Statement with the SEC with respect to the Registered
Exchange Offer to exchange the Notes for the Exchange Notes, which will have
terms substantially identical in all material respects to the Notes (except that
the Exchange Notes will not contain terms with respect to transfer restrictions
and with respect to the payment of additional interest under circumstances
relating to breaches of the Registration Rights Agreement by the Company and the
Subsidiary Guarantors), and (ii) use its best efforts to cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 120 days after the date of original issue of the Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer the Exchange Notes in exchange for surrender of the Notes. The
registration statement of which this Prospectus is a part has been
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filed with the SEC and the Exchange Offer is being made to satisfy the Company's
and the Subsidiary Guarantors' obligations under the Registration Rights
Agreement
In the event that applicable interpretations of the staff of the SEC do not
permit the Company to effect such a Registered Exchange Offer, or if for any
other reason, the Registered Exchange Offer is not consummated within 150 days
of the date of original issue of the Notes, or if the Initial Purchasers so
request with respect to Notes not eligible to be exchanged for Exchange Notes in
the Registered Exchange Offer, or if any holder of Notes is not eligible to
participate in the Registered Exchange Offer or does not receive freely tradable
Exchange Notes in the Registered Exchange Offer, the Company will, at its cost,
(a) as promptly as practicable, file a shelf registration statement (the "Shelf
Registration Statement") with the SEC covering resales of the Notes or the
Exchange Notes, as the case may be, (b) use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act, and
(c) keep the Shelf Registration Statement effective until the earlier of (i) the
time when the Notes covered by the Shelf Registration Statement can be sold
pursuant to Rule 144 without any limitations under clauses (c), (e), (f) and (h)
of Rule 144, or (ii) two years from the Issue Date. The Company will, in the
event a Shelf Registration Statement is filed, among other things, provide to
each holder for whom such Shelf Registration Statement was filed copies of the
prospectus which is part of the Shelf Registration Statement, notify each such
holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of the
Notes or the Exchange Notes, as the case may be. A holder selling such Notes or
Exchange Notes pursuant to the Shelf Registration Statement generally would be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification obligations).
If (i) on or prior to October 27, 1997 (the first business day following
the 60th day after the Issue Date), neither the Exchange Offer Registration
Statement nor the Shelf Registration Statement has been filed with the SEC, (ii)
on or prior to January 23, 1998 (150 days after the Issue Date), neither the
Registered Exchange Offer is consummated nor the Shelf Registration Statement is
declared effective; or (iii) after the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to certain
exceptions) in connection with resales of Notes or Exchange Notes in accordance
with and during the periods specified in the Registration Rights Agreement (each
such event referred to in clause (i) through (iii) being herein called a
"Registration Default"), additional interest will accrue on the Notes at the
rate of 0.50% per annum from and including the date on which any such
Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. All accrued additional interest shall be
paid to holders in the same manner in which payments of other interest are made
pursuant to the Indenture. At all other times, the Notes will bear interest at
the rate of 9% per annum.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
79
<PAGE> 83
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the principal United States
federal income tax consequences of the acquisition, ownership and disposition of
the Notes and the Exchange Notes to initial beneficial owners of the Notes who
are U.S. Holders (as defined below) and the principal U.S. federal income and
estate tax consequences of the acquisition, ownership and disposition of the
Notes and the Exchange Notes to initial beneficial owners of the Notes who are
Non-U.S. Holders (as defined below). This discussion is based on currently
existing provisions of the Code, existing and proposed Treasury regulations
promulgated thereunder and administrative and judicial interpretations thereof,
all as in effect or proposed on the date hereof and all of which are subject to
change, possibly with retroactive effect, or different interpretations. It does
not include any description of the tax laws of any state, local or foreign
government that may be applicable to the Notes or Exchange Notes or beneficial
owners thereof. This discussion does not address the tax consequences to
subsequent beneficial owners of the Notes and the Exchange Notes, and is limited
to beneficial owners who hold the Notes or the Exchange Notes as capital assets
within the meaning of section 1221 of the Code. This discussion also does not
address the tax consequences to Non-U.S. Holders that are subject to U.S.
federal income or estate tax on a net basis on income realized with respect to a
Note or Exchange Note because such income is effectively connected with the
conduct of a U.S. trade or business. Such holders are generally taxed in a
similar manner to U.S. Holders; however, certain special rules apply. Moreover,
this discussion is for general information only, and does not address all of the
U.S. federal income tax consequences that may be relevant to particular initial
beneficial owners in light of their personal circumstances, or to certain types
of initial beneficial owners (such as certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities, persons who have hedged
the risk of owning a Note or Exchange Note or U.S. Holders that have a
functional currency other than the U.S. dollar).
PROSPECTIVE PARTICIPANTS IN THE REGISTERED EXCHANGE OFFER ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF
THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES AND EXCHANGE NOTES,
INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS OR ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS
OR INTERPRETATIONS THEREOF.
U.S. FEDERAL INCOME TAXATION OF U.S. HOLDERS
Payments of Interest
In general, interest on a Note or Exchange Note will be taxable to a
beneficial owner who or which is (i) a citizen or resident of the United States,
(ii) a corporation created or organized under the laws of the United States or
any State thereof (including the District of Columbia), or (iii) a person
otherwise subject to U.S. federal income taxation on its worldwide income (a
"U.S. Holder") as ordinary income at the time it is (actually or constructively)
received or accrued, depending on the beneficial owner's method of accounting
for U.S. federal income tax purposes.
Original Issue Discount
If the Notes are not issued at a discount or are deemed to be issued with
no discount because such discount is de minimis, a U.S. Holder will include in
income as ordinary interest income the gross amount of interest paid or payable
in respect of the Notes as provided above in "Payments of Interest." A discount
on original issue will be considered de minimis and, thus, will be treated as
zero discount if the original issue discount is less than one-fourth ( 1/4) of
one percent of the stated redemption price at maturity, multiplied by the number
of complete years to maturity. The Company expects that the Notes will be deemed
to be issued without original issue discount.
Registered Exchange Offer
The exchange of Notes for the Exchange Notes pursuant to the Registered
Exchange Offer will not be treated as an "exchange" for U.S. federal income tax
purposes because the Exchange Notes will not be
80
<PAGE> 84
considered to differ materially in kind or extent from the Notes. As a result,
there will be no U.S. federal income tax consequences to beneficial owners
exchanging the Notes for the Exchange Notes pursuant to the Registered Exchange
Offer. The Company is obligated to pay additional interest to the beneficial
owners of Exchange Notes under certain circumstances described under
"Registration Rights." The Company believes that any such payments should be
treated as an "incidental contingency" for purposes of the original issue
discount rules because the potential amount of any such payments, if required to
be made, is expected to be insignificant relative to the total expected amount
of remaining payments on the Notes, and accordingly should be taxable to the
beneficial owners in the manner described in the preceding paragraph but should
not otherwise impact the federal income tax consequences to beneficial owners of
the Notes.
Sale, Exchange or Retirement of the Notes or Exchange Notes
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a Note or Exchange Note, a U.S. Holder will generally recognize
taxable gain or loss equal to the difference between the sum of cash plus the
fair market value of all other property received on such disposition (except to
the extent such cash or property is attributable to accrued but unpaid interest,
which will be taxable as ordinary income) and such beneficial owner's adjusted
tax basis in the Note or Exchange Note. A U.S. Holder's adjusted tax basis in a
Note or Exchange Note generally will equal the cost of the Note or Exchange Note
to such holder, less any principal payments received by such holder.
Gain or loss recognized on the disposition of a Note or Exchange Note
generally will be capital gain or loss, and will be long-term capital gain or
loss if, at the time of such disposition, the U.S. Holder's holding period for
the Note or Exchange Note is more than one year. The Taxpayer Relief Act of 1997
reduced the maximum capital gains tax rate for investments held for at least one
year to 20% from 28% effective May 7, 1997. Effective July 29, 1997, the holding
period necessary to qualify for the new capital gains rates increased from one
year to 18 months. For Notes sold after July 28, 1997 with a holding period
between one year and 18 months, the maximum rate remains at 28%.
U.S. TAXATION OF NON-U.S. HOLDERS
Under present U.S. federal income and estate tax law and subject to the
discussion of backup withholding below:
(i) payments of principal and interest on the Notes or Exchange Notes
by the Company or any agent of the Company to any beneficial owner of a
Note or Exchange Note that is not a U.S. Holder (a "Non-U.S. Holder") will
not be subject to U.S. federal withholding tax, provided that in the case
of interest (a)(1) the Non-U.S. Holder does not actually or constructively
own 10 percent or more of the total combined voting power of all classes of
stock of the Company entitled to vote, (2) the Non-U.S. Holder is not a
controlled foreign corporation that is related to the Company through stock
ownership, (3) the Non-U.S. Holder is not a bank described in Section
881(c)(3)(A) of the Code, and (4) either (A) the beneficial owner of the
Notes or Exchange Notes certifies to the Company or its agent on Internal
Revenue Service ("IRS") Form W-8 (or a suitable substitute form), under
penalties of perjury, that it is not a "U.S. person" (as defined in the
Code) and provides its name and address, or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Notes or Exchange Notes on behalf of the
beneficial owner certifies to the Company or its agent under penalties of
perjury that such statement has been received from the beneficial owner by
it or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof or (b) the Non-U.S. Holder is
entitled to the benefits of an income tax treaty under which interest on
the Notes or Exchange Notes is exempt from U.S. withholding tax and
provides a properly executed IRS Form 1001 claiming the exemption;
(ii) the exchange of Notes for the Exchange Notes pursuant to the
Registered Exchange Offer will not be treated as an "exchange" for U.S.
federal income tax purposes because the Exchange Notes will not be
considered to differ materially in kind or extent from the Notes. As a
result, there will be no U.S.
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<PAGE> 85
federal income tax consequences to beneficial owners exchanging the Notes
for the Exchange Notes pursuant to the Registered Exchange Offer;
(iii) a Non-U.S. Holder will not be subject to U.S. federal
withholding tax on gain realized on the sale, exchange or redemption of a
Note or Exchange Note, unless the Non-U.S. Holder is an individual who is
present in the United States for a period or periods aggregating 183 or
more days in the taxable year of the disposition and certain other
conditions are met; and
(iv) Notes or Exchange Notes held at the time of death (or theretofore
transferred subject to certain retained rights or powers) by an individual
who at the time of death is a Non-U.S. Holder will not be included in such
holder's gross estate for U.S. federal estate tax purposes provided that
the individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote or hold the Notes or Exchange Notes in connection with a U.S. trade
or business.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes or Exchange Notes are
outstanding, the Company is required to provide the IRS with certain
information, including the beneficial owner's name, address and taxpayer
identification number, the aggregate amount of interest paid to that beneficial
owner during the calendar year and the amount of tax withheld, if any. This
obligation, however, does not apply with respect to certain payments to U.S.
Holders, including corporations, tax-exempt organizations, qualified pension and
profit sharing trusts and individual retirement accounts, provided that they
establish entitlement to an exemption.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax liability, the
Company, its agents or paying agents or a broker may be required to "backup"
withhold a tax equal to 31% of each payment of interest and principal (and
premium, if any) on the Notes or Exchange Notes. This backup withholding is not
an additional tax and may be credited against the U.S. Holder's U.S. federal
income tax liability, provided that the required information is furnished to the
IRS.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a Non-U.S. Holder of a Note or Exchange Note if
such holder has provided the required certification that it is not a U.S. person
as set forth in clause (4) in the first paragraph under "U.S. Taxation of
Non-U.S. Holders," or has otherwise established an exemption (provided that
neither the Company nor its agent has actual knowledge that the holder is a U.S.
person or that the conditions of any exemption are not in fact satisfied).
Payment of the proceeds from the sale of a Note or Exchange Note to or
through a foreign office of a broker will not be subject to information
reporting or backup withholding, except that if the broker is a U.S. person, a
controlled foreign corporation for U.S. federal income tax purposes or a foreign
person 50 percent or more of whose gross income from all sources for the
three-year period ending with the close of its taxable year preceding the
payment was effectively connected with a U.S. trade or business, information
reporting may apply to such payments. Payment of the proceeds from a sale of a
Note or Exchange Note to or through the U.S. office of a broker subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its taxpayer identification number or otherwise
establishes an exemption from information reporting and backup withholding.
PROPOSED REGULATIONS
The IRS has issued proposed regulations relating to withholding, backup
withholding and information reporting that, if adopted in their current form,
would, among other things, unify current certification procedures and forms and
clarify certain reliance standards. The regulations are proposed to be effective
for payments made after December 31, 1997 but provide that certificates issued
on or before the date that is 60 days after the proposed regulations are made
final will continue to be valid until they expire. The proposed regulations,
however, may be subject to change prior to their adoption in final form.
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<PAGE> 86
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, the Company believes that Exchange Notes issued
pursuant to the Registered Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by any holder of such Exchange
Notes (other than broker-dealers, as set forth below, and any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder does not intend
to participate, and has no arrangement or understanding with any person to
participate, in the distribution of such Exchange Notes. Any holder who tenders
in the Registered Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the Exchange Notes may not rely
on the position of the staff of the SEC enunciated in Exxon Capital Holdings
Corporation (available April 13, 1989), Morgan Stanley & Co., Incorporated
(available June 5, 1991), Shearman & Sterling (available July 2, 1993) or
similar no-action letters, but rather must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. In addition, any such resale transaction should be covered
by an effective registration statement containing the selling security holders
information required by Item 507 of Regulation S-K of the Securities Act.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must agree that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1997 (90 days after
commencement of the Registered Exchange Offer), all dealers effecting
transactions in the Exchange Notes may be required to deliver a Prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Registered Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells the Exchange Notes that were received by
it for its own account pursuant to the Registered Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the holders of the Notes) other than commission or concessions of any
brokers or dealers and will indemnify the holders of the Exchange Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
By tendering in the Registered Exchange Offer, each holder will represent
to the Company that, among other things, (i) the Exchange Notes acquired
pursuant to the Registered Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is
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<PAGE> 87
a holder, (ii) neither the holder nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such
Exchange Notes, and (iii) the holder and such other person acknowledge that if
they participate in the Registered Exchange Offer for the purpose of
distributing the Exchange Notes, (a) they must, in the absence of an exemption
therefrom, comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale of the Exchange Notes and
cannot rely on the no-action letters referenced above, and (b) failure to comply
with such requirements in such instance could result in such holder incurring
liability under the Securities Act for which such holder is not indemnified by
the Company. Further, by tendering in the Registered Exchange Offer, each holder
that may be deemed an "affiliate" (as defined under Rule 405 of the Securities
Act) of the Company will represent to the Company that such holder understands
and acknowledges that the Exchange Notes may not be offered for resale, resold
or otherwise transferred by that holder without registration under the
Securities Act or an exemption therefrom.
As set forth above, affiliates of the Company are not entitled to rely on
the foregoing interpretations of the staff of the SEC with respect to resales of
the Exchange Notes without compliance with the registration and prospectus
delivery requirements of the Securities Act.
By acceptance of this Registered Exchange Offer, each broker-dealer that
receives Exchange Notes for its own account pursuant to the Registered Exchange
Offer agrees that, upon receipt of notice from the Company of the happening of
any event which makes any statement in this Prospectus untrue in any material
respect or which requires the making of any changes in this Prospectus in order
to make the statements therein not misleading (which notice the Company agrees
to deliver promptly to such broker-dealer), such broker-dealer will suspend use
of this Prospectus until the Company has amended or supplemented this Prospectus
to correct such misstatement or omission and has furnished copies of the amended
or supplemental Prospectus to such broker-dealer.
The Initial Purchasers have advised the Company that they propose to offer
the Notes for sale from time to time in one or more transactions (which may
include block transactions), in negotiated transactions or otherwise, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Initial Purchasers may effect such transactions by selling the Notes
to or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the Initial Purchasers and/or the
purchaser of the Notes for whom they may act as agents. In connection with the
sale of the Notes, the Initial Purchasers may be deemed to have received
compensation from the Company in the form of discounts, and the Initial
Purchasers may also receive commissions from the purchasers of the Notes for
whom they may act as agents. Any discounts or commissions received by the
Initial Purchasers and any dealers that participate with the Initial Purchasers
in the distribution of the Notes, and any profit on the resale of the Notes by
them, may be deemed to be discounts or commissions.
The Notes are new securities for which there currently is no market. The
Exchange Notes sold to QIBs are expected to be eligible for trading in The
PORTAL Market. The Initial Purchasers have advised the Company that they have
acted as market makers for the Notes and presently intend to make a market in
the Exchange Notes as permitted by applicable law. The Initial Purchasers are
not obligated, however, to make a market in the Exchange Notes and any such
market-making may be discontinued at any time at the sole discretion of the
Initial Purchasers. Accordingly, no assurance can be given as to the development
or liquidity of any market for the Exchange Notes.
The Company has agreed to indemnify the Initial Purchasers against certain
liabilities or contribute to payments which the Initial Purchasers may be
required to make in respect thereof.
In the ordinary course of their respective businesses, certain of the
Initial Purchasers and their affiliates have engaged in investment banking and
commercial banking transactions with the Company for which they have received
customary fees, and may engage in such transactions in the future. Affiliates of
BancAmerica Securities, Inc. serve as the agent bank, the arranger and a lending
bank under the Credit Agreement. Such affiliates will receive their
proportionate share of any repayment by the Company of amounts outstanding under
the Credit Agreement from the net proceeds of the offering of the Notes.
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<PAGE> 88
LEGAL MATTERS
Certain legal matters relating to the Exchange Notes offered hereby will be
passed upon for the Company by Fennemore Craig, P.C., Phoenix, Arizona.
EXPERTS
The consolidated financial statements and related financial statement
schedule of Giant Industries, Inc. and subsidiaries as of December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996
included and incorporated by reference in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are included and incorporated by reference herein, and have been so included and
incorporated by reference in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of Bloomfield Refining Company as of December 31,
1993 and 1994 and for each of the three years in the period ended December 31,
1994 incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent auditors, as stated in their report, which is
incorporated by reference herein, and have been so incorporated by reference in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
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GLOSSARY
The following is a selection of terms used in this Prospectus.
BBLS. Barrels of oil. One barrel equals 42 gallons.
BCF. One billion cubic feet of gas.
BOE OR OIL EQUIVALENT. Oil equivalent reserve and production information
is expressed in Bbls of oil based on a ratio of gas to oil of six Mcf to one
Bbl.
CARDLOCK OPERATION. An unmanned fleet fueling operation.
CRUDE OIL. Crude oil includes condensate.
COAL SEAM GAS. Natural gas recovered from seams of coal beds and produced
using conventional drilling and completion methods.
FEEDSTOCKS. Hydrocarbon compounds, such as crude oil and natural gas
liquids that are processed and blended into refined products.
LPG. Liquid Propane Gas.
MBBLS. One thousand barrels of oil.
MCF. One thousand cubic feet of gas.
NGL. Natural gas liquid.
RATED CRUDE OIL CAPACITY. The crude oil processing capacity of a refinery
that is established by engineering design.
REFINERY CONVERSION. The ability of a refinery to produce high-value
refined products such as gasoline, diesel fuel and jet fuel from crude oil and
other feedstocks.
REFINERY MARGIN. The difference between crude oil, NGLs and other
feedstock, intermediate stock and blending component costs and the prices of
refined products sold, expressed in dollars per barrel of refined product.
REFINED PRODUCTS. The hydrocarbon compounds, such as gasoline, diesel
fuel, jet fuel and residual fuel, that are produced by a refinery.
YIELD. The percentage of refined products that are produced from
feedstocks.
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<PAGE> 90
INDEX TO FINANCIAL STATEMENTS*
CONSOLIDATED FINANCIAL STATEMENTS OF GIANT INDUSTRIES, INC. AND SUBSIDIARIES:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets, December 31, 1995 and 1996, and June 30, 1997
(Unaudited)......................................................................... F-3
Consolidated Statements of Earnings, Years Ended December 31, 1994, 1995 and 1996, and
Six Months Ended June 30, 1996 and 1997 (Unaudited)................................. F-4
Consolidated Statements of Stockholders' Equity, Years Ended December 31, 1994, 1995
and 1996, and Six Months Ended June 30, 1997 (Unaudited)............................ F-5
Consolidated Statements of Cash Flows, Years Ended December 31, 1994, 1995 and 1996,
and Six Months Ended June 30, 1996 and 1997 (Unaudited)............................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
UNAUDITED INTERIM FINANCIAL STATEMENTS OF BLOOMFIELD REFINING COMPANY:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Balance Sheets, December 31, 1994 and September 30, 1995.............................. F-27
Statements of Operations, Nine Months Ended September 30, 1994 and 1995............... F-28
Statements of Cash Flows, Nine Months Ended September 30, 1994 and 1995............... F-29
Notes to Financial Statements......................................................... F-30
</TABLE>
- ---------------
* The financial statements of the Subsidiary Guarantors are omitted because all
of the Company's subsidiaries will guarantee the Exchange Notes on a full,
unconditional, joint and several basis.
F-1
<PAGE> 91
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Giant Industries, Inc.
Scottsdale, Arizona
We have audited the accompanying consolidated balance sheets of Giant
Industries, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Giant
Industries, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 3, 1997, except for Note 17 as to
which the date is June 3, 1997
F-2
<PAGE> 92
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1995 1996 1997
-------- --------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 9,549 $ 12,628 $ 7,136
Receivables:
Trade, less allowance for doubtful accounts of
$424,000, $254,000, and $470,000 (unaudited)...... 22,264 25,014 46,871
Income tax refunds.................................. 380 1,355 1,282
Other............................................... 1,381 4,395
-------- --------- ---------
24,025 30,764 48,153
-------- --------- ---------
Inventories............................................ 42,581 38,226 56,305
Prepaid expenses and other............................. 3,880 3,252 8,699
Net assets of discontinued operations.................. 26,689
Deferred income taxes.................................. 2,145 1,636 1,636
-------- --------- ---------
Total current assets........................... 108,869 86,506 121,929
-------- --------- ---------
Property, plant and equipment............................ 292,919 322,260 391,988
Less accumulated depreciation and amortization......... (94,357) (108,715) (116,768)
-------- --------- ---------
198,562 213,545 275,220
-------- --------- ---------
Other assets............................................. 17,431 23,956 37,222
-------- --------- ---------
$324,862 $ 324,007 $ 434,371
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable and current portion of long-term debt..... $ 4,063 $ 1,439 $ 5,190
Accounts payable....................................... 34,162 35,754 49,893
Accrued expenses....................................... 20,316 27,772 24,780
-------- --------- ---------
Total current liabilities...................... 58,541 64,965 79,863
-------- --------- ---------
Long-term debt, net of current portion................... 142,676 113,081 202,358
Deferred income taxes.................................... 12,864 19,042 20,664
Other liabilities........................................ 1,049 4,795 4,753
Commitments and contingencies (Notes 2, 7, 8, 14, 15 and
17)....................................................
Stockholders' equity:
Preferred stock, par value $.01 per share, 10,000,000
shares authorized, none issued......................
Common stock, par value $.01 per share, 50,000,000
shares authorized, 12,188,629, 12,221,367, and
11,022,567 (unaudited) shares issued................ 122 122 122
Additional paid-in capital............................. 72,389 72,617 72,617
Retained earnings...................................... 45,373 60,170 65,863
Unearned compensation related to restricted stock...... (151)
-------- --------- ---------
117,733 132,909 138,602
Less common stock in treasury-at cost, 939,500,
1,123,500, and 1,198,800 (unaudited) shares............ (8,001) (10,785) (11,869)
-------- --------- ---------
109,732 122,124 126,733
-------- --------- ---------
$324,862 $ 324,007 $ 434,371
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 93
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues.................... $ 291,623 $ 332,888 $ 499,184 $ 239,743 $ 270,261
Cost of products sold........... 195,489 234,271 361,864 166,678 198,645
----------- ----------- ----------- ----------- -----------
Gross margin.................... 96,134 98,617 137,320 73,065 71,616
Operating expenses.............. 51,823 51,856 64,315 31,277 34,129
Depreciation and amortization... 12,246 13,345 17,673 8,381 10,571
Selling, general and
administrative expenses....... 11,930 12,778 15,602 9,042 9,808
----------- ----------- ----------- ----------- -----------
Operating income................ 20,135 20,638 39,730 24,365 17,108
Interest expense................ (11,805) (11,506) (12,318) (6,599) (6,005)
Interest and investment
income........................ 1,733 2,239 771 222 232
----------- ----------- ----------- ----------- -----------
Earnings from continuing
operations before income
taxes......................... 10,063 11,371 28,183 17,988 11,335
Provision for income taxes...... 2,608 3,638 11,132 6,970 4,536
----------- ----------- ----------- ----------- -----------
Earnings from continuing
operations.................... 7,455 7,733 17,051 11,018 6,799
Discontinued operations:
Earnings (loss) from oil and
gas operations (net of
taxes)..................... (2,934) 143 7
Loss on disposal of oil and
gas operations (net of
taxes)..................... (13)
----------- ----------- ----------- ----------- -----------
Net earnings.................... $ 4,521 $ 7,876 $ 17,038 $ 11,025 $ 6,799
=========== =========== =========== =========== ===========
Earnings (loss) per common
share:
Continuing operations......... $ 0.61 $ 0.68 $ 1.52 $ 0.98 $ 0.61
Discontinued operations....... (0.24) 0.01
----------- ----------- ----------- ----------- -----------
Net earnings.................. $ 0.37 $ 0.69 $ 1.52 $ 0.98 $ 0.61
=========== =========== =========== =========== ===========
Weighted average number of
shares outstanding............ 12,127,481 11,478,779 11,220,380 11,255,853 11,084,336
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 94
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
UNEARNED UNEARNED UNREALIZED
COMMON STOCK EMPLOYEE COMPENSATION LOSS ON
------------------- ADDITIONAL BENEFITS RELATED TO SECURITIES
SHARES PAR PAID-IN RETAINED RELATED TO RESTRICTED AVAILABLE-
ISSUED VALUE CAPITAL EARNINGS ESOP STOCK FOR-SALE
---------- ----- ---------- -------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994...... 12,192,770 $122 $ 72,417 $35,852 $ (1,347) (1,130)
Purchase of treasury stock....
Stock options exercised....... 500 3
Benefits allocated to
employees by ESOP........... 833
Compensation related to
restricted stock awards..... 469
Restricted stock award shares
forfeited................... (5,641) (47) 47
Unrealized loss on securities
available-for-sale.......... $ (398)
Net earnings.................. 4,521
---------- ---- ------- ------- ----- ----- -----
Balances, December 31, 1994.... 12,187,629 122 72,373 40,373 (514) (614) (398)
Purchase of treasury stock....
Stock options exercised....... 1,000 8
Benefits allocated to
employees by ESOP........... 514
Compensation related to
restricted stock awards..... 8 463
Dividends declared............ (2,876)
Change in unrealized loss on
securities
available-for-sale.......... 398
Net earnings.................. 7,876
---------- ---- ------- ------- ----- ----- -----
Balances, December 31, 1995.... 12,188,629 122 72,389 45,373 (151)
Purchase of treasury stock....
Stock options exercised....... 32,750 216
Compensation related to
restricted stock awards..... 12 151
Restricted stock award
fractional shares
redeemed/canceled........... (12)
Dividends declared............ (2,241)
Net earnings.................. 17,038
---------- ---- ------- ------- ----- ----- -----
Balances, December 31, 1996.... 12,221,367 122 72,617 60,170
Purchase of treasury stock
(unaudited).................
Dividends declared
(unaudited)................... (1,106)
Net earnings (unaudited)...... 6,799
---------- ---- ------- ------- ----- ----- -----
Balances, June 30, 1997
(unaudited)................... 12,221,367 $122 $ 72,617 $65,863 $ $ $
========== ==== ======= ======= ===== ===== =====
<CAPTION>
TREASURY STOCK TOTAL
--------------------- STOCKHOLDERS'
SHARES COST EQUITY
--------- -------- -------------
<S> <C> <C> <C>
Balances, January 1, 1994...... $ 105,914
Purchase of treasury stock.... 202,300 $ (1,652) (1,652)
Stock options exercised....... 3
Benefits allocated to
employees by ESOP........... 833
Compensation related to
restricted stock awards..... 469
Restricted stock award shares
forfeited...................
Unrealized loss on securities
available-for-sale.......... (398)
Net earnings.................. 4,521
--------- -------- --------
Balances, December 31, 1994.... 202,300 (1,652) 109,690
Purchase of treasury stock.... 737,200 (6,349) (6,349)
Stock options exercised....... 8
Benefits allocated to
employees by ESOP........... 514
Compensation related to
restricted stock awards..... 471
Dividends declared............ (2,876)
Change in unrealized loss on
securities
available-for-sale.......... 398
Net earnings.................. 7,876
--------- -------- --------
Balances, December 31, 1995.... 939,500 (8,001) 109,732
Purchase of treasury stock.... 184,000 (2,784) (2,784)
Stock options exercised....... 216
Compensation related to
restricted stock awards..... 163
Restricted stock award
fractional shares
redeemed/canceled...........
Dividends declared............ (2,241)
Net earnings.................. 17,038
--------- -------- --------
Balances, December 31, 1996.... 1,123,500 (10,785) 122,124
Purchase of treasury stock
(unaudited)................. 75,300 (1,084) (1,084)
Dividends declared
(unaudited)................... (1,106)
Net earnings (unaudited)...... 6,799
--------- -------- --------
Balances, June 30, 1997
(unaudited)................... 1,198,800 $(11,869) $ 126,733
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 95
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- -------------------
1994 1995 1996 1996 1997
--------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................................ $ 4,521 $ 7,876 $ 17,038 $ 11,025 $ 6,799
Adjustments to reconcile net earnings to net cash provided by continuing
operating activities:
Loss (earnings) from discontinued operations.......................... 2,934 (143) 13 (7)
Depreciation and amortization......................................... 12,246 13,345 17,673 8,381 10,571
Deferred income taxes................................................. (1,058) 1,632 6,514 1,665 1,623
Restricted stock award compensation................................... 469 471 163 76
Gain on involuntary conversion of refinery assets..................... (533)
Increase (decrease) in other liabilities.............................. 1,019 (328) 470 457 562
Other................................................................. 341 57 73 (47) (49)
Changes in operating assets and liabilities, net of effects of
acquisitions:
(Increase) decrease in receivables.................................. (7,200) (2,513) (6,718) (5,188) 185
(Increase) decrease in inventories.................................. (8,929) (10,311) 4,355 (2,314) (12,201)
Decrease (increase) in prepaid expenses and other................... 1,120 (1,563) 647 1,678 493
Increase (decrease) in accounts payable............................. 5,037 15,096 1,644 3,557 (2,698)
(Decrease) increase in accrued expenses............................. (2,121) 904 883 3,774 1,175
------- ------- ------- ------- -------
Net cash provided by continuing operating activities.............. 7,846 24,523 42,755 23,057 6,460
------- ------- ------- ------- -------
Cash flows from investing activities:
Refinery acquisition.................................................... (55,000)
Acquisition of businesses, net of cash received......................... (47,029)
Purchases of property, plant and equipment and other assets............. (17,165) (22,978) (27,468) (15,780) (18,466)
Refinery acquisition contingent payment................................. (6,910)
Proceeds from sale of property, plant and equipment and other assets.... 5,611 2,588 4,587 3,352 246
Insurance proceeds from involuntary conversion of refinery assets....... 438
Payments received on ESOP loan.......................................... 833 514
Purchases of marketable securities...................................... (101,562)
Proceeds from sales and maturities of marketable securities............. 100,849 35,991
Proceeds from sale of discontinued operations........................... 24,106
Net cash provided (used) by discontinued operations..................... 639 (6,150) (3,831)
Net change in assets of discontinued operations......................... 372
------- ------- ------- ------- -------
Net cash used by investing activities............................. (10,357) (45,035) (2,606) (12,056) (72,159)
------- ------- ------- ------- -------
Cash flows from financing activities:
Proceeds of long-term debt.............................................. 41,000 10,000 120,850
Payments of long-term debt.............................................. (3,025) (14,458) (42,218) (12,252) (58,244)
Purchase of treasury stock.............................................. (1,652) (6,349) (2,784) (1,084)
Deferred financing costs................................................ (100) (698) (201)
Payment of dividends.................................................... (2,302) (2,284) (1,156) (1,114)
Proceeds from exercise of stock options................................. 3 8 216 95
------- ------- ------- ------- -------
Net cash (used) provided by financing activities.................. (4,774) 17,201 (37,070) (13,313) 60,207
------- ------- ------- ------- -------
Net (decrease) increase in cash and cash equivalents.............. (7,285) (3,311) 3,079 (2,312) (5,492)
Cash and cash equivalents:
Beginning of period..................................................... 20,145 12,860 9,549 9,549 12,628
------- ------- ------- ------- -------
End of period........................................................... $ 12,860 $ 9,549 $ 12,628 $ 7,237 $ 7,136
======= ======= ======= ======= =======
</TABLE>
Noncash Investing and Financing Activities. For the year ended December 31,
1994, a portion of the acquisition price of nine retail units was seller
financed for $2,917,000. For the year ended December 31, 1995, two retail units
with a net book value of $1,613,000 were exchanged for a finished products
terminal and $1,198,000 was incurred as a contingent payment related to the
acquisition of the Bloomfield refinery. In the second quarter of 1996 and for
the year ended December 31, 1996, the Company accrued $2,250,000 for estimated
preacquisition environmental liabilities assumed in the purchase of the
Bloomfield refinery. For the year ended December 31, 1996, $6,910,000 was
incurred as a contingent payment, also related to the acquisition of the
Bloomfield refinery. Both of these amounts have been added to property, plant
and equipment as an adjustment to the purchase price of the Bloomfield refinery.
In the second quarter of 1997, the Company exchanged an office building with a
net book value of approximately $800,000, a truck maintenance shop with a net
book value of approximately $500,000 and recorded $22,904,000 as long-term debt
for capital leases as part of the acquisition of ninety-six service
station/convenience stores and other assets.
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 96
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Giant Industries, Inc. ("Giant" or the "Company") was organized to combine
the refining and marketing business of Giant Industries Arizona, Inc. ("Giant
Arizona") with the oil and gas business of Hixon Development Company ("Hixon")
through a merger in December 1989 in which Giant Arizona and Hixon became
wholly-owned subsidiaries of the Company. In conjunction with the merger, the
Company completed its initial public offering. In 1990, Hixon was renamed Giant
Exploration & Production Company ("Giant E&P").
In early 1996, the Company approved a plan for disposition of its oil and
gas business. On August 30, 1996, the Company completed the sale of
substantially all of its oil and gas assets. (See Note 3 for further
discussion.)
DESCRIPTION OF BUSINESS
The Company operates primarily as an independent refiner and marketer of
petroleum products. The Company has two operating refineries in New Mexico. The
Ciniza refinery, with a crude oil throughput capacity of 20,800 barrels per day
("bpd") and a total capacity including natural gas liquids of 26,000 bpd, is
located near Gallup, New Mexico. In October 1995, the Company acquired the
Bloomfield refinery, with a crude oil throughput capacity of 18,000 bpd and a
total capacity including natural gas liquids of 18,600 bpd, located in
Bloomfield, New Mexico. (See Note 2 for further discussion.) The Company also
owns an ethanol production plant which supplies ethanol for blending by the
Company as well as for sale to third party customers. Due to high grain costs,
this facility temporarily suspended operations in October 1995. Based on current
raw material and product prices, the Company has reevaluated its options
regarding this facility and currently plans to reopen the plant in 1997.
The Company's principal business is the refining of crude oil into
petroleum products which are sold through branded retail outlets as well as
through distributors, industrial/commercial accounts and major oil companies.
The Company is the largest refiner and one of the largest marketers of petroleum
products in the Four Corners area of the southwestern United States where New
Mexico, Arizona, Colorado and Utah adjoin. As an adjunct to its retail outlets,
the Company sells merchandise through its stores.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Giant and all
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
NET REVENUES
Revenues are recognized from sales when product ownership is transferred to
the customer. Excise and other similar taxes are excluded from net revenues.
F-7
<PAGE> 97
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CASH FLOWS
All highly liquid instruments with an original maturity of three months or
less are considered to be cash equivalents.
FUTURES AND OPTION CONTRACTS
The Company periodically enters into futures or option contracts to hedge
its exposure to price fluctuations on crude oil and refined products. Gains and
losses on hedge contracts are deferred and reported as a component of the
related transaction. For the purposes of the Statement of Cash Flows, hedging
transactions are considered to be operating activities.
INTEREST RATE SWAPS
In the past, interest rate management techniques such as swaps and caps
were entered into in order to effectively manage and reduce net interest
expense. Net settlements on swap transactions are reported as an adjustment to
net interest expense over the life of the associated debt instruments. These
debt instruments were repaid in 1996, and the remaining net settlement proceeds
were recorded as an adjustment to interest expense.
MARKETABLE SECURITIES
All marketable securities were sold or matured in 1995. Marketable
securities were stated at fair value which was generally estimated based on
quoted market prices. Marketable securities were managed as part of the
Company's shortterm cash management program.
CONCENTRATION OF CREDIT RISK
Credit risk with respect to customer receivables is concentrated in a small
geographic area in which the Company operates and relates to customers in the
oil and gas industry. To minimize this risk, the Company performs ongoing credit
evaluations of its customers' financial position and requires collateral, such
as letters of credit, in certain circumstances.
INVENTORIES
Inventories are stated at the lower of cost or market. Costs for crude oil
and refined products produced by the refineries are determined by the last-in,
first-out ("LIFO") method. Costs for exchange and terminal refined products and
shop supplies are determined by the first-in, first-out ("FIFO") method. Costs
for merchandise inventories are determined by the retail inventory method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreciated on the
straight-line method over their respective estimated useful lives. The estimated
useful lives for the various categories of property, plant and equipment are:
<TABLE>
<S> <C>
Buildings and improvements.............................. 7-30 years
Machinery and equipment................................. 7-24 years
Pipelines............................................... 30 years
Furniture and fixtures.................................. 2-15 years
Vehicles................................................ 3-7 years
</TABLE>
F-8
<PAGE> 98
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Routine maintenance, repairs and replacement costs are charged against
earnings as incurred. Turnaround costs, which consist of complete shutdown and
inspection of significant units of the refineries at intervals of two or more
years for necessary repairs and replacements, are deferred and amortized over
the period until the next expected shutdown which generally ranges from
twenty-four to forty-eight months depending on the type of shutdown and the unit
involved. Expenditures which materially increase values, expand capacities or
extend useful lives are capitalized. Interest expense is capitalized as part of
the cost of constructing major facilities and equipment.
TREASURY STOCK
The Company's Board of Directors has authorized the repurchase of up to
1,500,000 shares of the Company's common stock or approximately 12% of all
shares issued as of the inception of the repurchase program. These purchases may
be made from time to time as conditions permit. Shares may be repurchased
through privately-negotiated transactions, block share purchases and open market
transactions. Through the end of 1996, the Company had repurchased 1,123,500
shares at a cost of approximately $10,785,000. These shares are being treated as
treasury shares.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated.
INCOME TAXES
The provision for income taxes is based on earnings reported in the
financial statements. Deferred income taxes are provided on temporary
differences between the basis of assets and liabilities for financial reporting
purposes and income tax purposes.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is computed on the weighted average number
of shares of common stock outstanding during each period. The exercise of
outstanding stock options would not result in a material dilution of earnings
per share.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Company
adopted this Statement in the first quarter of 1996 and based on an evaluation
of its operations in accordance with the criteria specified in the Statement,
determined that there was no material impact to the Company's financial position
or results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 "Accounting for Stock Based Compensation." The Company determined that it
will not change to the fair value method prescribed in the Statement and will
continue to use Accounting Principles Board Opinion No. 25 for measurement and
recognition of employee stock based compensation. SFAS No. 123 requires
additional disclosures to be made in the financial statements.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 96-1 "Environmental Remediation
Liabilities." The Company has not completed the process of evaluating the impact
that will result from adopting this SOP. However, management does not believe
the
F-9
<PAGE> 99
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adoption will have a significant impact on the Company's financial position or
results of operations. SOP 96-1 is required to be adopted in the first quarter
of 1997.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial statements
and notes to conform to the statement classifications used in 1996.
NOTE 2 -- ACQUISITION
On October 4, 1995, the Company completed the purchase of the Bloomfield
refinery along with related pipeline and transportation assets from
Gary-Williams Energy Co. and its wholly-owned subsidiary, Bloomfield Refining
Company ("BRC").
The purchase price was $55,000,000 plus approximately $7,500,000 for crude
oil and refined products inventories associated with the refinery operations.
The purchase agreement provides for potential contingent payments to be made to
BRC over approximately six years from the acquisition date, not to exceed a
present value of $25,000,000, should certain criteria be met. These contingent
payments are considered to be additional purchase price and will be allocated to
the assets acquired in the same proportions as the original purchase price was
allocated, not to exceed the estimated current replacement cost, and amortized
over the estimated remaining life of the assets. At December 31, 1995 and 1996,
the Company had accrued $1,198,000 and $6,910,000, respectively, under this
arrangement relating to 1995 and 1996 operations. In addition, the Company
accrued $2,250,000 relating to certain environmental obligations assumed in the
purchase. The above accruals have been recorded as additional purchase price and
allocated to the assets acquired.
The following Statements of Earnings compare the consolidated results of
Giant, including the results of the Bloomfield refinery, for the year ended
December 31, 1996, with the pro forma combined condensed statement of earnings
of the Company and BRC ("Pro Forma") for the years ended December 31, 1994 and
1995. The pro forma statements assume the transaction was consummated at the
beginning of the periods presented, and include the results of operations of the
Company and BRC, along with adjustments which give effect to events that are
directly attributable to the transaction and which are expected to have a
continuing impact.
The unaudited pro forma combined condensed financial information does not
purport to represent the results of operations that actually would have resulted
had the purchase occurred on the date specified, nor should it be taken as
indicative of the future results of operations.
F-10
<PAGE> 100
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
PRO FORMA PRO FORMA GIANT
1994 1995 1996
--------- --------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net revenues..................................... $ 432,089 $ 439,719 $499,184
Cost of products sold............................ 294,964 313,353 361,864
-------- -------- --------
Gross margin..................................... 137,125 126,366 137,320
-------- -------- --------
Operating expenses............................... 64,755 61,504 64,315
Depreciation and amortization.................... 14,996 15,408 17,673
Selling, general and administrative expenses..... 14,495 14,339 15,602
-------- -------- --------
Operating income................................. 42,879 35,115 39,730
Interest expense, net and other.................. 14,021 12,229 11,547
-------- -------- --------
Earnings from continuing operations before income
taxes.......................................... 28,858 22,886 28,183
Provision for income taxes....................... 9,955 8,118 11,132
-------- -------- --------
Earnings from continuing operations ............. $ 18,903 $ 14,768 $ 17,051
======== ======== ========
Earnings from continuing operations per common
share.......................................... $ 1.56 $ 1.29 $ 1.52
======== ======== ========
</TABLE>
NOTE 3 -- DISCONTINUED OPERATIONS
In early 1996, the Company approved a plan of disposition for its oil and
gas segment. The decision was based upon management's review of the prospects
for this operation, which indicated that substantial new capital would be
necessary to further develop this business and reach an acceptable level of
profitability and integration.
The net assets of the oil and gas segment at December 31, 1995, were
approximately $26,689,000, consisting primarily of oil and gas properties and
related deferred taxes.
On August 30, 1996, the Company completed the sale of substantially all of
its oil and gas assets for $25,500,000. The transaction was structured so that
the Company retained only the oil and gas properties that will generate future
coal seam gas tax credits under Section 29 of the Internal Revenue Code. The
reserves related to these properties will be produced by the buyer and tax
credits will be realized by the Company. The net asset value assigned to these
properties is approximately $4,300,000 and is included in other assets and
liabilities in the accompanying Consolidated Balance Sheet. The Company also
retained an office building and some equipment. Future coal seam gas tax
credits, when earned, will be used to offset income taxes payable.
Revenues for the oil and gas operations in 1996, up to the date of sale,
were $6,891,000 and were $5,959,000 and $8,363,000 for the years 1994 and 1995,
respectively. These revenues are not included in revenues as reported in the
Consolidated Statements of Earnings.
Loss on the disposal of the oil and gas segment for 1996 is a loss on the
sale of the oil and gas properties of approximately $18,000, including a
provision for income taxes of $53,000, offset by earnings from operations of
approximately $5,000, including income tax benefits of $861,000. For 1994 and
1995, earnings (loss) from operations were $(2,934,000), net of income tax
benefit of $1,351,000, and $143,000, net of income taxes of $154,000,
respectively. A pre-tax charge for a reduction of the carrying value of crude
oil and natural gas properties of $3,395,000 was recorded in 1994.
F-11
<PAGE> 101
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Coal seam gas tax credits generated from these operations in 1996 of
$519,000 were allocated to discontinued operations. Similar tax credits
generated in 1994 and 1995 of $635,000 and $700,000, respectively, which could
not be used on a separate return basis, were allocated to continuing operations
based on the Company's tax sharing arrangement.
NOTE 4 -- MARKETABLE SECURITIES
During 1995, all of the Company's marketable securities, which were
classified as available-for-sale as defined in SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," were sold or matured.
In recording gains and losses on the sale of marketable securities, cost is
determined using specific identification. In 1995, the Company realized gross
losses of approximately $310,000, offset in part by a $200,000 gain realized on
the full payment of certain notes which had been written down by that amount in
1994 to reflect an estimated other than temporary impairment.
NOTE 5 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
First-in, first-out ("FIFO") method:
Crude oil.............................................. $15,465 $10,443
Refined products....................................... 17,605 22,462
Refinery and shop supplies............................. 6,871 7,439
Retail method:
Merchandise............................................ 2,721 2,768
------- -------
Subtotal............................................... 42,662 43,112
Allowance for last-in, first-out ("LIFO") method......... (81) (4,886)
------- -------
Total.......................................... $42,581 $38,226
======= =======
</TABLE>
The Company uses the LIFO method of inventory valuation. The portion of
inventories valued on a LIFO basis totaled $29,710,000 and $25,887,000 at
December 31, 1995 and 1996, respectively. The following data will facilitate
comparison with the operating results of companies using the FIFO method.
If inventories had been determined using the FIFO method at December 31,
1994, 1995 and 1996, net earnings and earnings per share for the years ended
December 31, 1994, 1995 and 1996 would have been higher (lower) by $357,000 and
$0.03, $(268,000) and $(0.02) and $2,883,000 and $0.26, respectively.
F-12
<PAGE> 102
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements................................. $ 21,582 $ 24,053
Buildings and improvements............................ 56,165 61,955
Machinery and equipment............................... 178,301 195,964
Pipelines............................................. 8,875 9,510
Furniture and fixtures................................ 15,195 16,568
Vehicles.............................................. 6,552 8,372
Construction in progress.............................. 6,249 5,838
-------- ---------
Subtotal......................................... 292,919 322,260
Accumulated depreciation and amortization............. (94,357) (108,715)
-------- ---------
Total....................................... $198,562 $ 213,545
======== =========
</TABLE>
NOTE 7 -- ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Excise taxes.......................................... $ 8,608 $ 8,212
Bloomfield refinery acquisition contingent payment.... 1,198 6,910
Payroll and related costs............................. 3,975 3,804
Bonus, profit sharing and retirement plans............ 538 2,850
Interest.............................................. 1,390 1,267
Other................................................. 4,607 4,729
------- -------
Total....................................... $20,316 $27,772
======= =======
</TABLE>
F-13
<PAGE> 103
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
9 3/4% senior subordinated notes, due 2003, interest
payable semi-annually................................ $100,000 $100,000
Unsecured credit agreement, due 1998, floating interest
rate, interest payable quarterly..................... 31,000 10,000
10.91% senior unsecured note repaid October 1996....... 8,750
Notes payable to others, collateralized by real estate,
9% to 11%, due 1996 to 2010, interest payable monthly
or annually.......................................... 3,645 2,208
8% secured promissory note, due 1996 to 1997, interest
payable quarterly.................................... 1,945 973
Other.................................................. 1,399 1,339
-------- --------
Subtotal.......................................... 146,739 114,520
Less current portion................................... (4,063) (1,439)
-------- --------
Total........................................ $142,676 $113,081
======== ========
</TABLE>
Repayment of the 9 3/4% senior subordinated notes ("Notes") is jointly and
severally guaranteed on an unconditional basis by the Company's direct and
indirect wholly-owned subsidiaries, subject to a limitation designed to ensure
that such guarantees do not constitute a fraudulent conveyance. Except as
otherwise allowed in the Indenture pursuant to which the Notes were issued,
there are no restrictions on the ability of such subsidiaries to transfer funds
to the Company in the form of cash dividends, loans or advances. General
provisions of applicable State law, however, may limit the ability of any
subsidiary to pay dividends or make distributions to the Company in certain
circumstances.
No separate financial statements of the subsidiaries are included herein
because the subsidiaries are jointly and severally liable; the aggregate assets,
liabilities, earnings, and equity of the subsidiaries are substantially
equivalent to the assets, liabilities, earnings, and equity of the Company on a
consolidated basis; and the separate financial statements and other disclosures
concerning the subsidiaries are not deemed material to investors.
The Indenture supporting the Notes contains certain covenants that, among
other things, restrict the ability of the Company and its subsidiaries to create
liens, incur or guarantee debt, pay dividends, sell certain assets or subsidiary
stock, engage in certain mergers, engage in certain transactions with affiliates
or alter the Company's current line of business. At December 31, 1996, the
Company was in compliance with these covenants. In addition, the Company is,
subject to certain conditions, obligated to offer to purchase a portion of the
Notes at a price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase, with the net cash proceeds of
certain sales or other dispositions of assets. Upon a change of control, the
Company will be required to offer to purchase all of the Notes at 101% of the
principal amount thereof, plus accrued interest, if any, to the date of
purchase. At December 31, 1996, retained earnings available for dividends under
the terms of the Indenture was approximately $16,123,000.
In October 1995, the Company entered into a Credit Agreement with a group
of banks under which $30,000,000 was borrowed pursuant to a three-year unsecured
revolving term facility to provide financing for the purchase of the Bloomfield
refinery. At December 31, 1996, this revolving term facility had been repaid.
The $30,000,000 that was repaid is currently available for reborrowing under
this facility for the acquisition of
F-14
<PAGE> 104
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
property, plant and equipment. This facility has a floating interest rate that
is tied to various short-term indices.
In addition, the Credit Agreement contains a three-year unsecured working
capital facility to provide working capital and letters of credit in the
ordinary course of business. The availability under this working capital
facility is the lesser of (i) $40,000,000, or (ii) the amount determined under a
borrowing base calculation tied to eligible accounts receivable and inventories
as defined in the Credit Agreement. At December 31, 1996, the lesser amount was
$40,000,000. At December 31, 1996, direct borrowings under this arrangement were
$10,000,000 and there were $15,928,000 of irrevocable letters of credit
outstanding. This facility has a floating interest rate that is tied to various
short-term indices and was 6.5% per annum at December 31, 1996.
The Company is required to pay a quarterly commitment fee based on the
unused amount of each facility.
The Credit Agreement contains certain covenants and restrictions which
require the Company to, among other things, maintain a minimum consolidated net
worth; minimum fixed charge coverage ratio; minimum funded debt to total
capitalization percentage; and places limits on investments, prepayment of
senior subordinated debt, guarantees, liens and restricted payments. At December
31, 1996, the Company was in compliance with these covenants. The Credit
Agreement is guaranteed by substantially all of the Company's wholly-owned
subsidiaries.
On October 17, 1996, the 10.91% senior unsecured note due to an insurance
company was repaid. In 1994, 1995 and 1996, the Company's interest expense was
reduced by approximately $288,000, $242,000 and $363,000, respectively, as a
result of amortizing the proceeds received from a terminated interest rate swap
agreement that was related to this note. At December 31, 1996, the balance of
the deferred swap proceeds was fully amortized due to the repayment of the
10.91% note.
Aggregate annual maturities of long-term debt as of December 31, 1996 are:
1997 -- $1,439,000; 1998 -- $10,395,000; 1999 -- $1,530,000; 2000 -- $49,000;
2001 -- $56,000; and all years thereafter -- $101,051,000.
NOTE 9 -- FINANCIAL INSTRUMENTS AND HEDGING ACTIVITY
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments" and SFAS No. 119,
"Disclosures about Derivative Financial Instruments and Fair Value of Financial
Instruments." The estimated fair value amounts have been determined by the
Company using available market information and valuation methodologies described
below. However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
may not be indicative of the amounts that the Company could realize in a current
market exchange. The use of different market assumptions or valuation
methodologies may have a material effect on the estimated fair value amounts.
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1995 1996
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance Sheet -- Financial Instruments:
Fixed rate long-term debt.................. $115,637 $ 116,259 $104,449 $ 108,491
</TABLE>
F-15
<PAGE> 105
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying values of cash and cash equivalents, receivables, accounts
payable and accrued expenses approximate fair values due to the short-term
maturities of these instruments. Variable rate long-term debt instruments are
estimated to approximate fair values as rates are tied to short-term indices.
FIXED RATE LONG-TERM DEBT
The fair value of fixed rate long-term debt was determined using quoted
market prices, where applicable, or estimated by discounting future cash flows
using rates estimated to be currently available for debt of similar terms and
remaining maturities.
HEDGING ACTIVITIES
The Company purchases crude oil futures contracts and options to reduce
price volatility, to fix margins in its refining and marketing operations and to
protect against price declines for excess inventory volumes. These contracts
permit settlement by delivery of commodities and, therefore, are not financial
instruments, as defined by SFAS No. 105, "Disclosures of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentration of Credit Risk."
The Company uses these contracts in its hedging activities. At December 31,
1995, the Company's hedging activities had futures contracts maturing in 1996
covering 85,000 barrels of crude oil and options had been purchased on 240,000
barrels of crude oil. At December 31, 1996, the Company's hedging activities had
futures contracts maturing in 1997 covering 16,000 barrels of crude oil. The
crude oil options provided the Company downside protection on a portion of crude
oil barrels in inventory in excess of current operating needs. The crude oil
futures contracts qualify as hedges and any gains or losses resulting from
market changes are substantially offset by losses or gains on the Company's
hedging contracts. Gains and losses on hedging contracts are deferred and
reported as a component of the related transaction. Net deferred gains/(losses)
for the Company's petroleum hedging activities were approximately $116,000 and
$(30,000) at December 31, 1995 and 1996, respectively.
The Company is exposed to loss in the event of nonperformance by the other
parties to these contracts. However, the Company does not anticipate
nonperformance by the counterparties.
NOTE 10 -- INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995 1996
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.............................................. $ 3,283 $1,140 $ 3,712
State................................................ 385 866 906
Deferred:
Federal.............................................. (1,189) 1,438 5,471
State................................................ 129 194 1,043
------- ------ -------
$ 2,608 $3,638 $11,132
======= ====== =======
</TABLE>
Income taxes paid in 1994, 1995 and 1996 were $5,379,000, $0, and
$8,909,000, respectively.
F-16
<PAGE> 106
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the difference between the provision for income taxes
and income taxes at the statutory U.S. federal income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995 1996
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes at the statutory U.S. federal income tax
rate................................................. $ 3,522 $3,980 $ 9,864
Increase (decrease) in taxes resulting from:
State taxes, net..................................... 505 563 1,346
General business credits, net........................ (910) (679)
Federal tax credits from nonconventional fuel........ (635) (700)
Other, net........................................... 126 474 (78)
------- ------ -------
$ 2,608 $3,638 $11,132
======= ====== =======
</TABLE>
Deferred income taxes are provided to reflect temporary differences in the
basis of net assets for income tax and financial reporting purposes. The tax
effected temporary differences and credit carryforwards which comprise deferred
taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
---------------------------------- ----------------------------------
ASSETS LIABILITIES TOTAL ASSETS LIABILITIES TOTAL
------- ----------- -------- ------- ----------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Nondeductible accruals for
uncollectible receivables...... $ 168 $ 168 $ 101 $ 101
Insurance accruals............... 597 597 373 373
Insurance settlements............ 106 106 213 213
Other nondeductible accruals..... 130 130 208 208
Other reserves................... 616 616 617 617
Inventory costs capitalized for
income tax purposes............ 137 137 124 124
Other............................ 391 391
------- -------- -------- ------- -------- --------
Total current............... 2,145 2,145 1,636 1,636
------- -------- -------- ------- -------- --------
Other nondeductible accruals..... 349 349 1,114 1,114
Restricted stock awards.......... $ (28) (28)
Operating lease.................. (1,003) (1,003) $ (938) $ (938)
Accelerated depreciation......... (19,953) (19,953) (25,717) (25,717)
Other............................ 42 (979) (937) 27 (1,664) (1,637)
Tax credit carryforwards......... 8,708 8,708 8,136 8,136
------- -------- -------- ------- -------- --------
Total noncurrent............ 9,099 (21,963) (12,864) 9,277 (28,319) (19,042)
------- -------- -------- ------- -------- --------
Total.................. $11,244 $ (21,963) $(10,719) $10,913 $ (28,319) $(17,406)
======= ======== ======== ======= ======== ========
</TABLE>
At December 31, 1996, the Company had a minimum tax credit carryforward of
approximately $5,537,000 available to offset future income taxes payable to the
extent regular income taxes payable exceeds alternative minimum taxes payable.
Minimum tax credits can be carried forward indefinitely.
At December 31, 1996, the Company also had approximately $2,599,000 of
general business credits available to offset future regular taxes payable.
Pursuant to Federal income tax law, these carryover credits must be used before
any minimum tax credit carryforward can be used. Of the total general business
credit available, $214,000 will expire in 2008, $1,341,000 will expire in 2009
and $1,044,000 will expire in 2010.
F-17
<PAGE> 107
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- EMPLOYEE STOCK OWNERSHIP PLAN
The Company and its subsidiaries have an Employee Stock Ownership Plan
("ESOP") which is a noncontributory defined contribution plan established
primarily to acquire shares of the Company's common stock for the benefit of all
eligible employees.
The ESOP originally borrowed $6,500,000 from a bank and purchased shares of
the Company's common stock from existing shareholders. The loan was purchased by
the Company from the bank in 1993 when the loan had a principal balance of
$1,347,000. In 1995, the ESOP paid the balance due on the loan of $514,000.
At December 31, 1995 and 1996, the ESOP's assets included 1,435,965 and
1,296,088 shares of the Company's common stock, respectively. All of these
shares have been allocated to the participants. Shares were allocated to
participants when principal payments were made on the loan discussed above. The
1996 contribution of $450,000 was invested in a balanced mutual fund.
Allocations to participant accounts are made on a formula based on the ratio
that each participant's compensation, during the Plan year, bears to the
compensation of all such participants. The Company treats all ESOP shares as
outstanding for earnings per share purposes.
Contributions to the ESOP are made at the discretion of the Board of
Directors. The Company made contributions of $900,000, $900,000 and $450,000 to
the ESOP for 1994, 1995 and 1996, respectively.
NOTE 12 -- STOCK INCENTIVE PLAN
The Company established the 1989 Stock Incentive Plan (the "Plan") under
which 500,000 shares of the Company's common stock were authorized to be issued
to deserving employees in the form of options and/or restricted stock. The Plan
is administered by the Compensation Committee of the Board of Directors, but to
the extent required under Section 16 of the Securities Exchange Act of 1934, any
transaction between the Company or the Plan and an executive officer of the
Company that involves a grant, award or other acquisition of the Company's
equity securities must be approved by the Board of Directors.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 "Accounting for Stock Based Compensation." The Company has determined that
it will not change to the fair value method prescribed in the Statement and will
continue to use Accounting Principles Board Opinion No. 25 for measurement and
recognition of employee stock based compensation.
F-18
<PAGE> 108
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes stock option transactions:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS OUTSTANDING AT SHARES EXERCISE PRICE
--------------------------------------------------- ------- ----------------
<S> <C> <C>
January 1, 1994.................................... 304,857 $ 8.05
Granted.......................................... 10,000 9.81
Exercised........................................ (500) 5.25
Forfeited........................................ (2,000) 5.25
-------
December 31, 1994.................................. 312,357 8.13
Exercised........................................ (1,000) 7.75
Forfeited........................................ (5,000) 7.75
-------
December 31, 1995.................................. 306,357 8.14
Exercised........................................ (32,750) 6.61
Forfeited........................................ (6,600) 6.39
-------
December 31, 1996.................................. 267,007 $ 8.37
=======
Options exercisable at December 31:
1994............................................. 154,481 $ 8.41
1995............................................. 222,973 8.29
1996............................................. 256,573 8.44
</TABLE>
The following summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------ OPTIONS EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -------------------------------------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 8.96...................................... 108,857 2.5 Years $ 8.96 108,857 $ 8.96
10.50...................................... 5,000 3.6 Years 10.50 5,000 10.50
10.63...................................... 26,000 4.2 Years 10.63 26,000 10.63
5.25...................................... 30,400 5.3 Years 5.25 23,300 5.25
7.75...................................... 86,750 6.3 Years 7.75 86,750 7.75
9.81...................................... 10,000 7.2 Years 9.81 6,666 9.81
------- -------
267,007 4.4 Years $ 8.37 256,573 $ 8.44
======= =======
</TABLE>
In 1990, an additional 29,500 shares of restricted stock were granted under
this plan of which 8,572 were forfeited in 1993 and 1,286 in 1994.
At December 31, 1996, there were 175,401 shares available for future
grants.
Prior to adoption of the 1989 Stock Incentive Plan, the Company granted
shares to employees under Restricted Stock Plans as follows:
<TABLE>
<CAPTION>
SHARES
-------
<S> <C>
1988..................................................... 214,436*
1989..................................................... 124,097**
</TABLE>
- ---------------
* Net of 33,757 shares forfeited/redeemed/canceled.
** Net of 21,045 shares forfeited.
F-19
<PAGE> 109
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
All of the options or restricted stock grants are subject to forfeiture
with vesting ranging from 14% to 33% annually beginning one year after the date
of grant for restricted stock and exercise dates of stock options. Compensation
expense related to restricted stock grants is charged to earnings over the
appropriate vesting period. All options were granted at fair market value at the
date of grant and expire on the tenth anniversary of the grant date.
NOTE 13 -- 401(k) PLAN
In 1993, the Company adopted a 401(k) retirement plan for its employees.
This plan complements the Company's Employee Stock Ownership Plan by allowing
the employees to invest on a pre-tax basis in non-Giant stock investments thus
diversifying their retirement portfolios. For the years ended December 31, 1994,
1995 and 1996, the Company had expensed $189,000, $188,000 and $800,000,
respectively, for matching contributions under this plan.
NOTE 14 -- INTEREST, OPERATING LEASES AND RENT EXPENSE
Interest paid and capitalized for 1994 was $11,644,000 and $0, for 1995 was
$11,833,000 and $190,000 and for 1996 was $12,804,000 and $43,000, respectively.
The Company is committed to annual minimum rentals under noncancelable
operating leases that have initial or remaining lease terms in excess of one
year as of December 31, 1996 as follows:
<TABLE>
<CAPTION>
LAND, BUILDING, MACHINERY
AND EQUIPMENT LEASES
-------------------------
(IN THOUSANDS)
<S> <C>
1997............................................ $ 939
1998............................................ 878
1999............................................ 659
2000............................................ 396
2001............................................ 68
------
Total minimum payments required............... $ 2,940
======
</TABLE>
Total rent expense was $1,890,000, $1,982,000 and $1,930,000 for 1994, 1995
and 1996, respectively.
NOTE 15 -- COMMITMENTS AND CONTINGENCIES
The Company and certain subsidiaries are defendants to various legal
actions. Certain of these pending legal actions involve or may involve claims
for compensatory, punitive or other damages. Litigation is subject to many
uncertainties and it is possible that some of these legal actions, proceedings
or claims could be decided adversely. Although the amount of liability at
December 31, 1996 with respect to these matters is not ascertainable, the
Company believes that any resulting liability should not materially affect the
Company's financial condition or results of operations.
Federal, state and local laws and regulations relating to health and the
environment affect nearly all of the operations of the Company. As is the case
with all companies engaged in similar industries, the Company faces significant
exposure from actual or potential claims and lawsuits involving environmental
matters. These matters include soil and water contamination, air pollution and
personal injuries or property damage allegedly caused by substances
manufactured, handled, used, released or disposed of by the Company. Future
expenditures related to health and environmental matters cannot be reasonably
quantified in many circumstances due to the speculative nature of remediation
and clean-up cost estimates and methods, imprecise and conflicting data
regarding the hazardous nature of various types of substances, the number of
other potentially
F-20
<PAGE> 110
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
responsible parties involved, various defenses which may be available to the
Company and changing environmental laws and interpretations of environmental
laws.
The United States Environmental Protection Agency notified the Company in
May 1991 that it may be a potentially responsible party for the release or
threatened release of hazardous substances, pollutants, or contaminants at the
Lee Acres Landfill, which is owned by the United States Bureau of Land
Management ("BLM") and which is adjacent to the Company's Farmington refinery.
This refinery was operated until 1982. Although a final plan of action for the
Landfill has not yet been adopted by the BLM, the BLM has developed a proposed
plan of action, which it projects will cost approximately $3,900,000 to
implement. This cost projection is based on certain assumptions which may or may
not prove to be correct, and is contingent on confirmation that the remedial
actions, once implemented, are adequately addressing Landfill contamination. For
example, if assumptions regarding groundwater mobility and contamination levels
are incorrect, BLM is proposing to take additional remedial actions with an
estimated cost of approximately $1,800,000. Potentially responsible party
liability is joint and several, such that a responsible party may be liable for
all of the clean-up costs at a site even though it was responsible for only a
small part of such costs. Based on current information, the Company does not
believe it needs to record a liability in relation to the BLM's proposed plan.
The Company has an environmental liability accrual of approximately
$2,900,000. Approximately $900,000 relates to ongoing environmental projects,
including the remediation of a hydrocarbon plume at the Company's Farmington
refinery and hydrocarbon contamination on and adjacent to 5.5 acres the Company
owns in Bloomfield, New Mexico. The remaining amount of approximately $2,000,000
relates to an original estimate of approximately $2,300,000, recorded in the
second quarter of 1996, for certain environmental obligations assumed in the
acquisition of the Bloomfield refinery. That amount was recorded as an
adjustment to the purchase price and allocated to the assets acquired. The
environmental accrual is recorded in the current and long-term sections of the
Company's Consolidated Balance Sheet.
The Company has received several tax assessments from the Navajo Nation
relating to crude oil and natural gas removed from properties located outside
the boundaries of the Navajo Indian Reservation in an area of disputed
jurisdiction, including a $1,800,000 severance tax assessment issued to Giant in
November 1991. The Company has invoked its appeal rights with the Nation's Tax
Commission in connection with this assessment and intends to oppose the
assessment. It is the Company's position that it is in substantial compliance
with laws applicable to the disputed area and, therefore, has accrued a
liability in regards thereto for substantially less than the amount of the
original assessment. It is possible that the Company's assessments will have to
be litigated by the Company before final resolution. In addition, the Company
may receive further tax assessments.
F-21
<PAGE> 111
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------
QUARTER
--------------------------------------------
FIRST SECOND THIRD FOURTH(1)
------- ------- ------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Continuing Operations:
Net revenues..................................... $69,562 $80,590 $78,400 $104,336
Cost of products sold............................ 49,357 56,497 53,719 74,698
------- ------- ------- --------
Gross margin..................................... 20,205 24,093 24,681 29,638
------- ------- ------- --------
Operating expenses............................... 12,115 12,255 13,120 14,366
Depreciation and amortization.................... 3,056 3,307 2,986 3,996
Selling, general and administrative expenses..... 2,842 3,365 3,333 3,238
Net earnings..................................... 112 2,093 1,968 3,560
Net earnings per common share.................... $ 0.01 $ 0.18 $ 0.17 $ 0.32
Discontinued Operations:
Net earnings..................................... $ 35 $ 59 $ 10 $ 39
Net earnings per common share.................... $ - $ 0.01 $ - $ -
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996(2)
-----------------------------------------------
QUARTER
-----------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Continuing Operations:
Net revenues.................................. $104,100 $135,643 $136,032 $123,409
Cost of products sold......................... 73,960 92,718 100,567 94,619
------- ------- ------- --------
Gross margin.................................. 30,140 42,925 35,465 28,790
------- ------- ------- --------
Operating expenses............................ 15,408 15,869 16,141 16,897
Depreciation and amortization................. 4,096 4,285 4,508 4,784
Selling, general and administrative expenses.. 3,595 5,447 3,423 3,137
Net earnings.................................. 2,325 8,693 5,283 750
Net earnings per common share................. $ 0.21 $ 0.77 $ 0.47 $ 0.07
Discontinued Operations:
Net earnings (loss)........................... $ 79 $ (72) $ (20) $ -
Net earnings (loss) per common share.......... $ - $ - $ - $ -
</TABLE>
- ---------------
(1) Fourth quarter 1995 includes the results of operations of the Bloomfield
refinery which was acquired on October 4, 1995.
(2) 1996 includes the results of operations of the Bloomfield refinery for all
periods presented.
NOTE 17 - SUBSEQUENT EVENTS
Over the period May 28, 1997 to May 31, 1997, Giant Four Corners, Inc.,
("GFC"), an indirect wholly-owned subsidiary of the Company, completed the
acquisition of ninety-six retail service station/convenience stores, seven
additional retail locations for future development, certain petroleum
transportation and maintenance assets, options to acquire service
station/convenience stores and other related assets (the "Thriftway Stations").
The assets were acquired from Thriftway Marketing Corp. and Clayton Investment
Company and from entities related to such sellers (collectively, "Thriftway
Marketing").
F-22
<PAGE> 112
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Thirty-two service station/convenience stores, the seven retail locations
for future development, the transportation and maintenance assets, the options
to acquire service station/convenience stores and other related assets are being
purchased for approximately $19,100,000 in cash, an office building with a net
book value of approximately $800,000 and a truck maintenance shop with a net
book value of approximately $500,000. GFC is leasing the remaining sixty-four
service station/convenience stores and related assets for a period of ten years
and intends to purchase them pursuant to options to purchase during the ten year
period for approximately $22,900,000. The leased service station/convenience
stores will be accounted for as capital leases and will initially require annual
lease payments of approximately $2,600,000. These lease payments will be reduced
as the individual service station/convenience stores are purchased pursuant to
the options. The amount paid for the options, described here and below, will be
applied to the acquisition of the last service station/convenience stores
purchased pursuant to such options.
The service station/convenience stores acquired are retail outlets that
sell various grades of gasoline, diesel fuel and merchandise to the general
public and are located in New Mexico, Arizona, Colorado and Utah, in or adjacent
to the Company's primary market area. GFC intends to use substantially all of
the assets acquired in a manner consistent with their previous operation. A
small number of the acquired service station/convenience stores have been
targeted for disposal and will be sold for use other than as retail service
station/convenience stores.
GFC also entered into a consignment agreement with Thriftway Marketing to
supply finished product to sixteen service station/convenience stores operated
by Thriftway Marketing which are located on the Navajo, Ute and Zuni Indian
Reservations. Under this agreement, GFC will receive the profits from the
finished product sales and will pay Thriftway Marketing annual consignment fees.
GFC has options to purchase these service station/convenience stores. The
Company has also entered into long-term supply arrangements with Thriftway
Marketing to provide gasoline and diesel fuel to other service stations in the
area that will continue to be operated by Thriftway Marketing.
In addition, GFC has one-year options to purchase forty-five additional
units from Thriftway Marketing that are located in Wyoming, Texas and Montana.
GFC paid additional monies for finished product, merchandise and supply
inventories associated with the units acquired. The amount paid approximated the
sellers' cost of such inventories.
On June 3, 1997, Giant Industries Arizona, Inc., ("Giant Arizona"), a
wholly-owned subsidiary of the Company, purchased all of the issued and
outstanding common stock of Phoenix Fuel Co., Inc. ("Phoenix Fuel") from J. W.
Wilhoit, as Trustee of the Wilhoit Trust Agreement Dated 12/26/74 and other
related entities for $30,000,000 in cash.
Phoenix Fuel is an independent industrial/commercial petroleum products
distributor with fuel sales of approximately 16,000 barrels per day, including
gasoline, diesel fuel, burner fuel, jet fuel, aviation fuel and kerosene. In
addition, Phoenix Fuel distributes oils and lubricants such as motor oil,
hydraulic oil, gear oil, cutting oil and grease.
Phoenix Fuel has nine bulk petroleum distribution plants, twenty cardlock
fueling operations, a lubricant storage and distribution facility and operates a
fleet of forty finished product truck transports. These assets and related
operations are located throughout the state of Arizona and will continue to be
used in a manner consistent with their previous operation.
Both acquisitions have been accounted for using the purchase method.
Results of operations of the acquired businesses from their respective dates of
acquisition have been included in the Company's consolidated statement of
earnings for the six months ended June 30, 1997. The Company recorded estimated
goodwill of approximately $15,000,000 for the acquisition of Phoenix Fuel and
$1,000,000 for the acquisition of the Thriftway Stations pending final
allocation of the purchase price. The Company is amortizing goodwill
F-23
<PAGE> 113
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
related to the Phoenix Fuel acquisition over 30 years and goodwill related to
the Thriftway Stations acquisition over 20 years.
The purchases were funded under Giant's Credit Agreement, (the
"Agreement"), dated October 4, 1995, as amended, with a group of banks. This
Agreement was amended effective May 23, 1997 to increase the borrowing
commitment under the unsecured capital expenditure facility portion of the
Agreement to $70,000,000 from $30,000,000 and to extend the due date to May 23,
2000 from October 4, 1998, for both the unsecured capital expenditure facility
and the unsecured working capital facility. The proceeds of the capital
expenditure facility can be used for the following: (a) to purchase the assets
of the above described acquisition and for the purchase of the common stock of
Phoenix Fuel, (b) to repurchase shares of the Company's common stock, and (c)
for acquisitions, capital expenditures and general corporate purposes, but not
for working capital expenditures. On May 23, 1999, the borrowing commitment
under the capital expenditure facility is required to be reduced by $20,000,000.
Funds under the working capital facility portion of the Agreement are available
to provide working capital and letters of credit in the ordinary course of
business. Certain covenants and restrictions contained in the original Credit
Agreement were also modified. The interest rate on these unsecured facilities is
tied to various short-term indices and the associated interest rate margin has
been revised downward. The interest rate at June 30, 1997 was approximately
6.5%. Phoenix Fuel will be a guarantor under the Agreement and the Indenture,
dated as of November 29, 1993 among Giant, as Issuer, the Subsidiary Guarantors,
as guarantors, and NBD Bank, National Association, as Trustee, relating to
$100,000,000 of 9 3/4% Senior Subordinated Notes due 2003.
NOTE 18 -- NOTES TO UNAUDITED FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited consolidated financial statements for the six
months ended June 30, 1996 and 1997 have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments and reclassifications considered
necessary for a fair and comparable presentation have been included and are only
of a normal recurring nature. Operating results for the six months ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997.
The Company adopted SOP 96-1 "Environmental Remediation Liabilities" in the
first quarter of 1997. Based on a review of current environmental remediation
activities, there was no current impact on the Company's financial position or
results of operations.
In March 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share", which is effective for financial statements
for both interim and annual periods ending after December 15, 1997. Early
adoption of the statement is not permitted. This new standard requires dual
presentation of "basic" and "diluted" earnings per share ("EPS") on the face of
the earnings statement and requires a reconciliation of the numerators and
denominators of basic and diluted EPS calculations. The Company's current EPS
calculation conforms to SFAS No. 128's basic EPS. Diluted EPS, which includes
the effects of dilutive stock options, is not materially different from basic
EPS for the Company.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
and SFAS No. 131 "Disclosures About Segments of an Enterprise and Related
Information". SFAS No. 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional capital in the equity section of a statement of
financial position. SFAS No. 131 establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for disclosures about products and services, geographic
areas and major customers. Both statements are effective for financial
statements for
F-24
<PAGE> 114
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
periods beginning after December 15, 1997. The Company has not completed
evaluating the impact of implementing the provisions of SFAS Nos. 130 and 131.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Inventories consist of the following at June 30, 1997:
First-in, first-out ("FIFO") method:
Crude oil......................................... $ 15,219
Refined products.................................. 27,494
Refinery and shop supplies........................ 7,565
Retail method:
Merchandise....................................... 5,438
-------
55,716
Allowance for last-in, first-out ("LIFO")
method.......................................... 589
-------
Total........................................ $ 56,305
=======
</TABLE>
The following unaudited pro forma combined condensed statements of earnings
for the six months ended June 30, 1996 and 1997 combine the historical financial
information for the Company, the Thriftway Stations and Phoenix Fuel assuming
the acquisitions were consummated at the beginning of the periods presented. The
pro forma statements include the results of operations of the Company and the
acquisitions, along with adjustments which give effect to events that are
directly attributable to the transactions and which are expected to have a
continuing impact.
This unaudited pro forma financial information does not purport to
represent the results of operations that actually would have resulted had the
acquisitions occurred on the date specified, nor should it be taken as
indicative of the future results of operations.
PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
1996 1997
----------- -----------
<S> <C> <C>
Net revenues.............................................. $ 373,421 $ 403,167
Cost of products sold..................................... 275,252 310,371
---------- ----------
Gross margin.............................................. 98,169 92,796
Operating expenses........................................ 45,669 46,187
Depreciation and amortization............................. 11,457 13,230
Selling, general and administrative expenses.............. 11,681 12,910
---------- ----------
Operating income.......................................... 29,362 20,469
Interest expense, net..................................... 9,616 8,551
---------- ----------
Earnings from continuing operations before income taxes... 19,746 11,918
Provision for income taxes................................ 7,673 4,769
---------- ----------
Earnings from continuing operations....................... $ 12,073 $ 7,149
========== ==========
Earnings per common share for continuing operations....... $ 1.07 $ .64
========== ==========
Weighted average number of shares outstanding............. 11,255,853 11,084,336
========== ==========
</TABLE>
F-25
<PAGE> 115
BLOOMFIELD REFINING COMPANY
INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1995
(UNAUDITED)
F-26
<PAGE> 116
BLOOMFIELD REFINING COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1994 SEPTEMBER 30, 1995
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and temporary investments........................... $ 8,379,601 $ 8,273,826
Accounts receivable -- affiliates........................ 6,008,872 7,647,303
Accounts receivable...................................... 257,820 126,876
Inventories.............................................. 7,887,826 6,213,748
Notes receivable -- affiliate............................ 15,000,000
Prepaid crude oil -- affiliate........................... 2,312,338 5,054,070
Prepaid expenses and other............................... 584,495 823,517
----------- -----------
Total current assets.................................. 25,430,952 43,139,340
----------- -----------
Property, Plant and Equipment
Refinery property, plant and equipment................... 23,165,353 23,396,346
Gas plants, property and equipment....................... 4,855,654 5,163,770
Less: Accumulated depreciation........................ (6,550,919) (7,853,081)
----------- -----------
21,470,088 20,707,035
Construction in progress................................. 147,712 596,205
----------- -----------
Total property, plant and equipment................... 21,617,800 21,303,240
----------- -----------
Other.................................................... 289,005 278,173
----------- -----------
Total Assets..................................... $47,337,757 $ 64,720,753
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable -- affiliates........................... $10,853,802 $ 9,601,415
Accounts payable......................................... 649,983 1,043,750
Accrued liabilities...................................... 2,227,067 872,247
Notes payable............................................ 14,166,667
Income taxes payable -- affiliate........................ 2,967,000
----------- -----------
Total current liabilities............................. 13,730,852 28,651,079
----------- -----------
Non-Current Liabilities
Deferred income taxes, net............................... 1,184,500 1,316,200
Accrued turnaround costs................................. 1,953,671 2,716,039
Other.................................................... 130,312 121,670
----------- -----------
Total non-current liabilities......................... 3,268,483 4,153,909
----------- -----------
Commitments and contingencies (Note 9)
Shareholder's Equity
Common stock, $.01 par value, 1,000 voting shares
authorized, issued and outstanding.................... 10 10
Contributed capital...................................... 3,200,090 3,200,090
Retained earnings........................................ 27,138,322 28,715,665
----------- -----------
Total shareholder's equity............................ 30,338,422 31,915,765
----------- -----------
Total Liabilities and Shareholder's Equity....... $47,337,757 $ 64,720,753
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-27
<PAGE> 117
BLOOMFIELD REFINING COMPANY
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Operating revenues............................................ $107,713,865 $107,734,435
Operating expenses............................................ 86,037,166 89,423,495
------------ ------------
Gross margin................................................ 21,676,699 18,310,940
General and administrative expenses........................... 5,306,263 4,932,441
------------ ------------
Operating income............................................ 16,370,436 13,378,499
------------ ------------
Other Income (Expense)
Interest income............................................. 258,012 230,290
Interest expense............................................ (196,934) (419,744)
Other....................................................... 78,951 305,988
------------ ------------
140,029 116,534
------------ ------------
Income before income taxes.................................. 16,510,465 13,495,033
Income Tax Expense (Note 4)
Current..................................................... (6,282,000) (5,124,000)
Deferred.................................................... (178,800) (131,700)
------------ ------------
(6,460,800) (5,255,700)
------------ ------------
Net Income............................................... $ 10,049,665 $ 8,239,333
============ ============
</TABLE>
STATEMENTS OF RETAINED EARNINGS
<TABLE>
<S> <C> <C>
Balance at January 1.......................................... $ 23,854,523 $ 27,138,322
Net income.................................................... 10,049,665 8,239,333
Dividends..................................................... (4,500,000) (6,661,990)
------------ ------------
Balance at September 30....................................... $ 29,404,188 $ 28,715,665
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-28
<PAGE> 118
BLOOMFIELD REFINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1995
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Reconciliation of net income to net cash provided by operating
activities:
Net income..................................................... $10,049,665 $ 8,239,333
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................ 1,276,944 1,302,162
Accrued turnaround costs.................................... 857,664 762,368
Changes in assets and liabilities:
Increase in accounts receivable........................... (1,315,740) (1,507,487)
(Increase) decrease in inventories........................ (1,849,190) 1,674,078
Increase in prepaid expenses and other.................... (1,692,608) (2,980,754)
Decrease in deferred tax asset............................ 291,500
Decrease in other assets.................................. 10,832 10,832
Increase (decrease) in accounts payable................... 1,076,781 (872,622)
Increase (decrease) in accrued liabilities................ 556,414 (1,354,820)
Increase in income taxes payable-affiliate................ 63,400 2,967,000
(Decrease) increase in deferred income taxes, net......... (1,679,400) 131,700
Decrease in other liabilities............................. (8,642)
----------- -----------
Net cash provided by operating activities.............. 7,646,262 8,363,148
----------- -----------
Cash flows used in investing activities:
Capital expenditures -- refinery............................... (1,005,795) (665,484)
Capital expenditures -- gas plants............................. (38,979) (308,116)
----------- -----------
Net cash used in investing activities.................. (1,044,774) (973,600)
----------- -----------
Cash flows used in financing activities:
Borrowings under term loan..................................... 15,000,000
Loan to parent................................................. (15,000,000)
Principal payments on debt..................................... (2,875,000) (833,333)
Dividends distributed.......................................... (4,500,000) (6,661,990)
----------- -----------
Net cash used in financing activities.................. (7,375,000) (7,495,323)
----------- -----------
Net decrease in cash and temporary investments................... (773,512) (105,775)
Cash and temporary investments at beginning of year.............. 9,501,500 8,379,601
----------- -----------
Cash and temporary investments at end of period.................. $ 8,727,988 $ 8,273,826
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-29
<PAGE> 119
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION, BACKGROUND AND ORGANIZATION
Basis Of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Management of Bloomfield Refining
Company, all adjustments and reclassifications considered necessary for a fair
and comparable presentation have been included and are of a normal recurring
nature. Operating results for the nine months ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995. The enclosed financial statements should be read in
conjunction with the financial statements and notes thereto included in the
December 31, 1994 annual financial statements of Bloomfield Refining Company.
ORGANIZATION
On August 31, 1984, Bloomfield Refining Company, a Delaware corporation
(Bloomfield), was incorporated. Bloomfield's primary activities are the refining
of petroleum products and gas plant operations. Bloomfield is a wholly-owned
subsidiary of Gary-Williams Energy Corporation (GWEC). Bloomfield operates a
refinery in Bloomfield, New Mexico (see Note 10) with a throughput capacity of
17,000 barrels per day and has ownership interests in two gas plants located in
Utah.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash And Temporary Investments
For purposes of these statements, Bloomfield considers investments
purchased with an original maturity of three months or less to be cash or
temporary investments. Temporary investments consist primarily of commercial
paper and money market funds. These securities are classified as held to
maturity investments as defined by Statement of Financial Accounting Standards
No. 115. At December 31, 1994 and September 30, 1995, these securities are
recorded at a market value of $7,633,000 and $8,273,826, respectively. Realized
gains and losses from sales of these securities are included in interest income
in the accompanying statements of operations. The net unrealized gain or loss on
these securities was not material as of and December 31, 1994 and September 30,
1995.
Inventories
Inventories are valued at the lower of first-in, first-out cost or market.
Inventories at December 31, 1994 and September 30, 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
<S> <C> <C>
Refined, unrefined and intermediate products....... $4,181,728 $ 3,823,475
Crude oil.......................................... 2,811,004 1,521,217
Materials and supplies............................. 895,094 869,056
---------- ----------
$7,887,826 $ 6,213,748
========== ==========
</TABLE>
Property, Plant And Equipment
The initial purchase and additions to property, plant and equipment are
recorded at cost. Depreciation is provided using the straight-line method based
on estimated useful lives ranging from 2 to 35 years, with an average initial
life of approximately 19 years.
F-30
<PAGE> 120
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Ownership interests in gas plants are recorded at cost and proportionately
consolidated for financial statement purposes. Depreciation is provided using
the straight-line method with estimated useful lives ranging from 5 to 12 years,
with an average initial life of approximately 7 years.
General And Administrative Expenses
Bloomfield reimburses GWEC for general and administrative services relating
to the supply and marketing of raw materials and refined products and gas plant
operations.
Accrued Turnaround Costs
Major repair and maintenance expenses (turnaround costs) are accrued and
charged to current operations in anticipation of the work to be performed in
future periods to renew the related refinery assets. Accrued turnaround costs
are classified as either current or non-current liabilities based upon the
scheduling of major expenditures.
Capitalized Interest
Bloomfield capitalizes interest on debt associated with the financing of
capital construction projects. No interest was capitalized during 1994 or during
the nine months ended September 30, 1995.
Reclassifications
Certain prior year amounts have been reclassified for consistency with the
current year presentation.
NOTE 3 -- LONG-TERM DEBT
Bloomfield borrowed $15,000,000 from a group of banks on July 31, 1995.
Bloomfield then lent the $15,000,000 to its parent, GWEC, which used the funds
to acquire another refinery. Interest is based on the bank's prime rate or
alternatively, interest rates can be fixed for 30 to 180 day periods at a
floating Eurocurrency rate. The loan was to be repaid ratably over 36 months
beginning August 31, 1995. However, the loan was paid in full in October, 1995.
Bloomfield also had a revolving credit facility, as amended, with a group
of banks under which it could issue letters of credit which in the aggregate
cannot exceed the lesser of $35,000,000 or the borrowing base. The borrowing
base, which consists primarily of accounts receivable, inventory, exchange
balances and unused outstanding letters of credit was approximately $21,000,000
and $27,000,000 as of December 31, 1994 and September 30, 1995. Bloomfield had
no amounts outstanding under the revolving credit facility, however letters of
credit totaling approximately $20,000,000 and $24,000,000 had been issued as of
December 31, 1994 and September 30, 1995. Borrowings under the revolving credit
facility bear interest at a rate based on the bank's prime rate.
The credit facility and term loan are secured by substantially all of the
assets of Bloomfield and, among other things, requires the maintenance of
certain financial covenants and ratios. The revolving credit facility was to
mature June 1, 1997; however, it was closed in October 1995.
NOTE 4 -- INCOME TAXES
Bloomfield and GWEC are members of a consolidated tax group which files a
consolidated federal income tax return. An agreement was entered into between
Bloomfield and GWEC whereby Bloomfield determines, on a stand alone basis, the
tax liability or benefit as if it were not a member of the tax group. Bloomfield
then reimburses GWEC for its current income tax liability on a quarterly basis.
Deferred income
F-31
<PAGE> 121
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
taxes are paid to GWEC periodically. Bloomfield is entitled to be reimbursed by
GWEC for its income tax benefit when Bloomfield could otherwise have utilized
such benefit on a stand alone basis.
Deferred income taxes are recognized for the differences between the tax
and financial reporting bases of assets and liabilities at each period-end based
on enacted tax laws and statutory tax rates. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
The net deferred tax liability consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
<S> <C> <C>
Gross deferred tax assets......................... $ (1,090,700) $ (1,364,000)
Gross deferred tax liabilities.................... 2,798,300 3,203,300
----------- -----------
1,707,600 1,839,300
Payments to affiliate............................. (523,100) (523,100)
Valuation allowance
----------- -----------
Net deferred tax liability........................ $ 1,184,500 $ 1,316,200
=========== ===========
</TABLE>
Deferred tax assets and liabilities result primarily from inventory and
overhead costs capitalized for tax, accounting reserves and from recording
depreciation and turnaround expenses in different periods for financial and tax
accounting purposes. In management's opinion, it is more likely than not that
the gross deferred tax assets will be realized based on past earnings history.
The difference between Bloomfield's tax provision at the federal statutory
rate and the effective rate is due primarily to state income taxes.
Tax Deficiency
The Internal Revenue Service concluded a field audit of the consolidated
tax group's income tax returns for the fiscal years 1990 and 1991 resulting in a
"Notice of Deficiency" for both fiscal years. Proposed adjustments to income and
tax credits resulted in a proposed tax deficiency of approximately $4,800,000
plus penalties for 1990 and $600,000 plus penalties for 1991. Bloomfield has
filed petitions with the United States Tax Court contesting the notices and
believes that it has meritorious legal defenses to the proposed tax
deficiencies, but the ultimate outcome of the Tax Court case is uncertain.
NOTE 5 -- OPERATING REVENUES AND EXPENSES BY SEGMENTS
The following segment information reflects operating revenues, operating
expenses and gross margins for the nine months ended September 30, 1994 and
1995.
<TABLE>
<CAPTION>
REFINING GAS PLANTS TOTAL
------------ ---------- ------------
<S> <C> <C> <C>
September 30, 1994
Operating Revenues....................... $105,748,159 $1,965,706 $107,713,865
Operating Expenses....................... 84,395,339 1,641,827 86,037,166
------------ ---------- ------------
Gross Margin..................... $ 21,352,820 $ 323,879 $ 21,676,699
============ ========== ============
September 30, 1995
Operating Revenues....................... $106,030,168 $1,704,267 $107,734,435
Operating Expenses....................... 87,818,761 1,604,734 89,423,495
------------ ---------- ------------
Gross Margin..................... $ 18,211,407 $ 99,533 $ 18,310,940
============ ========== ============
</TABLE>
F-32
<PAGE> 122
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- RELATED PARTY TRANSACTIONS
A supply and marketing service agreement was entered into between
Bloomfield and GWEC, whereby GWEC purchases crude oil and other raw materials
for resale to Bloomfield, at cost, for processing at the refinery. The
intercompany purchases of raw materials include all amounts accrued and owing by
GWEC to third parties, including prepayments and offsite inventory. Also,
Bloomfield sells refined petroleum products to GWEC, at market, for resale by
GWEC.
Bloomfield has guaranteed the payment by GWEC of an aggregate maximum at
any one time of $2,000,000 of present and/or future indebtedness owed to a third
party crude oil supplier.
NOTE 7 -- EMPLOYEE BENEFIT PLANS
Bloomfield has a profit sharing plan (defined contribution plan) covering
certain non-union employees who meet eligibility requirements as to age and
length of service. Contributions to the plan are determined annually by
Bloomfield. Contributions of $138,140 and $125,460 were accrued for 1994 and the
nine months ended September 30, 1995, respectively. The funding of the plan was
discontinued in October, 1995.
Bloomfield also has a defined benefit pension plan for union employees.
Bloomfield's funding policy is to contribute annually an amount to fund normal
cost and amortize unfunded actuarial liabilities over 19 years. Plan assets at
December 31, 1994 and September 30, 1995 consist primarily of private and public
debt and equity investments. The funding of the plan was discontinued in
October, 1995.
Benefits are based on a percentage of the employee's earnings, as defined,
as of June 1, 1993, and years of credited service up to a maximum of 30 years.
The following table sets forth the funded status and amounts recognized in
Bloomfield's statements of financial position and operations at December 31,
1994 for the defined benefit pension plan:
<TABLE>
<CAPTION>
1994
---------
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$417,559 at December 31, 1994............................... $(433,264)
=========
Projected benefit obligation for service rendered to date........ $(433,264)
Plan assets at fair value........................................ 302,952
---------
Projected benefit obligation in excess of plan assets............ (130,312)
Unrecognized net obligation existing at January 1, 1989 being
recognized over 19 years....................................... 8,926
Prior service cost not yet recognized............................ 77,483
Unrecognized net loss from past experience different from that
assumed and effects of changes in assumptions.................. 70,391
Adjustment to recognize minimum liability........................ (156,800)
---------
Accrued pension liability included in other liabilities.......... $(130,312)
=========
Net pension cost includes the following components:
Service cost................................................... $ 55,079
Interest cost.................................................. 29,266
Actual return on plan assets................................... 6,557
Net amortization and deferral of other components.............. (19,922)
---------
Net periodic pension cost........................................ $ 70,980
=========
</TABLE>
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<PAGE> 123
BLOOMFIELD REFINING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.0% for 1994. The expected long-term rate of
return on pension plan assets was 8.0% in 1994.
NOTE 8 -- MAJOR CUSTOMERS
During the nine months ended September 30, 1994 and 1995, Bloomfield sold
100% of the refined products to GWEC. Also, during that period, Bloomfield
purchased 100% of the crude oil and raw materials from GWEC.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
Bloomfield is subject to certain environmental and other regulations
primarily administered by the United States Environmental Protection Agency
(E.P.A.) and various state agencies. Management of Bloomfield believes it has
complied with all material aspects associated with these regulations. Bloomfield
entered into an administrative order with the E.P.A. to perform a study to
assess the nature of any environmental cleanup requirements at the refinery
which was substantially completed in 1994. Management is currently evaluating
the E.P.A.'s response and is uncertain as to what, if any, additional costs may
be required.
Bloomfield is subject to various claims and business disputes in the
ordinary course of business. Management does not anticipate that the ultimate
outcome of these issues will have a material impact on Bloomfield's financial
position or results of operations.
An affiliate of Bloomfield entered into a ten year lease agreement for
office space in November 1989. Bloomfield has guaranteed the performance of the
affiliate's obligations. Terms of the lease provided for annual rent of $796,000
in 1995 through 1999. In addition to the rent, Bloomfield has guaranteed the
annual payment of $328,000 in occupancy costs with provisions for escalation
based on actual expenses. Currently, the affiliate of Bloomfield is subleasing
certain office space to a third party and a related party.
NOTE 10 -- SUBSEQUENT EVENT
In October, 1995 Bloomfield and GWEC sold the Bloomfield, New Mexico
refinery and related assets to a third party. The sales price was $55,000,000
plus the market value of hydrocarbon inventories and an earnout provision based
on the combined per barrel gross margin of the buyer's refineries providing for
annual payments through the year 2001 of up to a net present value of
$25,000,000 using a discount rate of 9.75% per annum.
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<PAGE> 124
======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. i
Prospectus Summary.................... 1
Risk Factors.......................... 13
Use of Proceeds....................... 20
Capitalization........................ 21
Selected Financial Data............... 22
Unaudited Pro Forma Combined Financial
Information......................... 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 28
The Registered Exchange Offer......... 36
Business.............................. 44
Description of the 9 3/4% Notes....... 55
Description of the Exchange Notes..... 55
Registration Rights................... 78
Certain Federal Income Tax
Consequences........................ 80
Plan of Distribution.................. 83
Legal Matters......................... 85
Experts............................... 85
Glossary.............................. 86
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1997, ALL DEALERS AFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
$150,000,000
[GIANT INDUSTRIES, INC. LOGO]
OFFER TO EXCHANGE ITS
9% SENIOR SUBORDINATED
NOTES DUE 2007 FOR
9% SENIOR SUBORDINATED
NOTES DUE 2007 THAT
HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
------------------------
PROSPECTUS
------------------------
, 1997
======================================================
<PAGE> 125
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has purchased insurance on behalf of the registrants' directors
and officers against certain liabilities that may be asserted against such
persons in connection with any actual or alleged Wrongful Act (as defined in the
policy) in their capacities as directors and officers of the registrants,
including certain liabilities under the federal and state securities laws,
except to the extent that the registrants have indemnified the directors and
officers.
The following contains summaries of certain circumstances in which
indemnification is provided pursuant to the registrants' Certificate or Articles
of Incorporation and Bylaws. Such summaries are qualified in their entirety by
reference to the registrants' Certificate or Articles of Incorporation and
Bylaws.
The Company
As permitted by the Delaware General Corporation law (the "DGCL"), the
Company's Restated Certificate of Incorporation provides that a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, including grossly negligent
business judgments made in good faith, except for liability (i) for breach of
the duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL (governing distributions
to stockholders), or (iv) for any transaction for which a director derives an
improper personal benefit. In addition, Section 145 of the DGCL and the
Company's Bylaws, under certain circumstances, provide for the indemnification
of the Company's officers, directors, employees, and agents against liabilities
which they may incur in such capacities.
In general, any officer, director, employee or agent may be indemnified
against expenses including attorneys' fees, fines, settlements or judgments
which were actually and reasonably incurred in connection with a legal
proceeding, other than one brought by or on the behalf of the Company, to which
he was a party as a result of such relationship, if he acted in good faith, and
in the manner he believed to in the Company's best interest and not unlawful. If
the action is brought by or on behalf of the Company, the person to be
indemnified must have acted in good faith in a manner he believed to have been
in the Company's best interest and generally must not have been adjudged liable
to the Company.
No person seeking indemnification may be denied indemnification unless the
Board of Directors or the stockholders of the Company determine in good faith,
or independent legal counsel for the Company opines in writing, that the
standards for indemnification have not been met. A successful defense is deemed
conclusive evidence of a person's right to be indemnified against expenses.
The Company may advance funds to pay the expenses of any person involved in
such action provided that the Company receives an undertaking that the person
will repay the advanced funds unless it is ultimately determined that he is not
entitled to indemnification.
Indemnification may also be granted pursuant to provisions of Bylaws which
may be adopted in the future, pursuant to the terms of agreements which may be
entered into in the future or pursuant to a vote of stockholders or
disinterested directors.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
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<PAGE> 126
Giant E&P
With respect to Giant Exploration & Production Company, a Texas corporation
("Giant E&P"), Article 2.02A(16) of the Texas Business Corporation Act empowers
a corporation to indemnify directors, officers, employees and agents of the
corporation and to purchase and maintain liability insurance for those persons.
Article 2.02-1 permits a corporation to indemnify a person who was, is or is
threatened to be made a named defendant or respondent in a proceeding because
the person is or was a director only if it is determined that the person
conducted himself in good faith, reasonably believed that his official conduct
was in the corporation's best interests (or in other cases was at least not
opposed to the corporation's best interests), and in the case of any criminal
proceeding had no reasonable cause to believe his conduct was unlawful. Under
Article 2.02-1, a corporation shall indemnify a director or officer against
reasonable expenses incurred by him in connection with a proceeding in which he
is named defendant or respondent because he is or was a director or officer if
he has been wholly successful, on the merits or otherwise, in the defense of the
proceedings, and, in addition, such indemnification may be ordered in a proper
case by a court of law. In addition, a corporation may indemnify and advance
expenses to person who are not or were not officers, employees, or agents of the
corporation but who are or were serving at the request of the corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprises to the same extent that it may indemnify and advance expenses to
directors under this article. The statute provides that a corporation may
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation or a person who is or was serving at the request of the
corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another enterprise, against any
liability asserted against him in such capacity or arising out of such status,
whether or not the corporation would have the power to indemnify him against
that liability under this article.
Article IX of Giant E&P's Articles of Incorporation (the "Articles")
provides that a director of the corporation shall not be liable to the
corporation or its shareholders for monetary damages for an act or omission in
such director's capacity as a director, except for liability of such director
for (1) a breach of such director's duty of loyalty to the corporation or its
shareholders; (2) an act or omission not in good faith that constitutes a breach
of duty of the director to the corporation or an act or omission that involves
intentional misconduct or a knowing violation of the law; (3) a transaction from
which such director received an improper benefit, whether or not the benefit
results from an action taken within the scope of such director's office; or (4)
an act or omission for which the liability of such director is expressly
provided by an applicable statute. No amendment to or repeal of this Article IX
shall apply to or have any effect upon the liability or alleged liability of any
director of the corporation for or with respect to any act or omission of such
director occurring prior to such amendment or repeal.
Giant E&P entered into indemnification agreements in October 1989 with
certain of its then directors and officers pursuant to which it may have
continuing obligations.
Giant Arizona, Giant Four Corners, Inc., Phoenix Fuel Co., Inc. and Giant
Mid-Continent, Inc.
With respect to Giant Industries Arizona, Inc., Giant Four Corners, Inc.,
Phoenix Fuel Co., Inc. and Giant Mid-Continent, Inc., all Arizona corporations
(collectively referred to herein as the "Arizona Subsidiaries"), Section 10-851
of the Arizona Revised Statutes empowers a corporation to indemnify directors,
officers, employees or agents of the corporation who are made a party to a
proceeding, including any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that the person is or was a director, officer, employee or agent of
the corporation only if that person acted in good faith and reasonably believed
(a) in the case of conduct in the person's official capacity with the
corporation that the person's conduct was within its best interest; and (b) in
all other cases, the person's conduct was at least not opposed to the Arizona
Subsidiaries' best interests. In the case of any criminal proceeding, the person
must have had no reasonable cause to believe that the person's conduct was
unlawful. Indemnification shall not be provided in respect of: (i) any
proceeding by or in the right of the corporation in which the person was
adjudged liable to the corporation, or (ii) any proceeding charging improper
personal benefit to the person, whether or not involving action in the person's
official capacity for the
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<PAGE> 127
corporation, in which the person was adjudged liable on the basis that personal
benefit was improperly received by that person.
Unless ordered by a court, indemnification pursuant to the foregoing may
only be made by the Arizona Subsidiaries as authorized in a specific case upon a
determination that indemnification is proper under the circumstances because the
director, officer, employee or agent has met the applicable standard of conduct.
Such determination shall be made (a) by the board of directors of the Arizona
Subsidiary, acting by a majority vote of a quorum consisting of directors who
are not parties to the proceeding; (b) by special legal counsel selected by a
majority vote of the disinterested directors or, if there are no disinterested
directors, by majority vote of the board; or (c) by the shareholders (but shares
owned by or voted under the control of persons who are parties to the proceeding
shall not be voted.
In addition, under Arizona law, the Arizona Subsidiaries are required to
indemnify a director, officer, employee or agent against expenses in connection
with any lawsuit or proceeding if such person has been successful on the merits
or otherwise in the defense of such lawsuit or proceeding. Further, the Arizona
Subsidiaries are required to indemnify an outside director against liability
except (1) in the cases described above in which indemnification is not
permitted and (2) if a court determines that the director did not meet the
applicable standard of conduct. The Arizona Subsidiaries may advance or pay
expenses incurred by a director, officer, employee or agent in advance of final
disposition of a proceeding if all of the following conditions exist: (a) the
person furnishes the corporation with a written affirmation of the person's good
faith belief that the person has met the applicable standard of conduct; (b) the
person furnishes the corporation with a written undertaking by or on behalf of
such person to repay the advance if it is ultimately determined that the person
did not met the applicable standard of conduct; and (c) a determination is made
that the facts then known to those making the determination would not preclude
indemnification.
The respective Articles of Incorporation ("Articles") and Bylaws of the
Arizona Subsidiaries provide that the Arizona Subsidiaries shall indemnify each
director and officer to the fullest extent permitted by law. The Arizona
Subsidiaries' Bylaws extend that protection to employees and agents of the
corporation. No modification of the indemnification provision may adversely
affect any director's or officer's right to indemnification with respect to any
act or omission occurring prior to such modifications.
The Arizona Subsidiaries' (except Phoenix Fuel's) respective Articles
provide that no director of the Arizona Subsidiaries shall be liable to the
Arizona Subsidiaries or their respective shareholders for monetary damages for
breach of fiduciary duty as a director; provided, however, that the Articles and
Arizona law do not permit the elimination of liability (a) for any breach of the
director's duty of loyalty to the corporation or its shareholders; (b) for acts
or omissions which are not in good faith or which involve intentional misconduct
or a knowing violation of law; (c) for authorizing the unlawful payment of a
dividend or other distribution on shares of the corporation's capital stock; (d)
for any transaction from which the director derived an improper personal
benefit; or (e) for any violation of Section 10-041 of the Arizona Revised
Statues, which relates to directors' conflicts of interests. The effect of this
provision in the Articles is to eliminate the rights of the Arizona Subsidiaries
and their respective shareholders (through shareholders' derivative suits on
behalf of the Arizona Subsidiaries) to recover monetary damages against a
director for breach of fiduciary duty as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the situations
described in clauses (a) through (e) above. This provision will not alter the
liability of directors under federal securities laws.
Giant Stop-N-Go of New Mexico, Inc,. Ciniza Production Company, and San Juan
Refining Company
With respect to Giant Stop-N-Go of New Mexico, Inc., Ciniza Production
Company and San Juan Refining Company, all New Mexico corporations (collectively
referred to herein as the "New Mexico Subsidiaries"), Section 53-11-4.1 NMSA
1978 of the New Mexico Business Corporation Act empowers a corporation to
indemnify directors, officers, employees or agents of the corporation who are
made a party to a proceeding, including any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation only if that person acted in good
faith and reasonably believed (a) in the case of
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<PAGE> 128
conduct in the person's official capacity with the corporation that the person's
conduct was within its best interest; and (b) in all other cases, the person's
conduct was at least not opposed to the New Mexico Subsidiaries' best interests.
In the case of any criminal proceeding, the person must have had no reasonable
cause to believe that the person's conduct was unlawful. Indemnification shall
not be provided in respect of any proceeding charging improper personal benefit
to the person, whether or not involving action in the person's official capacity
for the corporation, in which the person shall have been adjudged to be liable
on the basis that personal benefit was improperly received by that person.
If a determination has been made by the board of directors that the person
has been wholly successful in the defense of the proceeding brought against him,
or if a court should so determine that indemnification is required, the person
shall be indemnified against reasonable expenses incurred by him in connection
with the proceeding.
The New Mexico Subsidiaries may not indemnify a person until a
determination has been made that the indemnification of that person in
permissible under the circumstances because that person has met the standards of
conduct required by Section 53-11-4.1B NMSA 1978. This determination shall be
made (1) by the board of directors by a majority vote of a quorum consisting of
directors who are not parties to the proceeding; (2) if that quorum cannot be
obtained, by a majority vote by a committee of the board elected by a majority
of the full board; (3) by special legal counsel selected by the board of
directors or a committee thereof; or (4) by the shareholders. The reasonable
expenses incurred by a person who is a party to the proceeding may be paid or
reimbursed by the corporation in advance if (1) that person furnishes the New
Mexico Subsidiaries with a written affirmation of his good faith belief that the
person has met the standard of conduct necessary for indemnification by the New
Mexico Subsidiaries; (2) the person furnishes the New Mexico Subsidiaries a
written undertaking by or on his behalf to repay that amount if it is ultimately
determined that the person has not met those standards of conduct; and (3) a
determination is made that the facts then known to those making the
determination will not preclude indemnification.
The Bylaws of the New Mexico Subsidiaries provide for indemnification of
directors and officers and each person who may serve at the corporation's
request as the director or officer of another corporation in which the
corporation owns shares of capital stock or of which it is a creditor, against
expenses actually and reasonably incurred in connection with the settlement or
defense of any action, suit or proceeding, civil or criminal, in which that
person is made a party by reason of being or having been such director or
officer, except in relation to matters as to which he shall be adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty to the corporation. This provision specifically indemnifies
each such director and officer from payment of any judgment, levy, or demand
that might be granted against that person by virtue of his occupancy of that
office growing out of any such action, suit or proceeding.
The Bylaws of the New Mexico Subsidiaries provide that the indemnification
contained therein is in addition, and not in lieu of, the indemnification of
directors and officers described in Section 53-11-4.1 NMSA 1978, as that law may
be amended from time to time.
The Articles of San Juan Refining Company provide that, subject to certain
exceptions, its directors shall not be personally liable to it or it
shareholders for monetary damages for breach of fiduciary duties.
ITEM 21. EXHIBITS AND FINANCIAL DATA SCHEDULES.
(A) EXHIBITS
The following is a list of all the exhibits filed as part of the
Registration Statement.
DEFINITIONS:
Form S-1 -- Refers to the Form S-1 Registration Statement under the
Securities Act of 1933 as filed October 16, 1989, File No. 33-31584.
Amendment No. 1 -- Refers to the Amendment No. 1 to Form S-1 Registration
Statement under the Securities Act of 1933 as filed October 27, 1989, File No.
33-31584.
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<PAGE> 129
Amendment No. 2 -- Refers to the Amendment No. 2 to Form S-1 Registration
Statement under the Securities Act of 1933 as filed November 20, 1989, File No.
33-31584.
Amendment No. 3 -- Refers to the Amendment No. 3 to Form S-1 Registration
Statement under the Securities Act of 1933 as filed December 12, 1989, File No.
33-31584.
Form S-3 -- Refers to the Form S-3 Registration Statement under the
Securities Act of 1933 as filed September 22, 1993, File No. 33-69252.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
2.1* Purchase and Sale Agreement, dated August 8, 1995, among Bloomfield Refining
Company and Gary-Williams Energy Corporation, as Sellers, and Giant Industries
Arizona, Inc., as Buyer. Incorporated by reference to Exhibit 2.1 to the
Company's Report on Form 8-K for the period of October 4, 1995, File No. 1-10398.
2.2 First Amendment, dated September 29, 1995, to Purchase and Sale Agreement, dated
August 8, 1995, among Bloomfield Refining Company and Gary-Williams Energy
Corporation, as Sellers, and Giant Industries Arizona, Inc., as Buyer.
Incorporated by reference to Exhibit 2.2 to the Company's Report on Form 8-K for
the period October 4, 1995, File No. 1-10398.
2.3 Second Amendment, dated October 2, 1995, to Purchase and Sale Agreement, dated
August 8, 1995, among Bloomfield Refining Company and Gary-Williams Energy
Corporation, as Sellers, and Giant Industries Arizona, Inc. as Buyer.
Incorporated by reference to Exhibit 2.3 to the Company's Report on Form 8-K for
the period October 4, 1995, File No. 1-10398.
2.4 Definitive Agreement, dated April 18, 1997, by and between Giant Four Corners,
Inc., as "Buyer," and Thriftway Marketing Corp. and Clayton Investment Company,
collectively as "Seller." Incorporated by reference to Exhibit 2.1 to the
Company's Report on Form 8-K filed June 12, 1997, File No. 1-10398.
2.5 Stock Purchase Agreement, dated April 30, 1997, by and among Phoenix Fuel Co.,
Inc. (the "Company"), J.W. Wilhoit, as Trustee of the Wilhoit Trust Agreement
Dated 12/26/74, Katherine C. Lahowetz, as Trustee of the Theresa Ann Wilhoit
Grantor Retained Annuity Trust Dated 4/4/97, Katherine C. Lahowetz, and Katherine
C. Lahowetz, as custodian for the Benefit of Emily Lahowetz, a minor
(collectively, the "Shareholders") and Giant Industries Arizona, Inc. (the
"Purchaser"). Incorporated by reference to Exhibit 2.1 to the Company's Report on
Form 8-K filed June 17, 1997, File No. 1-10398.
3.1 Restated Certificate of Incorporation of Giant Industries, Inc., a Delaware
corporation (the "Company"). Incorporated by reference to Exhibit 3.1 to
Amendment No. 3.
3.2 Bylaws of the Company, as amended. Incorporated by reference to Exhibit 3.2 to
Amendment No. 3.
3.3 Articles of Incorporation of Giant Exploration & Production Company, a Texas
corporation ("Giant Exploration"), formerly Hixon Acquisition Corp. Incorporated
by reference to Exhibit 2.1, Annex III to Form S-1.
3.4 Bylaws of Giant Exploration. Incorporated by reference to Exhibit 2.1, Annex IV
to Form S-1.
3.5 Articles of Incorporation of Giant Industries Arizona, Inc., an Arizona
corporation ("Giant 3.6 Arizona") formerly Giant Acquisition Corp. Incorporated
by reference to Exhibit 2.1, Annex V to Form S-1.
3.6 Bylaws of Giant Arizona. Incorporated by reference to Exhibit 2.1, Annex VI to
Form S-1.
3.7 Articles of Incorporation of Ciniza Production Company. Incorporated by reference
to Exhibit 3.7 to Form S-3.
3.8 Bylaws of Ciniza Production Company. Incorporated by reference to Exhibit 3.8 to
Form S-3.
3.9 Articles of Incorporation of Giant Stop-N-Go of New Mexico, Inc. Incorporated by
reference to Exhibit 3.9 to Form S-3.
</TABLE>
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<PAGE> 130
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
3.10 Bylaws of Giant Stop-N-Go of New Mexico, Inc. Incorporated by reference to
Exhibit 3.10 to Form S-3.
3.11 Articles of Incorporation of Giant Four Corners, Inc. Incorporated by reference
to Exhibit 3.11 to Form S-3.
3.12 Bylaws of Giant Four Corners, Inc. Incorporated by reference to Exhibit 3.12 to
Form S-3.
3.13 Articles of Incorporation of Giant Mid-Continent, Inc. Incorporated by reference
to Exhibit 3.13 to the Company's Report on Form 10-K for fiscal year ended
December 31, 1994, File No. 1-10398.
3.14 Bylaws of Giant Mid-Continent, Inc. Incorporated by reference to Exhibit 3.14 to
the Company's Report on Form 10-K for fiscal year ended December 31, 1995, File
No. 1-10398.
3.15 Articles of Incorporation of San Juan Refining Company. Incorporated by reference
to Exhibit 3.15 to the Company's Report on Form 10-K for fiscal year ended
December 31, 1995, File No. 1-10398.
3.16 Bylaws of San Juan Refining Company. Incorporated by reference to Exhibit 3.16 to
the Company's Report on Form 10-K for fiscal year ended December 31, 1995, File
No. 1-10398.
3.17** Articles of Incorporation of Phoenix Fuel Co., Inc.
3.18** Bylaws of Phoenix Fuel Co., Inc.
4.1 Amended and Restated Note Agreement, dated as of September 30, 1993, among the
Prudential Insurance Company of America ("Prudential"), Pruco Life Insurance
Company ("Pruco"), the Company and Giant Arizona, relating to $20,000,000 of
10.91% Senior Notes due March 31, 1999. Incorporated by reference to Exhibit 4.13
to Amendment No. 2 to the Form S-3 Registration Statement under the Securities
Act of 1933 as filed November 12, 1993, File No. 33-69252.
4.2 Letter Amendment No. 1, dated December 31, 1994, to Amended and Restated Note
Agreement, dated September 30, 1993, among Prudential, Pruco, the Company and
Giant Arizona. Incorporated by reference to Exhibit 4.2 to the Company's Report
on Form 10-K for fiscal year ended December 31, 1994, File No. 1-10398.
4.3 Letter Amendment No. 2, dated May 9, 1995, to Amended and Restated Note
Agreement, dated September 30, 1993, among Prudential, Pruco, the Company and
Giant Arizona. Incorporated by reference to Exhibit 4 to the Company's Report on
Form 10-Q for the quarter ended September 30, 1995, File No. 1-10398.
4.4 Indenture, dated as of November 29, 1993 among the Company, as Issuer, the
Subsidiary Guarantors, as guarantors, and NBD Bank, National Association, as
Trustee, relating to $100,000,000 of 9 3/4% Senior Subordinated Notes due 2003.
Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form
8-K dated November 29, 1993, File No. 1-10398.
4.5 Credit Agreement, dated October 4, 1995, among Giant Industries, Inc., as
Borrower , Giant Industries Arizona, Inc., Ciniza Production Company, San Juan
Refining Company, Giant Exploration & Production Company and Giant Four Corners,
Inc., as Guarantors, and Bank of America National Trust and Savings Association,
as Agent, Bank of America Illinois, as a Bank and as Letter of Credit Issuing
Bank and the Other Financial Institutions Parties thereto. Incorporated by
reference to Exhibit 4.1 to the Company's Report on Form 8-K for the period
October 4, 1995, File No. 1-10398.
</TABLE>
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<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
4.6 First Amendment, dated May 15, 1996, to Credit Agreement, dated October 4, 1995,
among Giant Industries, Inc., as Borrower, Giant Industries Arizona, Inc., Giant
Exploration & Production Company, Giant Four Corners, Inc., San Juan Refining
Company and Ciniza Production Company, as Guarantors, and Bank of America
National Trust and Savings Association, as Agent, Bank of America Illinois, as
issuing Bank and as a Bank, NBD Bank as a Bank, and Union Bank, as a Bank.
Incorporated by reference to Exhibit 4.2 to the Company's Report of Form 8-K
dated June 12, 1997, File No. 1-10398.
4.7 Second Amendment, dated May 23, 1997, to Credit Agreement, dated October 4, 1995,
among Giant Industries, Inc., as Borrower, Giant Industries Arizona, Inc., Giant
Exploration & Production Company, San Juan Refining Company, Giant Four Corners,
Inc. and Ciniza Production Company, as Guarantors, and Bank of America National
Trust and Savings Association, as Agent, Bank of America Illinois, as issuing
Bank and as a Bank, First National Bank of Chicago (successor to NBD Bank, by
assignment), as a Bank, and Union Bank of California, N.A. (formerly known as
Union Bank), as a Bank. Incorporated by reference to Exhibit 4.3 to the Company's
Report of Form 8-K dated June 12, 1997, File No. 1-10398.
4.8** Indenture, dated as of August 26, 1997, among the Company, as Issuer, the
Subsidiary Guarantors, as guarantors, and The Bank of New York, as Trustee,
relating to $150,000,000 of 9% Senior Subordinated Notes due 2007.
4.9*** Form of Exchange Note.
5.1*** Opinion of Fennemore Craig, P.C., as to the legality of the Exchange Notes.
10.1**** 1989 Stock Incentive Plan of the Company. Incorporated by reference to Exhibit
10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, File No. 1-10398.
10.2**** Amendment No. 1 dated August 14, 1996, to 1989 Stock Incentive Plan. Incorporated
by reference to Exhibit 10 to the Company's Report on Form 10-Q for the quarter
ended September 30, 1996, File No. 1-10398.
10.3 Employee Stock Ownership Plan and Trust Agreement of the Company, as amended.
Incorporated by reference to Exhibit 10.1 of the Company's Report on Form 10-Q
for the quarter ended September 30, 1994, File No. 1-10398.
10.4 Ninth Amendment of the Employee Stock Ownership Plan and Trust Agreement of Giant
Industries, Inc. and Affiliated Companies dated October 1, 1996. Incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, File No. 1-10398.
10.5**** ESOP Substitute Excess Deferred Compensation Benefit Plan. Incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, File No. 1-10398.
10.6**** Amended 1988 Restricted Stock Plan of the Company. Incorporated by reference to
Exhibit 10.3 to Form S-1.
10.7**** 1989 Stock Option Plan of the Company. Incorporated by reference to Exhibit 10.4
to Form S-1.
10.8 Purchase Agreement, dated November 29, 1990, between Giant Arizona and Prime
Pinnacle Peak Properties Limited Partnership. Incorporated by reference to
Exhibit 10.16 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-10398.
10.9 Escrow Instructions, dated January 7, 1991, between Prime Pinnacle Peak
Properties Limited Partnership and Giant Arizona. Incorporated by reference to
Exhibit 10.17 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-10398.
</TABLE>
II-7
<PAGE> 132
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
10.10 Agreement for Leasing of Service Station Site, dated March 1, 1991, between Giant
Arizona and Prime Pinnacle Peak Properties Limited Partnership. Incorporated by
reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, File No. 1-10398.
10.11 First Amendment to Agreement for Leasing of Service Station Site, dated March 1,
1991, between Giant Arizona and Prime Pinnacle Peak Properties Limited
Partnership. Incorporated by reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, File No.
1-10398.
10.12 Purchase and Sale Agreement, dated as of May 7, 1991, between New Bank of New
England N.A., Den Norske Bank, Kansallis -- Osake -- Pankki -- and Portales
Energy Company, Inc. and the Company. Incorporated by reference to Exhibit 10.4
to the Company's Report on Form 10-Q for the quarter ended June 30, 1991, File
No. 1-10398.
10.13 Aircraft Lease Purchase Agreement, dated as of June 21, 1991, between Metlife
Capital Corporation and the Company. Incorporated by reference to Exhibit 10.1 to
the Company's Report on Form 10-Q for the quarter ended June 30, 1991, File No.
1-10398.
10.14 Promissory Note for $600,000, dated December 1, 1988, from JEA to Metlife Capital
Corporation ("Metlife"). Incorporated by reference to Exhibit 10.38 to Form S-1.
10.15 Promissory Note for $825,000, dated December 20, 1988, from JEA to Metlife.
Incorporated by reference to Exhibit 10.39 to Form S-1.
10.16 Promissory Note for $750,000, dated December 28, 1987, from JEA to Metlife.
Incorporated by reference to Exhibit 10.40 to Form S-1.
10.17 Promissory Note for $1,087,500, dated December 30, 1988, from JEA to Metlife.
Incorporated by reference to Exhibit 10.44 to Form S-1.
10.18 Promissory Note for $1,082,900, dated December 30, 1988, from JEA to Metlife.
Incorporated by reference to Exhibit 10.45 to Form S-1.
10.19* Sales Agreement, dated June 6, 1989, between Giant Arizona and Mobil Oil
Corporation. Incorporated by reference to Exhibit 10.47 to Amendment No. 2.
10.20* Amendment, dated April 20, 1990, to Sales Agreement, dated June 6, 1989, between
Giant Arizona and Mobil Oil Corporation. Incorporated by reference to Exhibit
10.51 of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, File No. 1-10398.
10.21* Crude Oil and Condensate Sales and Purchase Agreement, dated August 1, 1994,
between Meridian Oil Trading Inc. (Seller) and Giant Refining Company, a division
of Giant Industries Arizona, Inc. (Buyer). Incorporated by reference to Exhibit
10.27 to the Company's Report on Form 10-K for fiscal year ended December 31,
1994, File No. 1-10398.
10.22* Natural Gas Liquids Sales and Purchase Agreement, dated October 27, 1994, between
Meridian Oil Hydrocarbons Inc. and Giant Refining Company, a division of Giant
Industries Arizona, Inc. Incorporated by reference to Exhibit 10.28 to the
Company's Report on Form 10-K for fiscal year ended December 31, 1994, File No.
1-10398.
10.23* Natural Gasoline Purchase and Sale Agreement, dated September 1, 1990, between
Sunterra Gas Processing Company and Giant Arizona. Incorporated by reference to
Exhibit 10.57 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-10398.
10.24**** Employment Agreement, dated as of November 16, 1989, between James E. Acridge and
the Company. Incorporated by reference to Exhibit 10.52 to Amendment No. 2.
10.25**** Employment Agreement, dated as of November 16, 1989, between Fredric L. Holliger
and the Company. Incorporated by reference to Exhibit 10.53 to Amendment No. 2.
</TABLE>
II-8
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
10.26**** Employment Agreement, dated as of August 1, 1990 between Morgan Gust and the
Company. Incorporated by reference to Exhibit 10.64 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, File No.
1-10398.
10.27 Consulting Agreement, dated January 1, 1990, between the Company and Kalen and
Associates. Incorporated by reference to Exhibit 10.66 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990, File No.
1-10398.
10.28 Consulting Agreement, dated March 12, 1992, between the Company and Geddes and
Company. Incorporated by reference to Exhibit 10.1 to the Company's Report on
Form 10-Q for the quarter ended June 30, 1992, File No. 1-10398.
10.29**** Giant Industries, Inc. and Affiliated Companies 401(k) Plan. Incorporated by
reference to Exhibit 10.46 to Amendment No. 2 to the Form S-3 Registration
Statement under the Securities Act of 1933 as filed November 12, 1993, File No.
33-69252.
10.30**** First Amendment of the Giant Industries, Inc. and Affiliated Companies 401(k)
Plan, dated October 17, 1996. Incorporated by reference to Exhibit 10.30 of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
File No. 1-10398.
10.31** Registration Rights Agreement, dated as of August 21, 1997, among the Company,
the Initial Purchasers and the Subsidiary Guarantors.
10.32** Purchase Agreement, dated August 21, 1997, among the Company, the Initial
Purchasers and the Subsidiary Guarantors.
11.1 Statement regarding computation of earnings per share. Incorporated by reference
to Exhibit 11.1 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and to Exhibit 11.1 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997, File No. 1-10398.
18.1 Letter regarding change in accounting principles. Incorporated by reference to
Exhibit 18.1 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-10398.
21.1** Subsidiaries of the Company.
23.1** Consent of Deloitte & Touche LLP.
23.2** Consent of Arthur Andersen LLP.
23.3*** Consent of Fennemore Craig, P.C. (included in Exhibit 5.1).
24.1** Powers of Attorney (included in the signature pages of this Registration
Statement.)
24.2*** Board of Directors resolutions authorizing Powers of Attorney.
25.1** Statement of Eligibility of Trustee on Form T-1 of The Bank of New York under the
Trust Indenture Act of 1939.
27 Financial Data Schedule. Incorporated by reference to Exhibit 27 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and to
Exhibit 27 of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, File No. 1-10398.
99.1*** Form of Letter of Transmittal.
99.2*** Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Certain information contained in these documents has been afforded
confidential treatment.
** Filed herewith.
*** To be filed by amendment.
**** Indicates contract with management or compensatory plan or arrangement
relating to management.
II-9
<PAGE> 134
(B) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of Giant Industries, Inc. for
the years ended December 31, 1996, 1995 and 1994 is incorporated by reference in
this Registration Statement and should be read in conjunction with the
Consolidated Financial Statements of Giant Industries, Inc.
<TABLE>
<S> <C>
Independent Auditors' Report on Schedule....................... S-1
Schedule II -- Valuation and Qualifying Accounts............... S-2
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or because the information required to be set
forth therein is included in the Consolidated Financial Statements or Notes
thereto.
ITEM 22. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
II-10
<PAGE> 135
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Each of the undersigned registrants hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to act
under subsection (a) of section 310 of the Trust Indenture Act ("Act") in
accordance with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Act.
II-11
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
GIANT INDUSTRIES, INC.
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge,
Chairman of the Board, President,
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board, President, Chief
- --------------------------------------------- Executive Officer and Director (Principal
James E. Acridge Executive Officer)
/s/ FREDRIC L. HOLLIGER Executive Vice President, Chief Operating
- --------------------------------------------- Officer and Director
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ ANTHONY J. BERNITSKY Director
- ---------------------------------------------
Anthony J. Bernitsky
/s/ F. MICHAEL GEDDES Director
- ---------------------------------------------
F. Michael Geddes
/s/ RICHARD T. KALEN, JR. Director
- ---------------------------------------------
Richard T. Kalen, Jr.
/s/ HARRY S. HOWARD, JR. Director
- ---------------------------------------------
Harry S. Howard, Jr.
</TABLE>
<PAGE> 137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
GIANT INDUSTRIES ARIZONA, INC.
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge,
Chairman of the Board, President,
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board, President, Chief
- --------------------------------------------- Executive Officer and Director (Principal
James E. Acridge Executive Officer)
/s/ FREDRIC L. HOLLIGER Executive Vice President, Chief Operating
- --------------------------------------------- Officer and Director
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ MORGAN GUST Vice President and General Counsel, Vice
- --------------------------------------------- President Administration, Secretary and
Morgan Gust Director
</TABLE>
<PAGE> 138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
GIANT EXPLORATION & PRODUCTION COMPANY
/s/ FREDRIC L. HOLLIGER
--------------------------------------
Fredric L. Holliger
President, Chief Executive Officer and
Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board and Director
- ---------------------------------------------
James E. Acridge
/s/ FREDRIC L. HOLLIGER President, Chief Executive Officer and
- --------------------------------------------- Director (Principal Executive Officer)
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ MORGAN GUST Vice President and General Counsel, Secretary,
- --------------------------------------------- Vice President Administration and Director
Morgan Gust
</TABLE>
<PAGE> 139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
GIANT STOP-N-GO OF NEW MEXICO, INC.
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge
Chairman of the Board, President,
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board, President, Chief
- --------------------------------------------- Executive Officer and Director (Principal
James E. Acridge Executive Officer)
/s/ FREDRIC L. HOLLIGER Executive Vice President, Chief Operating
- --------------------------------------------- Officer and Director
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ MORGAN GUST Vice President and General Counsel, Secretary,
- --------------------------------------------- Vice President Administration and Director
Morgan Gust
</TABLE>
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
SAN JUAN REFINING COMPANY
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge,
Chairman of the Board, President,
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board, President, Chief
- --------------------------------------------- Executive Officer and Director (Principal
James E. Acridge Executive Officer)
/s/ FREDRIC L. HOLLIGER Executive Vice President, Chief Operating
- --------------------------------------------- Officer and Director
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ MORGAN GUST Vice President and General Counsel, Secretary,
- --------------------------------------------- Vice President Administration and Director
Morgan Gust
</TABLE>
<PAGE> 141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
CINIZA PRODUCTION COMPANY
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge,
Chairman of the Board, President,
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board, President, Chief
- --------------------------------------------- Executive Officer and Director (Principal
James E. Acridge Executive Officer)
/s/ FREDRIC L. HOLLIGER Executive Vice President, Chief Operating
- --------------------------------------------- Officer and Director
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ MORGAN GUST Vice President and General Counsel, Secretary,
- --------------------------------------------- Vice President Administration and Director
Morgan Gust
</TABLE>
<PAGE> 142
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
GIANT FOUR CORNERS, INC.
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge,
Chairman of the Board, President,
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board, President, Chief
- --------------------------------------------- Executive Officer and Director (Principal
James E. Acridge Executive Officer)
/s/ FREDRIC L. HOLLIGER Executive Vice President, Chief Operating
- --------------------------------------------- Officer and Director
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ MORGAN GUST Vice President and General Counsel, Secretary,
- --------------------------------------------- Vice President Administration and Director
Morgan Gust
</TABLE>
<PAGE> 143
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
GIANT MID-CONTINENT, INC.
/s/ JAMES E. ACRIDGE
--------------------------------------
James E. Acridge,
Chairman of the Board, President,
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board, President, Chief
- --------------------------------------------- Executive Officer and Director (Principal
James E. Acridge Executive Officer)
/s/ FREDRIC L. HOLLIGER Executive Vice President, Chief Operating
- --------------------------------------------- Officer and Director
Fredric L. Holliger
/s/ A. WAYNE DAVENPORT Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer and Principal
A. Wayne Davenport Accounting Officer)
/s/ MORGAN GUST Vice President and General Counsel, Secretary,
- --------------------------------------------- Vice President Administration and Director
Morgan Gust
</TABLE>
<PAGE> 144
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Scottsdale, State of Arizona on
October 7, 1997.
PHOENIX FUEL CO., INC.
/s/ FREDRIC L. HOLLIGER
--------------------------------------
Fredric L. Holliger,
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the undersigned hereby appoints James E. Acridge, Fredric L.
Holliger, A. Wayne Davenport, Morgan Gust and each of them, with full power to
act alone, as attorney and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Commission under the Securities Act any and all amendments and
exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Commission pertaining to
the registration of the securities covered hereby, with full power and authority
to do and perform any and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES E. ACRIDGE Chairman of the Board and Director
- ---------------------------------------------
James E. Acridge
/s/ FREDRIC L. HOLLIGER Chief Executive Officer and Director
- --------------------------------------------- (Principal Executive Officer)
Fredric L. Holliger
/s/ JACK KELLER President and Chief Operating Officer
- ---------------------------------------------
Jack Keller
/s/ GARY DALKE Vice President, Chief Financial Officer and
- --------------------------------------------- Treasurer (Principal Financial Officer and
Gary Dalke Principal Accounting Officer)
/s/ MORGAN GUST Vice President and General Counsel, Secretary
- --------------------------------------------- and Director
Morgan Gust
</TABLE>
<PAGE> 145
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
3.17 Articles of Incorporation of Phoenix Fuel Co., Inc.
3.18 Bylaws of Phoenix Fuel Co., Inc.
4.8 Indenture, dated as of August 26, 1997, among the Company, as Issuer, the
Subsidiary Guarantors, as guarantors, and The Bank of New York, as Trustee,
relating to $150,000,000 of 9% Senior Subordinated Notes due 2007.
10.31 Registration Rights Agreement, dated as of August 21, 1997, among the Company, the
Initial Purchasers and the Subsidiary Guarantors.
10.32 Purchase Agreement, dated August 21, 1997, among the Company, the Initial
Purchasers and the Subsidiary Guarantors
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney (included in the signature pages of this Registration
Statement).
25.1 Statement of Eligibility of Trustee of Form T-1 of The Bank of New York under the
Trust Indenture Act of 1939.
</TABLE>
<PAGE> 1
EXHIBIT 3.17
STATE OF ARIZONA
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF PHOENIX FUEL CO., INC.
Pursuant to the provisions of A.R.S. Section 10-061, the undersigned
corporation adopts the following attached articles of amendment to its articles
of incorporation:
FIRST: The name of the corporation is Phoenix Fuel Co., Inc.
SECOND: The document attached hereto as exhibit A sets forth amendments to
the articles of incorporation which were adopted by the shareholders
of the corporation on March 31, 1981, in the manner prescribed by
A.R.S. Section 10-059.
THIRD: The number of shares outstanding at the time of such adoption was
560 and the number of shares entitled to vote thereon was 560.
FOURTH: The corporation has outstanding only a single class of stock.
FIFTH: The number of shares voted for the amendments was 560 and the number
of shares voted against the amendment was 0.
SIXTH: The amendments do no effect any exchange, reclassification, or
cancellation of issued shares.
SEVENTH: The amendments do not effect a change in the amount of stated
capital.
EIGHTH: The amendments remove the corporation's limited period of existence
and thereby provide for perpetual succession.
DATED: March 31, 1981.
Phoenix Fuel Co., Inc.
By /s/ J.W. Wilhoit
-----------------------------------
J. W. Wilhoit, President
By /s/ T.A. Wilhoit
-----------------------------------
T.A. Wilhoit, Secretary
<PAGE> 2
ACKNOWLEDGEMENTS
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 31st day of
March, 1981, by J. W. Wilhoit, President of Phoenix Fuel Co., Inc., an Arizona
corporation, on behalf of the corporation.
/s/ David Frazer
-----------------------------------
Notary Public
My Commission Expires:
July 7, 1984
- ------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 31st day of
March, 1981, by T. A. Wilhoit, Secretary of Phoenix Fuel Co., Inc., an Arizona
corporation, on behalf of the corporation.
/s/ David Frazer
-----------------------------------
Notary Public
My Commission Expires:
July 7, 1984
- --------------------
2
<PAGE> 3
EXHIBIT A
1. The following Article X is hereby added to the Articles of
Incorporation of Phoenix Fuel Co., Inc.:
"ARTICLE X
Subject to the further provisions hereof, the corporation shall
indemnify any and all of its existing and former directors, officers, employees
and agents against all expenses incurred by them and each of them including but
not limited to legal fees, judgments, penalties, and amounts paid in settlement
or compromise, which may arise or be incurred, rendered, or levied in any legal
action brought or threatened against any of them for or on account of any action
or omission alleged to have been committed while acting within the scope of
employment as director, officer, employee or agent of the corporation, whether
or not any action is or has been filed against them and whether or not any
settlement or compromise is approved by a court. Indemnification shall be made
by the corporation whether the legal action brought or threatened is brought by
or in the right of the corporation or by any other person. Whenever such
director, officer, employee or agent shall report to the president of the
corporation or the chairman of the board of directors that he or she has
incurred or may incur expenses, including but not limited to legal fees,
judgments, penalties, and amounts paid in settlement or compromise in a legal
action brought or threatened against him or her for or on account of any action
or omission alleged to have been committed by him or her while acting within the
scope of his or her employment as a director, officer, employee or agent of the
corporation, the board of directors shall, at its next regular or at a special
meeting held within a reasonable time thereafter, determine in good faith
whether, in regard to the matter involved in the action or contemplated action,
such person acted, failed to act, or refused to act willfully or with gross
negligence or with fraudulent or criminal intent. If the board of directors
determines in good faith that such person did not act, fail to act, or refuse to
act willfully or with gross negligence or with fraudulent or criminal intent in
regard to the matter involved in the action or contemplated action,
indemnification shall be mandatory and shall be automatically extended as
specified herein, provided however, that no such indemnification shall be
available with respect to liabilities under the Securities Act of 1933, and,
provided further, that the corporation shall have the right to refuse
indemnification in any instance in which the person to whom indemnification
would otherwise have been applicable shall have unreasonably refused to permit
the corporation, at its own expense and through counsel of its own choosing, to
defend him or her in the action."
3
<PAGE> 4
STATE OF ARIZONA
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF PHOENIX FUEL CO., INC.
Pursuant to the provisions of Section 10-061, Arizona Revised
Statutes, the undersigned corporation adopts the attached Articles of Amendment
to its Articles of Incorporation.
FIRST: The name of the corporation is Phoenix Fuel Co., Inc.
SECOND: The document attached hereto as Exhibit A sets forth an
amendment to the Articles of Incorporation which was adopted by the shareholders
of the corporation of October 1, 1977 in the manner prescribed by the Arizona
Revised Statutes.
THIRD: The number of shares of the corporation outstanding at the
time of such adoption was 560; and the number of shares entitled to vote thereon
was 560.
FOURTH: The designation and number of outstanding shares of each
class or series entitled to vote thereon as a class or series were as follows:
<TABLE>
<CAPTION>
CLASS OR NUMBER OF
SERIES SHARES
------ ------
<S> <C>
Common Stock 560
</TABLE>
FIFTH: The number of shares of each class or series entitled to vote
thereon as a class or series voted for or against such amendment, respectively,
was:
<TABLE>
<CAPTION>
CLASS OR NUMBER OF NUMBER OF
SERIES SHARES FOR SHARES AGAINST
------ ---------- --------------
<S> <C> <C>
Common 560 -0-
</TABLE>
SIXTH: No exchange, reclassification, or cancellation of issued
shares was provided for in the amendment.
SEVENTH: No change in the amount of stated capital was made by the
amendment.
4
<PAGE> 5
DATED: December 13, 1977.
PHOENIX FUEL CO., INC.
By /s/ J.W. Wilhoit
-------------------------------
J.W. Wilhoit, President
By /s/ T.A. Wilhoit
-------------------------------
T.A. Wilhoit, Secretary
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ___ day of
December, 1977, by J. W. Wilhoit, President of Phoenix Fuel Co., Inc., an
Arizona corporation, on behalf of the corporation.
/s/ David Frazer
-------------------------------
Notary Public
My Commission Expires:
July 7, 1980
- -------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ___ day of
December, 1977, by T. A. Wilhoit, Secretary of Phoenix Fuel Co., Inc., an
Arizona corporation, on behalf of the corporation.
/s/ David Frazer
---------------------------------
Notary Public
My Commission Expires:
July 7, 1980
- -------------------
5
<PAGE> 6
EXHIBIT A
1. ARTICLE V is amended to read as follows:
"ARTICLE V
No holder of common stock shall have the right or power to transfer, pledge,
sell or otherwise dispose of any of the shares of the common stock of the
corporation, nor shall any transfer, pledge, sale or other disposition thereof,
unless such transfer be accomplished by right of inheritance or by operation of
law, be valid and effective until the shares of common stock proposed to be
transferred are first offered for sale to the corporation. Whenever tendered to
the corporation for purchase, the corporation shall have the right to purchase
any share or shares of said stock from the holder by paying therefor a price
fixed by the valuation put upon said stock by the stockholders at their last
annual meeting. If this corporation shall fail or refuse, for a period of ninety
(90) days after said shares of stock so offered, then the said stock shall be
offered on a ratable basis to the other holders of stock of this corporation,
and shall not be subject to the conditions hereinabove set forth. Upon the death
of any stockholder, the corporation shall have the right and option to purchase
the common stock of this corporation held by the deceased at the time of his
death by paying therefor the price determined in accordance with this section.
The purchase price therefor shall be paid in cash, within such time as shall be
agreed upon by the personal representative of the deceased, and the corporation.
Unless the corporation pays for such stock in cash or arrives at an agreement
with the personal representative of the deceased within one year from the date
such personal representative is legally qualified to act, then the personal
representative of the deceased shall be authorized to offer such stock for sale
to the other holders of stock in this corporation on a ratable basis according
to the percentage ownership of the other stockholders. In the event that the
other stockholders of stock in this corporation shall fail or refuse for a
period of ninety (90) days after said shares of stock are offered for sale, to
purchase the shares of stock so offered, the stockholder or personal
representative of a deceased stockholder shall be authorized to offer such stock
for sale to any other person or persons."
2. ARTICLE VIII is amended to read as follows:
"ARTICLE VIII
The holders from time to time of the common stock of the corporation shall have
pre-emptive rights as to any new or existing class of stock then or thereafter
authorized to be issued, including treasure stock. No resolution of the board of
directors authorizing the issuance of stock to which pre-emptive rights shall
attach may require such rights to be exercised within fewer than sixty days."
6
<PAGE> 7
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
PHOENIX FUEL CO., INC.
This is to certify that a special meeting of the stockholders of PHOENIX
FUEL CO., INC., an Arizona corporation, was held in Phoenix, Arizona, on the
18th day of April, 1960, written notice of the time, place and purpose of such
meeting having been given to all of the stockholders more than thirty (30) days
prior to the said meeting; all shares of the capital stock of the corporation
were present, and by the unanimous vote of those present, the following sections
of the Articles of Incorporation were amended to read as follows:
ARTICLE IV
The authorized amount of the capital stock of the corporation shall
be five thousand (5,000) shares, of the par value of One Hundred Dollars
($100.00) each, and shall be paid for at such time and in such manner as
the board of directors shall determine. All or any portion of the capital
stock of the corporation may be issued in payment for real or personal
property, services or any other thing of value, for the uses and purposes
of the corporation, and when so issued shall be fully paid, the same as
though paid for in cash, and the directors shall be the sole judges of the
value of any property, right or thing acquired in exchange for capital
stock. The shares of the capital stock of the corporation, when issued,
shall be fully paid and nonassessable.
ARTICLE VIII
The highest amount of indebtedness or liability, direct or
contingent, to which the corporation shall at any time subject itself,
shall be THREE HUNDRED THIRTY-THREE THOUSAND, THREE HUNDRED THIRTY-THREE
DOLLARS ($333,333.00).
7
<PAGE> 8
IN WITNESS WHEREOF, the undersigned, as president and secretary,
respectively, of the said corporation, have hereunto affixed their signatures
and the seal of said corporation this 19th day of April, 1960.
/s/ J.W. Wilhoit
-----------------------------------
J. W. Wilhoit, President
ATTEST:
/s/ Christine M. Wilhoit
- -----------------------------------
Christine M. Wilhoit, Secretary
STATE OF ARIZONA )
) ss
County of Maricopa )
On this, the 19th day of April, 1960, before me, the undersigned Notary
Public, personally appeared J. W. WILHOIT and CHRISTINE M. WILHOIT, who
acknowledged themselves to be the president and secretary, respectively, of
PHOENIX FUEL CO., INC., a corporation, and as such president and secretary,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained, by signing their names as said president and secretary.
IN WITNESS WHEREOF I have hereunto set my hand and official seal.
/s/ Richard G. Kleindienst
----------------------------------
Notary Public
My Commission Expires:
January 16, 1963
- -----------------------
8
<PAGE> 9
ARTICLES OF INCORPORATION
OF
PHOENIX FUEL CO., INC.
---------
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, having associated ourselves together for
the purpose of forming a corporation under and by virtue of the laws of the
State of Arizona, do hereby adopt the following Articles of Incorporation:
ARTICLE I.
The name of the corporation shall be PHOENIX FUEL CO., INC., and its
principal place of business within the State of Arizona shall be in the City of
Phoenix, in the County of Maricopa, in said State, but the board of directors
may designate other places, either within or without the State of Arizona, where
other offices may be established and maintained, and all corporate business
transacted.
ARTICLE II.
The names, residences and post office addresses of the incorporators
are as follows:
F. A. Wilhoit 5208 North 19th Drive
Phoenix, Arizona
Christine M. Wilhoit 5208 North 19th Drive
Phoenix, Arizona
J. William Wilhoit 5208 North 19th Drive
Phoenix, Arizona
9
<PAGE> 10
ARTICLE III.
The general nature of the business in which the corporation shall
engage is as follows:
1. To buy, sell, market, transport and otherwise deal in and with
respect to petroleum products of all kinds and classes;
2. To issue such notes, bonds, debentures, contracts, or other
security or evidences of indebtedness upon such terms and conditions and in such
manner and form as may be prescribed or determined by the board of directors;
3. To purchase, acquire, own, hold, sell, assign, transfer,
mortgage, pledge, or otherwise to acquire, dispose of, hold or deal in the
shares of the stock, bonds, debentures, notes or other security or evidences of
indebtedness of this or any other corporation, association or individual, and to
exercise all the rights, powers and privileges of ownership, including the right
to vote thereon to the same extent as a natural person might or could do;
4. To lend or invest the funds, with or without security, upon such
terms and conditions as shall be prescribed or determined by the board of
directors;
5. To borrow money and to issue bonds, debentures, notes, contracts,
and other evidences of indebtedness or obligations, and from time to time for
any lawful purpose to mortgage, pledge and otherwise charge any or all of its
properties, property rights, privileges and assets to secure the payment
thereof;
6. To act as agent, trustee, broker, or in any other fiduciary or
representative capacity;
10
<PAGE> 11
7. To purchase, own, hold or hypothecate any patent rights,
privileges, trademarks, or secret processes;
8. To act as surety or guarantor and to underwrite in whole or in
part, any contract, issue of stock, bonds, debentures or other securities or
evidences of indebtedness of any other corporation or association, or of any
person or persons;
9. To supervise and to manage or otherwise control properties or
property rights and to manage and conduct any business, venture or enterprise
for other persons, corporations or associations;
10. To make and perform contracts of every kind and description, and
in carrying on its business, or for the purpose of attaining and furthering any
of its objects, to do any and all things which a natural person might or could
do, and which now or hereafter may be authorized by law, and in general to do
and perform such acts and things and transact such business in connection with
the foregoing objects, not inconsistent with law, as may be necessary and
required.
The designation of any object or purpose herein shall not be
considered to be a limitation on qualification or in any manner to limit or
restrain the purposes and objects of the corporation.
ARTICLE IV.
The authorized amount of the capital stock of the corporation shall
be one thousand (1,000) shares, of the par value of one hundred dollars
($100.00) each, and shall be paid for at such time and in such manner as the
board of directors shall determine. All or any portion of the capital stock of
the corporation may be issued in payment for real or personal property, services
or any other thing of value, for the uses and purposes of the corporation,
11
<PAGE> 12
and when so issued, shall be fully paid, the same as though paid for in cash,
and the directors shall be the sole judges of the value of any property, right
or thing acquired in exchange for capital stock. The shares of the capital stock
of the corporation, when issued, shall be fully paid and non-assessable.
ARTICLE V.
The time of the commencement of the corporation shall be from the
date of the issuance to it of the certificate of incorporation by the Arizona
Corporation Commission, and it shall endure for the term of twenty-five (25)
years thereafter, with the privilege of renewal as provided by law.
ARTICLE VI.
The affairs of the corporation shall be conducted by a Board of
Directors and such officers as the directors may elect or appoint. The officers
and directors need not be stockholders of the corporation. The number of
directors shall be not less than three (3) nor more than five (5). Directors
shall hold office for one year, or until their successors are elected and
qualified, and shall be elected by the stockholders of the corporation at the
annual meeting thereof to be held at 10:00 o'clock A.M. on the second Monday in
January of each year, commencing with the year 1953. The time for holding the
annual meeting of the stockholders may be altered by the majority vote of the
stockholders at any meeting thereof.
Until the first annual meeting of the stockholders and until their
successors have been elected and qualified, the following named persons shall be
directors of the corporation:
F. A. Wilhoit
Christine M. Wilhoit
J. William Wilhoit
12
<PAGE> 13
In furtherance, and not in limitation of the powers conferred by
law, the board of directors is expressly authorized to adopt, amend and rescind
bylaws for the corporation, and to fill vacancies in any office or in the board
of directors resulting from any cause.
ARTICLE VII.
The private property of the stockholders, directors and officers of
the corporation shall at all times be exempt from all corporate debts and
liabilities whatsoever.
ARTICLE VIII.
The highest amount of indebtedness or liability, direct or
contingent, to which the corporation shall at any time subject itself, shall be
SIXTY-SIX THOUSAND, SIX HUNDRED SIXTY-SIX DOLLARS ($66,666.00).
ARTICLE IX.
RICHARD G. KLEINDIENST, whose address is 619 Title & Trust Building,
Phoenix, Arizona, and who has been a bona fide resident of the State of Arizona
for more than three (3) years last past, is hereby appointed and designated
Statutory Agent for the corporation for the State of Arizona, upon whom service
of process may be had.
IN WITNESS WHEREOF, we have hereunto set our hands and seals this
6th day of January, 1953.
/s/ F.A. Wilhoit
-----------------------------------
/s/ Christine M. Wilhoit
-----------------------------------
/s/ J. William Wilhoit
-----------------------------------
13
<PAGE> 14
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the 6th day of January, 1953, before me the undersigned
Notary Public, personally appeared F. A. WILHOIT, CHRISTINE M. WILHOIT and J.
WILLIAM WILHOIT, known to me to be the persons whose names are subscribed to the
foregoing instrument, and acknowledged that they executed the same for the
purposes therein contained.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
/s/ Richard G.Kleindienst
-----------------------------------
Notary Public
My commission expires:
January 16, 1955
- -----------------------------
14
<PAGE> 1
EXHIBIT 3.18
A M E N D E D B Y L A W S
OF
PHOENIX FUEL CO., INC.
(As Adopted October 1, 1977)
SECTION 1
OFFICES AND CORPORATE SEAL
1.1. Principal Office. In addition to its known place of business,
which shall be the office of its statutory agent, the corporation shall maintain
a principal office in Maricopa County, Arizona.
1.2. Other Offices. The corporation may also maintain offices at
such other place or places, either within or without the State of Arizona, as
may be designated from time to time by the board of directors, where the
business of the corporation may be transacted with the same effect as though
done at the principal office.
1.3. Corporate Seal. A corporate seal shall not be requisite to the
validity of any instrument executed by or on behalf of the corporation, but
nevertheless if in any instance a corporate seal be used, the same shall, at the
pleasure of the officer affixing the same, be either (a) circular in form, shall
have inscribed thereon the name of the corporation, the year of its
organization, and the words "Incorporated" and "Arizona," or (b) a circle
containing the words "Corporate Seal" on the circumference thereof.
SECTION 2
STOCKHOLDERS
2.1. Stockholders' Meetings. All meetings of stockholders shall be
held at such place as may be fixed from time to time by the board of directors,
or in the absence of direction by the board of directors, by the president or
secretary of the corporation, either within or without the State of Arizona, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
2.2. Annual Meetings. Annual meetings of stockholders shall be held
on the second Monday in January, if not a legal holiday, and if a legal holiday,
then on the next secular day following, or at such other date and time as shall
be designated from time to time by the board of directors and stated in the
notice of the meeting. Stockholders shall, at the annual meeting, elect a board
of directors and transact such other business as properly may be brought before
the meeting.
2.3. Notice of Annual Meetings. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such
<PAGE> 2
meeting not less than ten nor more than fifty days before the date of the
meeting. Stockholders entitled to vote at the meeting shall be determined as of
4 o'clock in the afternoon on the day before notice of the meeting is sent.
2.4. List of Stockholders. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified, in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
2.5. Special Meetings of Stockholders. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise proscribed by
statute or by the articles of incorporation, may be called by the president and
shall be called by the president or secretary at the request in writing of a
majority of the board of directors, or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
2.6. Notice of Special Meetings. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten nor more than
fifty days before the date of the meeting, to each stockholder entitled to vote
at such meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice. Stockholders entitled to
vote at the meeting shall be determined as of 4 o'clock in the afternoon on the
day before notice of the meeting is sent.
2.7. Quorum and Adjournment. The holders of a majority of the stock
issued and outstanding and entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the articles of incorporation. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote at the meeting, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
2.8. Majority Required. When a quorum is present at any meeting, the
vote of the holders of a majority of the voting power present, whether in person
or represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by
-2-
<PAGE> 3
express provision of the statutes or of the articles of incorporation, a
different vote is required in which case such express provision shall govern and
control the decision of such question.
2.9. Voting. Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted or acted upon after eleven months from its date, unless the proxy
provides for a longer period.
No stock shall be voted at any stockholders' meeting: (1) upon which
any installment is due and unpaid until such arrears have been paid; (2) which
shall have been transferred on the books of the corporation within ten (10) days
next preceding the date of such meeting; (3) which belongs to the corporation.
2.10. Action Without Meeting. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of all of the outstanding stock
entitled to vote with respect to the subject matter of the action.
2.11. Waiver of Notice. Attendance of a stockholder at a meeting
shall constitute waiver of notice of such meeting, except when the person
attends the meeting for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened. Any
stockholder may waive notice of any annual or special meeting of stockholders by
executing a written waiver of notice either before or after the time of the
meeting.
SECTION 3
DIRECTORS
3.1. Number. The number of directors which shall constitute the
whole board shall be not fewer than three nor more than five. The directors
shall be elected at the annual meeting of the stockholders, except as
provided in 3.2. of this Section 3, and each director elected shall hold
office until his or her successor is elected and qualifies. Directors need
not be stockholders.
3.2. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute.
3.3. Powers. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the articles of
incorporation or by these bylaws directed or required to be exercised or done by
the stockholders.
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<PAGE> 4
3.4. Place of Meetings. The board of directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Arizona.
3.5. Annual Meetings. The first meeting of each newly elected board
of directors shall be held immediately following the annual meeting of
stockholders and in the same place as the annual meeting of stockholders, and no
notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, providing a quorum shall be present. In
the event such meeting is not held, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver by all of the directors.
3.6. Regular Meetings. Regular meetings of the board of
directors may be held without notice at such time and at such place as shall
from time to time be determined by the board.
3.7. Special Meetings. Special meetings of the board may be called
by the president or the secretary on one day's notice to each director, either
personally or by mail or by telegram or by telephone; special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of two directors.
3.8. Quorum. A majority of the membership of the board of directors
shall constitute a quorum and the concurrence of a majority of those present
shall be sufficient to conduct the business of the board, except as may be
otherwise specifically provided by statute or by the articles of incorporation.
If a quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
3.9. Action Without Meeting. Unless otherwise restricted by the
articles of incorporation or these bylaws, any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
3.10. Waiver of Notice. Attendance of a director at a meeting shall
constitute waiver of notice of such meeting, except when the person attends the
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Any director may waive
notice of any annual, regular or special meeting of directors by executing a
written waiver of notice either before or after the time of the meeting.
SECTION 4
OFFICERS
4.1. Designation of Titles. The officers of the corporation shall be
chosen by the board of directors and shall be a president, a vice president, a
secretary and a treasurer. The board of directors may also choose a chairman of
the board, additional vice presidents, and one or more assistant secretaries and
assistant treasurers. Any number of offices, except the offices of president and
secretary, may be held by the same person.
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<PAGE> 5
4.2. Appointment of Officers. The board of directors at its first
meeting after each annual meeting of stockholders shall choose a president, one
or more vice presidents, a secretary and a treasurer, and may choose a chairman
of the board, each of whom shall serve at the pleasure of the board of
directors. The board of directors at any time may appoint such other officers
and agents as it shall deem necessary who shall hold their offices at the
pleasure of the board of directors and who shall exercise such powers and
perform such duties as shall be determined from time to time by the board.
4.3. Salaries. The salaries of the officers shall be fixed from time
to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation. The salaries of the officers or the rate by which salaries are
fixed shall be set forth in the minutes of the meetings of the board of
directors.
4.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the board
of directors at any time.
4.5. Chairman of the Board. The chairman of the board, if one shall
have been appointed and be serving, shall preside at all meetings of the board
of directors and shall perform such other duties as may be from time to time
assigned to him or her.
4.6 President. The president shall preside at all meetings of
stockholders, and if a chairman of the board shall not have been appointed or,
having been appointed, shall not be serving or be absent, the president shall
preside at all meetings of the board of directors. He or she shall sign all
deeds and conveyances, all contracts and agreements, and all other instruments
requiring execution on behalf of the corporation, and shall act as operating and
directing head of the corporation, subject to policies established by the board
of directors.
4.7. Vice Presidents. There shall be as many vice presidents as
shall be determined from time to time and they shall perform such duties as may
be from time to time assigned to them. Any one of the vice presidents, as
authorized by the board, shall have all the powers and perform all the duties of
the president in case of the temporary absence of the president or in case of
his or her temporary inability to act. In case of the permanent absence or
inability of the president to act, the office shall be declared vacant by the
board of directors and a successor chosen by the board.
4.8. Secretary. The secretary shall see that the minutes of all
meetings of stockholders, of the board of directors and of any standing
committees are kept. He or she shall be the custodian of the corporate seal, and
shall affix it to all proper instruments when deemed advisable by him or her. He
or she shall give or cause to be given required notices of all meetings of the
stockholders and of the board of directors. He or she shall have charge of all
the books and records of the corporation except the books of account and in
general shall perform all the duties incident to the office of the secretary of
a corporation and such other duties as may be assigned to him or her.
4.9. Treasurer. The treasurer shall have general custody of all the
funds and securities of the corporation except such as may be required by law to
be deposited with any state official; he or she shall see to the deposit of the
funds of the corporation in such bank or banks as
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<PAGE> 6
the board of directors may designate. Regular books of account shall be kept
under his or her direction and supervision, and he or she shall render financial
statements to the president, directors and stockholders at proper times. He or
she shall have charge of the preparation and filing of such reports and
financial statements and returns as may be required by law. He or she shall give
to the corporation such fidelity bond as may be required, and the premium
therefor shall be paid by the corporation as an operating expense.
4.10. Assistant Secretaries. There may be such number of assistant
secretaries as the board of directors may from time to time fix, and such
persons shall perform such functions as may be from time to time assigned to
them. No assistant secretary shall have power or authority to collect, account
for, or pay over any tax imposed by any federal, state of city government.
4.11. Assistant Treasurers. There may be such number of assistant
treasurers as the board of directors may from time to time fix, and such persons
shall perform such functions as may be from time to time assigned to them. No
assistant treasurer shall have the power or authority to collect, account for,
or pay over any tax imposed by any federal, state or city government.
SECTION 5
REPEAL, ALTERATION OR AMENDMENT
These bylaws may be repealed, altered or amended or substitute
bylaws may be adopted only by a majority of the board of directors at any time.
/s/ J.W. Wilhoit
------------------------------
J.W. Wilhoit, President
ATTEST:
/s/ T.A. Wilhoit
- ------------------------------------
T.A. Wilhoit, Secretary
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<PAGE> 1
EXHIBIT 4.8
GIANT INDUSTRIES, INC.,
as Issuer,
THE SUBSIDIARY GUARANTORS,
as Guarantors,
and
THE BANK OF NEW YORK,
as Trustee
INDENTURE
DATED AS OF AUGUST 26, 1997
$150,000,000
9% SENIOR SUBORDINATED NOTES DUE 2007
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE ................................ 1
Section 1.01. Definitions ................................................ 1
Section 1.02. Other Definitions .......................................... 12
Section 1.03. Incorporation by Reference of Trust Indenture Act .......... 12
Section 1.04. Rules of Construction ...................................... 13
ARTICLE TWO
THE SECURITIES ............................................................ 13
Section 2.01. Form and Dating ............................................ 13
Section 2.02. Execution and Authentication ............................... 14
Section 2.03. Registrar and Paying Agent ................................. 15
Section 2.04. Paying Agent to Hold Money In Trust ........................ 15
Section 2.05. Lists of Holders of Securities ............................. 16
Section 2.06. Transfer and Exchange ...................................... 16
Section 2.07. Replacement Securities ..................................... 20
Section 2.08. Outstanding Securities; Treasury Securities ................ 20
Section 2.09. Temporary Securities and Definitive Notes .................. 21
Section 2.10. Cancellation ............................................... 21
Section 2.11. Defaulted Interest ......................................... 22
Section 2.12. CUSIP Number ............................................... 22
Section 2.13. Persons Deemed Owners ...................................... 22
ARTICLE THREE
REDEMPTION ................................................................ 22
Section 3.01. Notice to Trustee .......................................... 22
Section 3.02. Selection of Securities to Be Redeemed ..................... 22
Section 3.03. Notice of Redemption ....................................... 22
Section 3.04. Effect of Notice of Redemption ............................. 23
Section 3.05. Deposit of Redemption Price ................................ 23
Section 3.06. Securities Redeemed in Part ................................ 24
ARTICLE FOUR
COVENANTS ................................................................. 24
Section 4.01. Payment of Securities ...................................... 24
Section 4.02. Commission Reports ......................................... 24
Section 4.03. Compliance Certificates .................................... 25
Section 4.04. Maintenance of Office or Agency ............................ 25
Section 4.05. Corporate Existence ........................................ 26
Section 4.06. Waiver of Stay, Extension or Usury Laws .................... 26
Section 4.07. Payment of Taxes and Other Claims .......................... 26
Section 4.08. Maintenance of Properties and Insurance; Line of Business... 26
Section 4.09. Limitation on Incurrence of Additional Indebtedness ........ 27
Section 4.10. Limitation on Restricted Payments .......................... 27
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 4.11. Limitation on Sale of Assets ....................................... 28
Section 4.12. Limitation on Liens Securing Indebtedness .......................... 31
Section 4.13. Limitation on Payment Restrictions Affecting Restricted Subsidiaries 31
Section 4.14. Limitation on Transactions with Affiliates ......................... 31
Section 4.15. Limitation on Future Senior Subordinated Indebtedness .............. 32
Section 4.16. Change of Control .................................................. 32
ARTICLE FIVE
SUCCESSOR CORPORATION ............................................................. 33
Section 5.01. When Company May Merge, etc ........................................ 33
Section 5.02. Successor Corporation Substituted .................................. 33
ARTICLE SIX
DEFAULTS AND REMEDIES ............................................................. 34
Section 6.01. Events of Default .................................................. 34
Section 6.02. Acceleration ....................................................... 35
Section 6.03. Other Remedies ..................................................... 36
Section 6.04. Waiver of Past Defaults ............................................ 36
Section 6.05. Control by Majority ................................................ 36
Section 6.06. Limitation on Remedies ............................................. 36
Section 6.07. Rights of Holders to Receive Payment ............................... 37
Section 6.08. Collection Suit by Trustee ......................................... 37
Section 6.09. Trustee May File Proofs of Claim ................................... 37
Section 6.10. Priorities ......................................................... 37
Section 6.11. Undertaking for Costs .............................................. 37
ARTICLE SEVEN
TRUSTEE ........................................................................... 38
Section 7.01. Duties of Trustee .................................................. 38
Section 7.02. Rights of Trustee .................................................. 38
Section 7.03. Individual Rights of Trustee ....................................... 39
Section 7.04. Trustee's Disclaimer ............................................... 39
Section 7.05. Notice of Defaults ................................................. 39
Section 7.06. Reports by Trustee to Holders ...................................... 39
Section 7.07. Compensation and Indemnity ......................................... 40
Section 7.08. Replacement of Trustee ............................................. 41
Section 7.09. Successor Trustee by Merger, etc ................................... 41
Section 7.10. Eligibility; Disqualification ...................................... 41
Section 7.11. Preferential Collection of Claims Against Company .................. 41
ARTICLE EIGHT
DISCHARGE OF INDENTURE ............................................................ 42
Section 8.01. Termination of Company's Obligations ............................... 42
Section 8.02. Application of Trust Money ......................................... 43
Section 8.03. Repayment to Company ............................................... 43
Section 8.04. Reinstatement ...................................................... 43
Section 8.05. Survival of Certain Obligations .................................... 43
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS .......................................................... 44
Section 9.01. Without Consent of Holders .................................................... 44
Section 9.02. With Consent of Holders ....................................................... 44
Section 9.03. Compliance with Trust Indenture Act ........................................... 45
Section 9.04. Revocation and Effect of Consents ............................................. 45
Section 9.05. Notation on or Exchange of Securities ......................................... 46
Section 9.06. Trustee Protected ............................................................. 46
ARTICLE TEN
SUBORDINATION OF SECURITIES .................................................................. 46
Section 10.01. Securities Subordinated to Senior Indebtedness ............................... 46
Section 10.02. No Payment on Securities in Certain Circumstances ............................ 47
Section 10.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of the Company... 48
Section 10.04. Holders to Be Subrogated to Rights of Holders of Senior Indebtedness ......... 48
Section 10.05. Obligations of the Company Unconditional ..................................... 49
Section 10.06. Trustee Entitled to Assume Payments, Not Prohibited in Absence of Notice ..... 49
Section 10.07. Application by Trustee of Assets Deposited With It ........................... 49
Section 10.08. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness .................................... 50
Section 10.09. Holders Authorize Trustee to Effectuate Subordination of Securities .......... 50
Section 10.10. Right of Trustee to Hold Senior Indebtedness ................................. 50
Section 10.11. Article Ten Not to Prevent Events of Default ................................. 50
Section 10.12. Payment ...................................................................... 50
Section 10.13. Trustee Not Fiduciary for Holders of Senior Indebtedness ..................... 51
ARTICLE ELEVEN
GUARANTEES ................................................................................... 51
Section 11.01. Unconditional Guarantee ...................................................... 51
Section 11.02. Subsidiary Guarantors May Consolidate. etc., on Certain Terms ................ 52
Section 11.03. Addition of Subsidiary Guarantors ............................................ 52
Section 11.04. Release of a Subsidiary Guarantor ............................................ 53
Section 11.05. Limitation of Subsidiary Guarantor=s Liability ............................... 53
Section 11.06. Contribution ................................................................. 53
Section 11.07. Execution and Delivery of Guarantee .......................................... 53
Section 11.08. Severability ................................................................. 54
Section 11.09. Consent to Jurisdiction and Service of Process ............................... 54
Section 11.10. Waiver of Immunity ........................................................... 54
Section 11.11. Judgment Currency ............................................................ 54
ARTICLE TWELVE
SUBORDINATION OF GUARANTEES .................................................................. 55
Section 12.01. Guarantees Subordinated to Senior Indebtedness ............................... 55
Section 12.02. No Payment on Guarantees in Certain Circumstances ............................ 55
</TABLE>
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<TABLE>
<S> <C>
Section 12.03. Guarantees Subordinated to Prior Payment of All Senior Indebtedness
on Dissolution, Liquidation or Reorganization of a Subsidiary Guarantor... 56
Section 12.04. Holders to Be Subrogated to Rights of Holders of Senior Indebtedness ..... 57
Section 12.05. Guarantees Unconditional ................................................. 57
Section 12.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice... 57
Section 12.07. Application by Trustee of Assets Deposited With It ....................... 58
Section 12.08. Subordination Rights Not Impaired by Acts or Omissions of the
Subsidiary Guarantors or Holders of Senior Indebtedness .................. 58
Section 12.09. Holders Authorize Trustee to Effectuate Subordination of Securities ...... 58
Section 12.10. Right of Trustee to Hold Senior Indebtedness ............................. 58
Section 12.11. Payment .................................................................. 59
Section 12.12. Trustee Not Fiduciary for Holders of Senior Indebtedness ................. 59
ARTICLE THIRTEEN
MISCELLANEOUS ............................................................................ 59
Section 13.01. Trust Indenture Act Controls ............................................. 59
Section 13.02. Notices .................................................................. 59
Section 13.03. Communication by Holders with Other Holders .............................. 60
Section 13.04. Certificate and Opinion as to Conditions Precedent ....................... 60
Section 13.05. Statements Required in Certificate or Opinion ............................ 60
Section 13.06. Rules by Trustee and Agents .............................................. 61
Section 13.07. Legal Holidays ........................................................... 61
Section 13.08. Governing Law ............................................................ 61
Section 13.09. No Adverse Interpretation of Other Agreements ............................ 61
Section 13.10. No Recourse Against Others ............................................... 61
Section 13.11. Successors ............................................................... 61
Section 13.12. Duplicate Originals ...................................................... 61
Section 13.13. Severability ............................................................. 61
</TABLE>
Exhibit A - Form of Initial Note
Exhibit B - Form of Exchange Note
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<PAGE> 6
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- --------------- ---------
<S> <C>
310(a)(1) ............................................ 7.10
(a)(2) ............................................ 7.10
(a)(3) ............................................ N/A
(a)(4) ............................................ N/A
(a)(5) ............................................ 7.10
(b) ............................................... 7.08; 7.10
(c) ............................................... N/A
311(a) ............................................... 7.11
(b) ............................................... 7.11
(c) ............................................... N/A
312(a) ............................................... 2.05
(b) ............................................... 13.03
(c) ............................................... 13.03
313(a) ............................................... 7.06
(b)(1) ............................................ N/A
(b)(2) ............................................ 7.06
(c) ............................................... 7.06; 13.02
(d) ............................................... 7.06
314(a) ............................................... 4.02; 4.03; 13.02
(b) ............................................... N/A
(c)(1) ............................................ 13.04
(c)(2) ............................................ 13.04
(c)(3) ............................................ N/A
(d) ............................................... N/A
(e) ............................................... 13.05
(f) ............................................... N/A
315(a) ............................................... 7.01(b)
(b) ............................................... 7.05; 13.02
(c) ............................................... 7.01(a)
(d) ............................................... 7.01(c)
(e) ............................................... 6.11
316(a)(1)(A) ......................................... 6.05
(a)(1)(B) ......................................... 6.02; 6.04; 9.02
(a)(2) ............................................ N/A
(b) ............................................... 6.07
(c) ............................................... N/A
317(a)(1) ............................................ 6.08
(a)(2) ............................................ 6.09
(b) ............................................... 2.04
318(a) ............................................... 13.01
(b) ............................................... N/A
(c) ............................................... 13.01
</TABLE>
- ------------------------
N/A means Not Applicable
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<PAGE> 7
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
INDENTURE, dated as of August 26, 1997, among GIANT INDUSTRIES, INC., a
Delaware corporation (the "Company"), the SUBSIDIARY GUARANTORS listed as
signatories hereto, and The Bank of New York, a New York banking corporation, as
Trustee.
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the holders of the Company's 9% Senior
Subordinated Notes due 2007.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of (i) the amount by which the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities of such Subsidiary
Guarantor, including, without limitation, contingent liabilities (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date), but excluding liabilities under the Guarantee of such Subsidiary
Guarantor at such date and (ii) the amount by which the present fair saleable
value of the assets of such Subsidiary Guarantor at such date exceeds the amount
that will be required to pay the probable liability of such Subsidiary Guarantor
on its debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date and after giving effect to any collection from
any Subsidiary of such Subsidiary Guarantor in respect of the obligations of
such Subsidiary under the Guarantee), excluding debt in respect of the
Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means any sale, capitalized lease (in accordance with GAAP),
transfer, exchange or other disposition (or series of related sales, capitalized
leases (in accordance with GAAP), transfers, exchanges or dispositions) of
shares of Capital Stock of a Subsidiary (other than directors' qualifying
shares), or of property or assets or any interests therein (each referred to for
purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries, including any disposition by means of a merger,
consolidation or similar transaction (other than (i) by the Company to a
Restricted Subsidiary or by a Subsidiary to the Company or to a Restricted
Subsidiary, (ii) a sale of inventory or hydrocarbons or other products
(including both crude and refined products), in each case in the ordinary course
of business of the Company's operations, (iii) the merger or consolidation of,
or the disposition of all or substantially all of the assets of, the Company
made in compliance with Article Five of this Indenture and (iv) the merger or
consolidation of a Restricted Subsidiary made in compliance with the
requirements set forth in Section 11.02(b)(i)(A)).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(A) the number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (B) the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means a revolving credit and/or letter of credit
and/or bankers' acceptance facility, the proceeds of which are used for working
capital and other general corporate purposes existing on the Issue Date or
entered into after the Issue Date by one or more of the Company and/or its
Subsidiaries and one or more financial institutions, as amended, extended or
refinanced from time to time.
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<PAGE> 8
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized to act on behalf of the Board of Directors of such
Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
85% of the book value of all accounts receivable owned by the Company and its
Restricted Subsidiaries (excluding any accounts receivable from an Affiliate of
the Company or that are more than 90 days past due, less (without duplication)
the allowance for doubtful accounts attributable to such current accounts
receivable) and (ii) 60% of the book value of all inventory owned by the Company
and its Restricted Subsidiaries as of such date, all calculated on a
consolidated basis and in accordance with GAAP. To the extent that information
is not available as to the amount of accounts receivable as of a specific date,
the Company may utilize the most recent available information for purposes of
calculating the Borrowing Base.
"Business Day" means any day on which the New York Stock Exchange, Inc.
is open for trading and which is not a Legal Holiday.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock or partnership interests and any and all warrants, options and rights with
respect thereto (whether or not currently exercisable), including each class of
common stock and preferred stock of such Person.
"Capitalized Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under a lease of property, real or
personal, that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
"Change of Control" means any event or series of events by which (i) any
"Person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act) of 50% or more of the total voting power of the Voting Stock
of the Company; (ii) the Company consolidates with or merges or amalgamates with
or into another Person or conveys, transfers, or leases all or substantially all
of its assets to any Person, or any Person consolidates with, or merges or
amalgamates with or into the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed into
or exchanged for cash, securities or other property, other than any such
transaction where (A) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving corporation which is not
Disqualified Stock and (B) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving corporation immediately after
such transaction; (iii) the stockholders of the Company approve any plan of
liquidation or dissolution of the Company; or (iv) during any period of twelve
consecutive months, individuals who at the beginning of such period constituted
the Board of Directors of the Company (or whose appointment or nomination for
election by the stockholders of the Company was approved by a vote of not less
than a majority of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
"Commission" means the Securities and Exchange Commission.
<PAGE> 9
"Company" means the party named as such above, until a successor replaces
such Person in accordance with the terms of this Indenture, and thereafter means
such successor.
"Consolidated Coverage Ratio" means, for any Reference Period, the ratio
on a pro forma basis of (i) Consolidated EBITDA for such Reference Period to
(ii) Consolidated Interest Expense for such Reference Period; provided, that, in
calculating Consolidated EBITDA and Consolidated Interest Expense (A) with
respect to any acquisition which occurs during the Reference Period or
subsequent to the Reference Period and on or prior to the date of the incurrence
of Indebtedness or issuance of Disqualified Stock giving rise to the need to
calculate the Consolidated Coverage Ratio (the "Debt Incurrence Date"), such
acquisition shall be assumed to have occurred on the first day of the Reference
Period, (B) with respect to the incurrence of any Indebtedness (including the
sale of the Securities) or issuance of any Disqualified Stock during the
Reference Period or subsequent to the Reference Period and on or prior to the
Debt Incurrence Date, the incurrence of such Indebtedness or the issuance of
such Disqualified Stock shall be assumed to have occurred on the first day of
such Reference Period, (C) any Indebtedness that had been outstanding during the
Reference Period that has been repaid on or prior to the Debt Incurrence Date
shall be assumed to have been repaid as of the first day of such Reference
Period, (D) the Consolidated Interest Expense attributable to interest on any
Indebtedness or dividends on any Disqualified Stock bearing a floating interest
(or dividend) rate shall be computed on a pro forma basis as if the rate in
effect on the Debt Incurrence Date were the average rate in effect during the
entire Reference Period, and (E) in determining the amount of Indebtedness
pursuant to Section 4.09, the incurrence of Indebtedness or issuance of
Disqualified Stock giving rise to the need to calculate the Consolidated
Coverage Ratio and, to the extent the net proceeds from the incurrence or
issuance thereof are used to retire Indebtedness, the application of the
proceeds therefrom, shall be assumed to have occurred on the first day of the
Reference Period.
"Consolidated EBITDA" means, for any Reference Period, the Consolidated
Net Income of the Company and its Restricted Subsidiaries for such Reference
Period, increased (to the extent deducted in determining Consolidated Net
Income) by the sum of: (i) all income taxes of the Company and its Restricted
Subsidiaries paid or accrued according to GAAP for such period (other than
income taxes attributable to extraordinary gains or losses), (ii) all interest
expense of the Company and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (including amortization of original issue
discount and other non-cash interest expense), (iii) depreciation and depletion
of the Company and its Restricted Subsidiaries, (iv) amortization of the Company
and its Restricted Subsidiaries including, without limitation, amortization of
capitalized debt issuance costs; and (v) other non-recurring non-cash charges
(excluding any such non-cash charges to the extent they require an accrual of,
or a reserve for, cash charges for any future periods) to the extent such
non-cash charges are deducted in connection with the determination of
Consolidated Net Income; and (vi) extraordinary losses to the extent deducted in
connection with the determination of Consolidated Net Income.
"Consolidated Interest Expense" means, with respect to the Company and its
Restricted Subsidiaries, for any Reference Period, the aggregate amount (without
duplication) of (i) interest expensed in accordance with GAAP (including, in
accordance with the following sentence, interest attributable to Capitalized
Lease Obligations) during such period in respect of all Indebtedness of the
Company and its Restricted Subsidiaries (including (A) amortization of original
issue discount on any Indebtedness, (B) the interest portion of all deferred
payment obligations, calculated in accordance with GAAP, and (C) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptance financing and currency and interest rate swap arrangements, in each
case to the extent attributable to such Reference Period), and (ii) dividend
requirements of the Company and its Restricted Subsidiaries with respect to
Disqualified Stock of the Company or its Restricted Subsidiaries, whether in
cash or otherwise (except dividends payable solely in shares of Qualified
Stock), paid (other than to the Company or any of its Restricted Subsidiaries),
declared, accrued or accumulated during such period, divided by the difference
of one minus the applicable actual combined federal state, local and foreign
income tax rate of the Company and its Restricted Subsidiaries (expressed as a
decimal), on a consolidated basis, for the four quarters immediately preceding
the date of the transaction giving rise to the need to calculate Consolidated
Interest Expense, in each case to the extent attributable to such Reference
Period and excluding items eliminated in consolidation. For purposes of
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<PAGE> 10
this definition, (i) interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined by the Company to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP and (ii) interest expense attributable to any Indebtedness represented
by the guarantee by the Company or a Subsidiary of the Company of an obligation
of another Person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of the Company and its Restricted Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP, provided that (i) the
net income for such period of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting will be included only to the
extent of the amount of dividends, payments or distributions actually paid to
the Company or its Restricted Subsidiaries by such other Person in such period;
(ii) the net income for such period of any Restricted Subsidiary of the Company
that is subject to any Payment Restriction will be included only to the extent
of the amount of dividends, payments or distributions which (A) are actually
paid by such Restricted Subsidiary in such period to the Company (or another
Restricted Subsidiary which is not subject to a Payment Restriction) and (B) are
not in excess of the amount which such Restricted Subsidiary would be permitted
to pay to the Company (or another Restricted Subsidiary which is not subject to
a Payment Restriction) in any future period under the Payment Restrictions
applicable to such Restricted Subsidiary, assuming that the net income of such
Restricted Subsidiary in each future period is equal to the net Income for such
Restricted Subsidiary for such period; and (iii) the following will be excluded:
(A) the net income (or loss) of any other Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, (B)
any net gain or loss on the sale or other disposition by the Company or any of
its Restricted Subsidiaries of assets (other than a sale of inventory or
hydrocarbons or other products (including both crude and refined products), in
each case in the ordinary course of business of the Company's operations) and of
the Capital Stock of any Restricted Subsidiary of the Company, (C) extraordinary
gains and (D) any ceiling limitation writedown required in accordance with the
full cost accounting method rules of the Commission.
"Consolidated Net Tangible Assets" means, as of any date, the total assets
of the Company and its Restricted Subsidiaries on a consolidated basis as of
such date (less applicable reserves and other items properly deductible from
total assets) and after deducting therefrom: (i) total liabilities and total
capital items as of such date except the following: items constituting
Indebtedness, paid-in capital and retained earnings, provisions for deferred
income taxes and deferred gains, and reserves which are not reserves for any
contingencies not allocated to any particular purpose; (ii) goodwill, trade
names, trademarks, patents, unamortized debt discount and expense, and other
intangible assets; and (iii) all Investments other than Permitted Investments.
"Consolidated Tangible Net Worth" means, with respect to any Person, as at
any date of determination, the sum of Capital Stock (other than Disqualified
Stock) and paid-in capital plus retained earnings (or minus accumulated deficit)
minus all intangible assets, including, without limitation, organization costs,
patents, trademarks, copyrights, franchise, research and development costs, and
any amount reflected in treasury stock, of such Person determined on a
consolidated basis in accordance with GAAP.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Designated Senior Indebtedness" means (i) any Senior Indebtedness of the
Company and/or its Restricted Subsidiaries permitted under this Indenture, the
original principal amount of which is $10 million or more and (ii) the
Indebtedness and/or other obligations under the Bank Credit Facility.
"Disqualified Stock" means any Capital Stock of a Person which, by its
terms (or by terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event or with the passage of
time, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable
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<PAGE> 11
at the option of the holder thereof, in whole or in part, on or prior to the
Maturity Date or which is exchangeable or convertible into debt securities of
such Person or any other Person, except to the extent that such exchange or
conversion rights cannot be exercised prior to the Maturity Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Exchange Notes" means the 9% Senior Subordinated Notes due 2007 to be
issued pursuant to this Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Rights Agreement.
"Existing Subordinated Notes" means $100,000,000 in original principal
amount of the Company's 9 3/4% Senior Subordinated Notes due 2003.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America from time to time.
"Guarantee" means, individually and collectively, the guarantees given by
the Subsidiary Guarantors pursuant to Article Eleven hereof, including a
notation in the Securities substantially in the form attached hereto as Exhibit
A-1.
"Holder" means a Person in whose name a Security is registered on the
Registrar's books.
"Indebtedness" means, without duplication, with respect to any Person, (i)
all obligations of such Person (A) in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof), (B) evidenced by bonds, notes, debentures or similar
instruments, (C) representing the balance deferred and unpaid of the purchase
price of any property or services (other than accounts payable or other
obligations arising in the ordinary course of business), (D) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (E) for
the payment of money relating to a Capitalized Lease Obligation, or (F)
evidenced by a letter of credit or a reimbursement obligation of such Person
with respect to any letter of credit; (ii) all net obligations of such Person as
of the date of a required calculation under interest swap obligations and
foreign currency hedges; (iii) all liabilities of others of the kind described
in the preceding clauses (i) or (ii) that such Person has guaranteed or that are
otherwise its legal liability; (iv) Indebtedness (as otherwise defined in this
definition) of another Person secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person, the amount of such
obligations being deemed to be the lesser of (A) the full amount of such
obligations so secured, and (B) the fair market value of such asset, as
determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board Resolution of such Person; (v) the
liquidation preference and any mandatory redemption payment obligations in
respect of Disqualified Stock of such Person; and (vi) any and all deferrals,
renewals, extensions, refinancings and refundings (whether direct or indirect)
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii), (iii), (iv), (v) or this
clause (vi), whether or not between or among the same parties.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Initial Notes" means the Company's 9% Senior Subordinated Notes due 2007,
as amended or supplemented from time to time in accordance with the terms
hereof, that are issued pursuant to this Indenture.
"Initial Purchasers" means UBS Securities LLC, Donaldson, Lufkin &
Jenrette Securities Corporation, BancAmerica Securities, Inc., and Jefferies
& Company, Inc.
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<PAGE> 12
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
(i) an insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization proceeding or other similar case or proceeding,
relative to such Person, as such, or its assets, or (ii) any liquidation,
dissolution, reorganization proceeding or winding up of such Person (other than
any reincorporation of such Person in another jurisdiction), whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or (iii)
any assignment for the benefit of creditors or any other marshaling of assets
and liabilities of such Person.
"Investment" of any Person means (i) all investments by such Person in any
other Person in the form of loans, advances or capital contributions (excluding
advances to employees in the ordinary course of business), (ii) all guarantees
of Indebtedness or other obligations of any other Person by such Person, (iii)
all purchases (or other acquisitions for consideration) by such Person of
Indebtedness, Capital Stock or other securities of any other Person and (iv) all
other items that would be classified as investments or advances on a balance
sheet of such Person prepared in accordance with GAAP.
"Issue Date" means the date on which the Securities are originally issued
under this Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person, and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction).
"Maturity Date" means September 1, 2007.
"Net Available Proceeds" means, with respect to any Asset Sale of any
Person, cash proceeds received (including any cash proceeds received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, and excluding any other consideration
until such time as such consideration is converted into cash) therefrom, in each
case net of all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all federal, state or local taxes required to be
accrued as a liability as a consequence of such Asset Sale, and in each case net
of all Indebtedness which is secured by such assets, in accordance with the
terms of any Lien upon or with respect to such assets, or which must, by its
terms or in order to obtain a necessary consent to such Asset Sale to prevent a
default or event of default under Senior Indebtedness or by applicable law, be
repaid out of the proceeds from such Asset Sale and which is actually so repaid.
"Net Cash Proceeds" means, in the case of any sale by the Company of
securities pursuant to clauses (B) or (C) of Section 4.10(a)(iii), the aggregate
net cash proceeds received by the Company, after payment of expenses,
commissions, discounts and any other transaction costs incurred in connection
therewith.
"Notes Custodian" means the custodian with respect to a Global Note (as
appointed by the Depository), or any successor person thereto and shall
initially be the Trustee.
"Officer" means, with respect to any Person, the Chairman of the Board,
the President, any Vice President, the Chief Financial Officer or the Treasurer
of such Person.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Officers, one of which must be the principal executive, principal
financial or principal accounting officer of the Company.
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<PAGE> 13
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company (or any Subsidiary Guarantor, if applicable) or the
Trustee.
"Pari Passu Indebtedness" means the Existing Subordinated Notes and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Permitted Business Investments" means (i) Investments by the Company or
any Restricted Subsidiary in any Person which immediately prior to the making of
such Investment is a Restricted Subsidiary; (ii) Investments in the Company by
any Restricted Subsidiary; and (iii) Investments by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (A) such Person becomes a Restricted Subsidiary of the Company or (B)
such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys all or substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary of the Company.
"Permitted Company Refinancing Indebtedness" means (i) Indebtedness of the
Company, the terms of which have been amended, modified or supplemented in a
manner that does not (A) affect the priority of such Indebtedness in right of
payment in relation to the Securities, (B) accelerate the maturity of such
Indebtedness or (C) shorten the Average Life of such Indebtedness and (ii)
Indebtedness of the Company, the net proceeds of which are used to renew,
extend, refinance, refund or repurchase outstanding Indebtedness of the Company,
provided that (A) if the Indebtedness (including the Securities) being renewed,
extended, refinanced, refunded or repurchased is pari passu with or subordinated
in right of payment to the Securities then such Indebtedness is pari passu with
or subordinated in right of payment to, as the case may be, the Securities at
least to the same extent as the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, (B) such Indebtedness is scheduled to
mature no earlier than the Indebtedness being renewed, extended, refinanced,
refunded or repurchased, and (C) such Indebtedness has an Average Life at the
time such Indebtedness is incurred that is equal to or greater than the
remaining Average Life of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased; provided, further, that such Indebtedness (to the
extent that such Indebtedness constitutes Permitted Company Refinancing
Indebtedness) is in an aggregate principal amount (or, if such Indebtedness is
issued at a price less than the principal amount thereof, the aggregate amount
of gross proceeds therefrom is) not in excess of the aggregate principal amount
then outstanding of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased (or if the Indebtedness being renewed, extended,
refinanced, refunded or repurchased was issued at a price less than the
principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP).
"Permitted Financial Investments" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof, (iii) certificates
of deposit and eurodollar time deposits with maturities of 12 months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
12 months and overnight bank deposits, in each case with any lender party to the
Bank Credit Facility or with any domestic commercial bank having capital and
surplus in excess of $300 million, (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution meeting
the qualifications specified in clause (iii) above, (v) commercial paper rated
at least A-2 or the equivalent thereof at the time of purchase by Moody's
Investors Service, Inc. and Standard & Poor's Corporation and in each case
maturing within 12 months after the date of acquisition, (vi) money market
mutual or similar funds having assets in excess of $100,000,000, and (vii) any
debt securities or adjustable rate preferred stock issued by a corporation
organized under the laws of a state of the United States of America or issued by
any state, county or municipality located in the United States of America which
is rated at least AA- or the equivalent thereof by Moody's Investors Service,
Inc. and Standard & Poor's Corporation and maturing or having a call provision
not exceeding 24 months from the date of acquisition.
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<PAGE> 14
"Permitted Investments" means Permitted Business Investments and
Permitted Financial Investments.
"Permitted Liens" means (i) Liens existing on the Issue Date; (ii) Liens
now or hereafter securing Senior Indebtedness; (iii) Liens now or hereafter
securing any interest rate hedging obligations (A) that the Company is required
to enter into with respect to the Bank Credit Facility or (B) that are entered
into for the purpose of managing interest rate risk with respect to Indebtedness
of the Company and its Restricted Subsidiaries, provided that such interest rate
obligations under clauses (A) and (B) do not have an aggregate notional amount
which exceeds the aggregate principal amount of Indebtedness of the Company and
its Restricted Subsidiaries; (iv) Liens securing obligations under agreements
that the Company enters into in the ordinary course of business for the purpose
of protecting against fluctuations in oil, natural gas, refined products or
grain prices; (v) Liens securing Indebtedness, the proceeds of which are used to
refinance secured Indebtedness of the Company or its Restricted Subsidiaries;
provided, that such Liens extend to or cover only the property or assets
currently securing the Indebtedness being refinanced; (vi) Liens for taxes,
assessments and governmental charges not yet delinquent or being contested in
good faith and for which adequate reserves have been established to the extent
required by GAAP; (vii) mechanics', workmen's, materialmen's, operator's or
similar Liens arising in the ordinary course of business for sums that are not
yet delinquent or are being contested in good faith by appropriate action;
(viii) Liens in connection with workmen's compensation, unemployment insurance
or other social security, old age pension or public liability obligations not
yet due or which are being contested in good faith by appropriate action; (ix)
Liens, deposits or pledges to secure the performance of bids, tenders, contracts
(other than contracts for the payment of money), leases, public or statutory
obligations, surety, stay, appeal, indemnity, performance or other similar
bonds, or other similar obligations arising in the ordinary course of business;
(x) survey exceptions, encumbrances, easements or reservations of, or rights of
others for, rights of way, zoning or other restrictions as to the use of real
properties, and minor defects in title which, in the case of any of the
foregoing, were nor incurred or created to secure the payment of borrowed money
or the deferred purchase price of property or services, and in the aggregate do
not materially adversely affect the value of such properties or materially
impair use for the purposes of which such properties are held by the Company or
any Restricted Subsidiaries; (xi) Liens on, or related to, properties to secure
all or part of the costs incurred in the ordinary course of business of
exploration, drilling, development or operation thereof; (xii) Liens on pipeline
or pipeline facilities which arise out of operation of law; (xiii) judgment and
attachment Liens not giving rise to an Event of Default or Liens created by or
existing from any litigation or legal proceeding that are currently being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established to the extent required by GAAP; (xiv) (A) Liens
upon any property of any Person existing at the time of acquisition thereof by
the Company or a Subsidiary, (B) Liens upon any property of a Person existing at
the time such Person is merged or consolidated with the Company or any
Restricted Subsidiary or existing at the time of the sale or transfer of any
such property of such Person to the Company or any Restricted Subsidiary, or (C)
Liens upon any property of a Person existing at the time such Person becomes a
Restricted Subsidiary; provided, that in each case such Lien has not been
created in contemplation of such sale, merger, consolidation, transfer or
acquisition, and provided further that in each such case no such Lien shall
extend to or cover any property of the Company or any Subsidiary other than the
property being acquired and improvements thereon; (xv) Liens on deposits to
secure public or statutory obligations or in lieu of surety or appeal bonds
entered into in the ordinary course of business; (xvi) Liens in favor of
collecting or payor banks having a right of setoff, revocation, refund or
chargeback with respect to money or instruments of the Company or any Restricted
Subsidiary on deposit with or in possession of such bank; (xvii) purchase money
Liens granted in connection with the acquisition of fixed assets in the ordinary
course of business and consistent with past practices, provided, that (A) such
Liens attach only to the property so acquired with the purchase money
indebtedness secured thereby and (B) such Liens secure only Indebtedness that is
not in excess of 100% of the purchase price of such fixed assets; (xviii) Liens
reserved in oil and gas mineral leases for bonus or rental payments and for
compliance with the terms of such leases; (xix) Liens arising under partnership
agreements, oil and gas leases, farm-out agreements, division orders, contracts
for the sale, purchase, exchange, transportation or processing of oil, gas or
other hydrocarbons, unitization and pooling declarations and agreements,
development agreements, operating agreements, area of mutual interest
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<PAGE> 15
agreements, and other agreements which are customary in the Principal Business;
and (xx) other Liens provided that such other Liens shall not secure obligations
in excess of $5,000,000 in the aggregate at any one time outstanding.
"Permitted Subsidiary Refinancing Indebtedness" means (i) Indebtedness of
any Subsidiary, the terms of which have been amended, modified or supplemented
in a manner that does not (A) affect the priority of such Indebtedness in right
of payment in relation to the Securities, ( B) accelerate the maturity of such
Indebtedness or (C) shorten the Average Life of such Indebtedness and (ii)
Indebtedness of any Subsidiary, the net proceeds of which are used to renew,
extend, refinance, refund or repurchase outstanding Indebtedness of such
Subsidiary, provided that (A) if the Indebtedness (including any guarantee
thereof) being renewed, extended, refinanced, refunded or repurchased is pari
passu with or subordinated in right of payment to the Guarantees, then such
Indebtedness is pari passu with or subordinated in right of payment to, as the
case may be, the Guarantees at least to the same extent as the Indebtedness
being renewed, extended, refinanced, refunded or repurchased, (B) such
Indebtedness is scheduled to mature no earlier than the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, and (C) such
Indebtedness has an Average Life at the time such Indebtedness is incurred that
is equal to or greater than the remaining Average Life of the Indebtedness being
renewed, extended, refinanced, refunded or repurchased; provided further, that
such Indebtedness (to the extent that such Indebtedness constitutes Permitted
Subsidiary Refinancing Indebtedness) is in an aggregate principal amount (or, if
such Indebtedness is issued at a price less than the principal amount thereof,
the aggregate amount of gross proceeds therefrom is) not in excess of the
aggregate principal amount then outstanding under the Indebtedness being
renewed, extended, refinanced, refunded or repurchased (or if the Indebtedness
being renewed, extended, refinanced, refunded or repurchased was issued at a
price less than the principal amount thereof, then not in excess of the amount
of liability in respect thereof determined in accordance with GAAP).
"Person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Post-Commencement Interest" means all interest accrued or accruing after
the commencement of any Insolvency or Liquidation Proceeding in accordance with
and at the contract rate (including, without limitation, any rate applicable
upon default) specified in the agreement or instrument creating, evidencing, or
governing any Senior Indebtedness, whether or not, pursuant to applicable law or
otherwise, the claim for such interest is allowed as a claim in such Insolvency
or Liquidation Proceeding.
"Principal Business" means (i) the business of the exploration for, and
development, acquisition, production, processing, marketing, refining, storage
and transportation of, hydrocarbons, (ii) any related energy and natural
resource business, (iii) any business currently engaged in by the Company or its
Subsidiaries, (iv) convenience stores, retail service stations, truck stops and
other public accommodations in connection therewith and (v) any activity or
business that is a reasonable extension, development or expansion of any of the
foregoing.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
the Initial Purchasers, in exchange for the Initial Notes held by the Initial
Purchasers as part of their initial distribution, a like aggregate principal
amount of Private Exchange Notes.
"Private Exchange Notes" means the 9% Senior Subordinated Notes due 2007
to be issued pursuant to this Indenture in connection with a Private Exchange
effected pursuant to the Registration Rights Agreement.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
the rules and regulations under the Securities Act.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act of 1933, as amended.
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<PAGE> 16
"Publicly Traded Stock" means, with respect to any Person, Voting Stock of
such Person which is registered under Section 12 of the Exchange Act and which
is actively traded on the New York Stock Exchange or American Stock Exchange or
quoted in the National Association of Securities Dealers Automated Quotation
System (National Market System).
"Purchase Agreement" means the Purchase Agreement dated August 21, 1997,
among the Company, the Subsidiary Guarantors and the Initial Purchasers.
"Qualified Stock" means any Capital Stock that is not Disqualified Stock.
"Reference Period" means, with respect to any Person, the four full fiscal
quarters ended immediately preceding any date upon which any determination is to
be made pursuant to the terms of the Securities or the Indenture.
"Registered Exchange Offer" means an offer by the Company, pursuant to the
Registration Rights Agreement, to certain Holders of Initial Notes, to issue and
deliver to such Holders, in exchange for the Initial Notes, a like aggregate
principal amount of Exchange Notes registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights Agreement
dated August 21, 1997 among the Company, the Subsidiary Guarantors and the
Initial Purchasers.
"Representative" means the indenture trustee or other trustee, agent or
representative of holders of any Senior Indebtedness.
"Restricted Payment" means, with respect to any Person, any of the
following: (i) any dividend or other distribution in respect of such Person's
Capital Stock (other than (A) dividends or distributions payable solely in
Capital Stock (other than Disqualified Stock) of such Person and (B) in the case
of Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Restricted Subsidiary of the Company that is a Wholly Owned
Subsidiary); (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock, or any option, warrant, or other right to
acquire shares of Capital Stock, of the Company or any of its Restricted
Subsidiaries other than any such purchase, redemption or other acquisition or
retirement for value by the Company or any Restricted Subsidiary of the Company
that is a Wholly Owned Subsidiary of any Capital Stock, or, any option, warrant
or other right to acquire shares of Capital Stock, of any Restricted Subsidiary
with respect to such Capital Stock, option, warrant or other right which is
owned, at the time of any such transaction, by the Company or another Restricted
Subsidiary; (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for value,
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, of any Indebtedness which is pari passu or subordinated in right of
payment to the Securities; and (iv) the making by such Person of any Investment
other than a Permitted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary. The Company may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary by a Board Resolution of the Company, as evidenced
by written notice thereof delivered to the Trustee; provided, however, that,
immediately after giving effect to such designation, (i) the Company could incur
at least $1.00 in additional Indebtedness pursuant to Section 4.09(a) and (ii)
no Default or Event of Default shall have occurred and be continuing.
"Securities" means the Initial Notes, the Exchange Notes and the Private
Exchange Notes, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
<PAGE> 17
"Senior Indebtedness" means any Indebtedness of a Person (whether
outstanding on the date hereof or hereafter incurred), unless such Indebtedness
is stated to be pari passu with or is contractually subordinate or junior in
right of payment to the Securities.
"Shelf Registration Statement" means the registration statement issued by
the Company in connection with the offer and sale of Initial Notes or Private
Exchange Notes pursuant to the Registration Rights Agreement.
"Subordinated Securities" means securities of the Company or any
Subsidiary Guarantor that are subordinated, at least to the same extent as the
Securities or the Guarantees, respectively, to Senior Indebtedness of the
Company and such Subsidiary Guarantor and to any securities that are issued in
exchange for any such Senior Indebtedness.
A "subsidiary" of any Person means (i) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more subsidiaries of such Person or by such Person and one or more
subsidiaries of such Person, (ii) a partnership in which such Person or a
subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if such Person or its subsidiary is
entitled to receive more than 50% of the assets of such partnership upon its
dissolution, or (iii) any other Person (other than a corporation or partnership)
in which such Person, directly or indirectly, at the date of determination
thereof, has (A) at least a majority ownership interest or (B) the power to
elect or direct the election of a majority of the directors or other governing
body of such Person. For purposes of the foregoing definition, an arrangement by
which a Person who owns an interest in an oil and gas property is subject to a
joint operating agreement, processing agreement, net profits interest,
overriding royalty interest, farm-out agreement, development agreement, area of
mutual interest agreement, joint bidding agreement, unitization agreement,
pooling arrangement or other similar agreement or arrangement shall not, in and
of itself, cause such Person to be considered a Subsidiary.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guarantor" means (i) each of the Company's Subsidiaries in
existence on the Issue Date, (ii) each of the Subsidiaries that becomes a
guarantor of the Securities in compliance with the provisions of Article Eleven
hereof and (iii) each of the Subsidiaries executing a supplemental indenture in
which such Subsidiary agrees to be bound by the terms of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.03.
"Transfer Restricted Notes" means Definitive Notes and Securities that
bear or are required to bear the legend set forth in Section 2.06(d).
"Trust Officer" means any officer or assistant officer within the
corporate trust department of the Trustee assigned by the Trustee to administer
its corporate trust matters.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of an Unrestricted
Subsidiary or (ii) any Subsidiary of the Company or of a Restricted Subsidiary
that is designated as an Unrestricted Subsidiary by a Board Resolution of the
Company in accordance with the following sentence. The Company may designate any
Subsidiary of the Company or of a Restricted Subsidiary (including any
Restricted Subsidiary or any newly formed or newly acquired Subsidiary) to be an
Unrestricted Subsidiary by a Board Resolution of the Company, as evidenced by
written notice thereof delivered to the Trustee, if after giving effect to such
designation, (i) the Company could incur $1.00 of
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<PAGE> 18
additional Indebtedness pursuant to Section 4.09(a), (ii) the Company could make
an additional Restricted Payment of $1.00 pursuant to Section 4.10(a), (iii)
such Subsidiary does not own or hold any Capital Stock of, or any lien on any
property of, the Company or any Restricted Subsidiary and (iv) such Subsidiary
is not liable, directly or indirectly, with respect to any Indebtedness other
than Unrestricted Subsidiary Indebtedness.
"Unrestricted Subsidiary Indebtedness" of any Person means Indebtedness of
such Person (i) as to which neither the Company nor any Restricted Subsidiary is
directly or indirectly liable (by virtue of the Company's or such Restricted
Subsidiary's being the primary obligor, or guarantor of, or otherwise liable in
any respect on, such Indebtedness), (ii) which, with respect to Indebtedness
incurred after the date of this Indenture by the Company or any Restricted
Subsidiary, upon the occurrence of a default with respect thereto, does not
result in, or permit any holder of any Indebtedness of the Company or any
Restricted Subsidiary to declare, a default on such Indebtedness of the Company
or any Restricted Subsidiary and (iii) which is not secured by any assets of the
Company or of any Restricted Subsidiary.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable at the option of the issuer
thereof.
"U.S. Legal Tender" means such coin or currency of the United States as
at the time of payment shall be legal tender for the payment of public and
private debts.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors or other governing body of such Person.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock (other
than directors' qualifying shares, if applicable) of which is owned by the
Company or another Wholly Owned Subsidiary.
Section 1.02. Other Definitions
Term Defined in Section
<TABLE>
<S> <C>
"Affiliate Transaction" ................................. 4.14
"Agent Members" ......................................... 2.01
"Authorized Agent" ...................................... 11.09
"Bankruptcy Law" ........................................ 6.01
"Change of Control Offer" ............................... 4.16
"Change of Control Notice" .............................. 4.16
"Change of Control Payment Date" ........................ 4.16
"Custodian" ............................................. 6.01
"Debt Incurrence Date" .................................. 1.01
"Definitive Notes" ...................................... 2.01
"Event of Default" ...................................... 6.01
"Excess Proceeds" ....................................... 4.11
"Funding Guarantor" ..................................... 11.06
"Global Note" ........................................... 2.01
"IAI" ................................................... 2.01
"incur" ................................................. 4.09
</TABLE>
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<PAGE> 19
<TABLE>
<S> <C>
"Judgment Currency" .......................................... 11.11
"Legal Holiday" .............................................. 13.07
"Net Proceeds Deficiency" .................................... 4.11
"Net Proceeds Offer" ......................................... 4.11
"Net Proceeds Offer Amount" .................................. 4.11
"Net Proceeds Payment Date" .................................. 4.11
"Non-U.S. Subsidiary Guarantor" .............................. 11.09
"Note Register" .............................................. 2.03
"Offered Price" .............................................. 4.11
"Pari Passu Indebtedness Amount" ............................. 4.11
"Pari Passu Offer" ........................................... 4.11
"Paying Agent" ............................................... 2.03
"Payment Default" ............................................ 10.02
"Payment Notice" ............................................. 10.02
"Payment Restriction" ........................................ 4.13
"Purchase Agreement" ......................................... 2.01
"Purchase Notice" ............................................ 4.11
"QIB" ........................................................ 2.01
"Registrar" .................................................. 2.03
"Regulation S" ............................................... 2.01
"Rule 144A" .................................................. 2.01
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms, if used in this Indenture, have the following meanings:
"Commission" means the Commission.
"indenture securities" means the Securities and the Guarantees.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the Subsidiary
Guarantors and any other obligor on the Securities or the Guarantees.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meanings assigned to them therein.
Section 1.04. Rules of Construction
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
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<PAGE> 20
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) any gender used in this Indenture shall be deemed to include the
neuter, masculine or feminine genders;
(6) provisions apply to successive events and transactions; and
(7) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other Subdivision.
ARTICLE TWO
THE SECURITIES
Section 2.01. Form and Dating
The Initial Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Exchange Notes, the
Private Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Securities may have
such notations, legends or endorsements approved as to form by the Company and
required, as applicable, by law, stock exchange rule, agreements to which the
Company is subject and/or usage. Each Security shall be dated the date of its
authentication. The Securities shall be issuable only in denominations of $1,000
and integral multiples thereof. The terms of the Securities set forth in Exhibit
A and Exhibit B are part of the terms of this Indenture.
The Initial Notes are being offered and sold by the Company pursuant to a
Purchase Agreement, dated August 21, 1997, among the Company, the Subsidiary
Guarantors and the Initial Purchasers (the "Purchase Agreement").
(a) Global Notes. Initial Notes offered and sold to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) (a
"QIB") in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
as provided in the Purchase Agreement, shall be issued initially in the form of
one permanent global Security in definitive, fully registered form without
interest coupons (the "Global Note") with the global security legend and
restricted security legend set forth in Exhibit A hereto, which shall be
deposited on behalf of the purchasers of the Initial Notes represented thereby
with the Trustee, as custodian for the Depository (or with such other custodian
as the Depository may direct), and registered in the name of the Depository or a
nominee of the Depository, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to
the Global Note deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01 (b), authenticate and deliver initially one Global Note that (i)
shall be registered in the name of the Depository or the nominee of the
Depository and (ii) shall be delivered by the Trustee to the Depository or
pursuant to the Depository's instructions or held by the Trustee as custodian
for the Depository.
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<PAGE> 21
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to the Global Note held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Note, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices of
such Depository governing the exercise of the rights of a holder of a beneficial
interest in the Global Note.
(c) Definitive Notes. Except as provided in this Section, Section 2.06 or
Section 2.09, owners of beneficial interests in the Global Note will not be
entitled to receive Definitive Notes. Purchasers of Initial Notes who are
institutional "accredited investors" as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act (each an "IAI") and who are not QIBs and did not
purchase Initial Notes sold in reliance on Regulation S will receive physical
delivery of certificated Initial Notes (certificated Securities are herein
referred to as "Definitive Notes"); provided, however, that upon transfer of
such Definitive Notes to a QIB or in reliance on Regulation S such Definitive
Notes will, unless the Global Note has previously been exchanged for Definitive
Notes pursuant to Section 2.06 or Section 2.09, be exchanged for an interest in
the Global Note pursuant to the provisions of Section 2.06. Definitive Notes
will bear the restricted securities legend set forth on Exhibit A unless removed
in accordance with Section 2.06(d).
Section 2.02. Execution and Authentication.
Two Officers of the Company shall sign the Securities for the Company, and
two Officers of each Subsidiary Guarantor shall sign the notation on the
Securities relating to the Guarantee of such Subsidiary Guarantor on behalf of
such Subsidiary Guarantor, in each case by manual or facsimile signature.
If an Officer of the Company or any Subsidiary Guarantor whose signature
is on a Security no longer holds that office at the time such Security is
authenticated such Security shall be valid nevertheless.
A Security shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that a
Security has been authenticated in accordance with the terms of this Indenture.
The Trustee, upon a written order of the Company signed by two Officers of
the Company, shall authenticate and deliver (1) Initial Notes for original issue
in an aggregate principal amount of $150,000,000, and (2) Exchange Notes or
Private Exchange Notes for issue only in a Registered Exchange Offer or a
Private Exchange, respectively, pursuant to the Registration Rights Agreement,
for a like principal amount of Initial Notes, in each case upon a written order
of the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall specify the
amount of the Securities to be authenticated, the date on which the original
issue of Securities is to be authenticated and whether the Securities are to be
Initial Notes, Exchange Notes or Private Exchange Notes. The aggregate principal
amount of Securities outstanding at any time may not exceed $150,000,000 except
as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate the Securities. Unless limited by the terms of such appointment,
any such authenticating agent may authenticate the Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such authenticating agent of the Trustee. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
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<PAGE> 22
The Company shall maintain (i) an office or agency where the Securities
may be presented for registration of transfer or for exchange (including any
co-registrar, the "Registrar"); and (ii) an office or agency where the
Securities may be presented for payment ("Paying Agent"). The Registrar shall
keep a register of the Holders of Securities and of the transfer and exchange of
such Securities (the "Note Register"). The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
shall include any such additional paying agent. The Company may change any
Paying Agent, Registrar or co-registrar without prior notice to any Holder of a
Security. The Company shall notify the Trustee and the Trustee shall, at the
Company's expense, notify the Holders of the Securities of the name and address
of any Agent not a party to this Indenture. The Company or any of its
domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar. The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which shall incorporate
the provisions of the TIA. Any such agency agreement shall implement the
provisions of this Indenture that relate to such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the
Trustee shall act as such, as appropriate, and shall be entitled to appropriate
compensation in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Securities.
Section 2.04. Paying Agent to Hold Money In Trust.
On or prior to each due date of the principal of, premium, if any, and
interest on any Security, the Company shall deposit with the Paying Agent a sum
sufficient to pay such principal, premium, if any, and interest when so becoming
due. The Company shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders of the Securities or the Trustee all money held by the Paying Agent
for the payment of principal of, premium, if any, and interest on the
Securities, and shall notify the Trustee of any Default by the Company in making
any such payment. While any such Default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee and to account for any
funds disbursed. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee. Upon payment over to the Trustee and accounting
for any funds disbursed, the Paying Agent (if other than the Company) shall have
no further liability for the money delivered to the Trustee. If the Company acts
as Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders of the Securities all money held by it as Paying Agent.
Section 2.05. Lists of Holders of Securities.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders of Securities. If the Trustee is not the Registrar, the Company
shall furnish or cause to be furnished to the Trustee at least ten Business Days
before each interest payment date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders of Securities,
including the aggregate principal amount of Securities held by each such Holder
of Securities.
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. Definitive Notes shall be
issued in registered form and shall be transferable only upon the surrender of
Definitive Notes for registration of transfer. When Definitive Notes are
presented to the Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Definitive Notes of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met; provided, however, that any
Definitive Notes presented or surrendered for registration of transfer or
exchange:
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<PAGE> 23
(i) shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Registrar and the Trustee duly
executed by the Holder thereof or by his attorney duly authorized in
writing; and
(ii) are being transferred pursuant to Section 2.06(b) or pursuant
to clause (A), (B) or (C) below, and are accompanied by the following
additional information and documents, as applicable:
(A) if such Definitive Notes are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect
(in the form set forth on the reverse of the Security); or
(B) if such Definitive Notes are being transferred to the
Company a certification to that effect (in the form set forth on the
reverse of the Security); or
(C) if such Definitive Notes are being transferred pursuant to
an exemption from registration in accordance with Rule 144, Rule
144A or Regulation S under the Securities Act: (i) a certificate to
that effect (in the form set forth on the reverse of the Security),
and (ii) if the Company or Registrar so requests, evidence
reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in Section
2.06(d)(i).
(b) Restrictions on Transfer of a Definitive Note for a Beneficial
Interest in the Global Note. A Definitive Note may not be exchanged for a
beneficial interest in the Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Note is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or to a non-U.S. person
in accordance with Rule 904 under the Securities Act; and
(ii)written instructions directing the Trustee to make, or to
direct the Notes Custodian to make, an adjustment on its books and records
with respect to such Global Note to reflect an increase in the aggregate
principal amount of the Securities represented by the Global Note,
then the Trustee shall cancel such Definitive Note and cause, or direct the
Notes Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Notes Custodian, the
aggregate principal amount of Securities represented by the Global Note to be
increased accordingly. If no Global Note is then outstanding, the Company shall
issue and the Trustee shall authenticate, upon written order of the Company in
the form of an Officers' Certificate, a new Global Note in the appropriate
principal amount.
(c) Transfer and Exchange of Global Notes.
(i) The transfer and exchange of the Global Note or beneficial
interests therein shall be effected through the Depository, in accordance
with this Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depository therefor, if
applicable.
(ii) Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in Section 2.09), the Global Note may not be
transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
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<PAGE> 24
(iii) In the event that the Global Note is exchanged for
Definitive Notes pursuant to Section 2.09, prior to the consummation of
a Registered Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to such Securities, such Securities
may be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of this Section 2.06
(including the certification requirements set forth on the reverse of
the Initial Notes intended to ensure that such transfers comply with
Rule 144A or Regulation S, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(d) Legend.
(i) Except as permitted by the following paragraphs (ii) and
(iii), each certificate evidencing the Global Note and the Definitive
Notes (and all Securities issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND UNDER APPLICABLE
STATE SECURITIES LAWS, AND THIS NOTE MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY
NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(ii) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
(iv) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED
TO IN (A) ABOVE."
When set forth on a Definitive Note, the legend will include the
following additional words:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM
THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by the Global Note)
pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act, which shall be
certified to the Trustee and Registrar upon which each may conclusively
rely:
(A) in the case of any Transfer Restricted Note that
is a Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Note for a
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<PAGE> 25
Definitive Note that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Note;
(B) in the case of any Transfer Restricted Note
represented by a Global Note, such Transfer Restricted Note
shall not be required to bear the legend set forth in (i)
above if all other interests in such Global Note have been or
are concurrently being sold or transferred pursuant to Rule
144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, but such
Transfer Restricted Note shall continue to be subject to the
provisions of Section 2.06(c) hereof; provided, however, that
with respect to any request for an exchange of a Transfer
Restricted Note that is represented by a Global Note for a
Definitive Note that does not bear a legend set forth in (i)
above, which request is made in reliance upon Rule 144 under
the Securities Act, the Holder thereof shall certify in
writing to the Security Registrar that such request is being
made pursuant to Rule 144 under the Securities Act (such
certification to be substantially in the form of Exhibit A
hereto and upon which the Registrar may conclusively rely).
(C) Notwithstanding the foregoing, upon consummation
of the Registered Exchange Offer, the Company shall issue and,
upon receipt of an authentication order in accordance with
Section 2.02 hereof, the Trustee shall authenticate Exchange
Notes in exchange for Initial Notes accepted for exchange in
the Registered Exchange Offer, which Exchange Notes shall not
bear the legend set forth in (i) above, and the Registrar
shall rescind any restriction on the transfer of such
Securities, in each case unless the Holder of such Initial
Notes is either (A) a broker-dealer, (B) a Person
participating in the distribution of the Series A Securities
or (C) a Person who is an affiliate (as defined in Rule 144
under the Securities Act) of the Company. The Company shall
identify to the Trustee such Holders of the Securities in a
written certification signed by an Officer of the Company and,
absent certification from the Company to such effect, the
Trustee shall assume that there are no such Holders.
(iii) After a transfer of any Initial Notes or Private
Exchange Notes during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Notes or Private
Exchange Notes, as the case may be, all requirements pertaining to
legends on such Initial Note or such Private Exchange Note will cease
to apply, the requirements requiring any such Initial Note or such
Private Exchange Note issued to certain Holders be issued in the form
of a Global Note will cease to apply, and an Initial Note or Private
Exchange Note in the form of a Definitive Note without legends will be
available to the transferee of the Holder of such Initial Notes or
Private Exchange Notes or upon receipt of directions to transfer such
Holder's interest in the Global Note, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Notes pursuant to which Holders of such Initial
Notes are offered Exchange Notes in exchange for their Initial Notes,
(A) all requirements pertaining to such Initial Notes that Initial
Notes issued to certain Holders be issued in the form of a Global Note
will cease to apply, (B) Initial Notes in the form of Definitive Notes
with the restricted securities legend set forth in Exhibit A hereto
will be available to Holders of such Initial Notes that do not exchange
their Initial Notes and (C) Exchange Notes in the form of Definitive
Notes without the restricted securities legend set forth in Exhibit A
hereto will be available to Holders that exchange such Initial Notes in
such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect
to the Initial Notes pursuant to which Holders of such Initial Notes
are offered Private Exchange Notes in exchange for their Initial Notes,
all requirements pertaining to such Initial Notes that Initial Notes
issued to certain holders be issued in the form of a Definitive Note
will still apply, and Private Exchange Notes in the form of a
Definitive Note with the restricted securities legend set forth in
Exhibit A hereto will be available to Holders that exchange such
Initial Notes in such Private Exchange.
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(e) Cancellation or Adjustment of Global Note. At such time as all
beneficial interests in the Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or canceled, such Global Note shall be
returned to the Depository for cancellation or retained and canceled by the
Trustee. At any time prior to such cancellation, if any beneficial interest in
the Global Note is exchanged for Definitive Notes, redeemed, repurchased or
canceled, the principal amount of Securities represented by such Global Note
shall be reduced and an adjustment shall be made by the Trustee or the Notes
Custodian to reflect such reduction on the books and records of the Notes
Custodian for such Global Note with respect to such Global Note.
(f) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registration of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities, Definitive Notes and the Global Note at the Registrar's or
co-registrar's request.
(ii) The Company may require payment of a sum sufficient to
pay all taxes, assessments or other governmental charges in connection
with any transfer or exchange pursuant to this Section 2.06.
(iii) The Company shall not be required to make and the
Registrar or co-registrar need not register transfers or exchanges of
Definitive Notes selected for redemption (except, in the case of any
Definitive Note to be redeemed in part, the portion thereof not to be
redeemed), or any Securities for a period of 15 days before the mailing
of a notice of redemption of Securities to be redeemed or 15 days
before an interest payment date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the person in
whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving payment of principal of and
interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture will evidence the same debt and
will be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner in the Global Note, a member of, or a participant
in the Depository or other Person with respect to the accuracy of the
records of the Depository or its nominee or of any participant or
member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any
notice (including any notice of redemption) or the payment of any
amount, under or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be made
to Holders under the Securities shall be given or made only to or upon
the order of the registered Holders (which shall be the Depository or
its nominee in the case of the Global Note). The rights of beneficial
owners in the Global Note shall be exercised only through the
Depository subject to the applicable rules and procedures of the
Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to
its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with
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respect to any transfer of any interest in any Security (including any
transfers between or among Depository participants, members or
beneficial owners in the Global Note) other than to make any required
delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly required
by, the terms of this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
Section 2.07. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Security, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Company's and the Trustee's
reasonable requirements for the replacements of Securities are met. An indemnity
bond shall be supplied by the Holder that is sufficient in the judgment of the
Trustee, the Company and the Subsidiary Guarantors to protect the Company, the
Trustee, any Agent or any authenticating agent from any loss which any of them
may suffer if a Security is replaced. The Company may charge for its expenses
(including fees and expenses of the Trustee) in replacing a Security.
Every replacement Security shall be an obligation of the Company.
Section 2.08. Outstanding Securities; Treasury Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee, except for those canceled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. A Security does not cease to be outstanding because the Company, a
Subsidiary Guarantor or any of their respective Subsidiaries or Affiliates of
the Company holds such Security.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, any Subsidiary Guarantor or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded.
If a Security is replaced pursuant to Section 2.07, it shall cease to
be outstanding unless the Trustee receives proof satisfactory to it that such
replaced Security is held by a bona fide purchaser. A mutilated Security ceases
to be outstanding upon surrender of such Security and replacement thereof
pursuant to Section 2.07.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Holders of
Securities on that date pursuant to the terms of this Indenture, then on and
after that date such Securities (or portions thereof) shall cease to be
outstanding and interest thereon shall cease to accrue.
Section 2.09. Temporary Securities and Definitive Notes.
(a) Until certificates in definitive form for the Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate
certificates in temporary form for the Securities. Certificates in temporary
form for the Securities shall be substantially in the form of certificates in
definitive form for the Securities but may have such variations as the Company
and the Trustee consider appropriate for certificates in temporary form for the
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate certificates in definitive form for the Securities in
exchange for certificates in temporary form for the Securities. Until such
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exchange, certificates in temporary form for the Securities shall be entitled to
the same rights, benefits and privileges as certificates in definitive form for
the Securities.
(b) The Global Note deposited with the Depository or with the Trustee
as custodian for the Depository pursuant to Section 2.01 shall be transferred to
the beneficial owners thereof in the form of Definitive Notes in an aggregate
principal amount equal to the principal amount of such Global Note, in exchange
for such Global Note, only if such transfer complies with Section 2.06 and (i)
the Depository notifies the Company that it is unwilling or unable to continue
as Depository for such Global Note or if at any time such Depository ceases to
be a "clearing agency" registered under the Exchange Act and a successor
depository is not appointed by the Company within 90 days of such notice, (ii)
an Event of Default has occurred and is continuing or (iii) the Company, in its
sole discretion, notifies the Trustee in writing that it elects to cause the
issuance of Definitive Notes under this Indenture.
(c) Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to the
Trustee to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Note, an equal aggregate principal amount of Initial
Notes of authorized denominations. Any portion of the Global Note transferred
pursuant to this Section shall be executed, authenticated and delivered only in
denominations of $1,000 and any integral multiple thereof and registered in such
names as the Depository shall direct. Any Initial Note delivered in exchange for
an interest in the Global Note shall, except as otherwise provided by Section
2.06(d), bear the restricted securities legend set forth in Exhibit A hereto.
(d) Subject to the provisions of Section 2.09(c), the registered Holder
of the Global Note may grant proxies and otherwise authorize any person,
including agent members, participants and persons that may hold interests
through agent members, to take any action which a Holder is entitled to take
under this Indenture or the Securities.
(e) In the event of the occurrence of any of the events specified in
Section 2.09(b), the Company will promptly make available to the Trustee a
reasonable supply of Definitive Notes in definitive, fully registered form
without interest coupons.
Section 2.10. Cancellation.
The Company or any Subsidiary Guarantor at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment,
replacement or cancellation, and shall return such canceled Securities to the
Company (subject to the record retention requirement of the Exchange Act). The
Company may not issue new Securities to replace Securities it has redeemed, paid
or delivered to the Trustee for cancellation.
Section 2.11. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, the
Company shall pay such defaulted interest in any lawful manner. The Company may
pay such defaulted interest to the Persons who are Holders of the Securities on
a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five Business Days prior to the
payment date, in each case at the rate provided in the Securities. The Company
shall fix or cause to be fixed any such special record date and payment date,
and, at least 15 days prior to the special record date, the Company shall mail
or cause to be mailed to each Holder of a Security a notice that states such
special record date, such related payment date and the amount of any such
defaulted interest to be paid to Holders of the Securities.
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Section 2.12. CUSIP Number.
The Company in issuing the Securities may use a "CUSIP" number, and, if
the Company shall do so, the Trustee shall use such CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in such notice or on the Securities and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company will promptly notify the Trustee of any change in a
CUSIP number.
Section 2.13 Persons Deemed Owners.
The Company, any Subsidiary Guarantor, the Trustee, any Paying Agent
and any authenticating agent may treat the Person in whose name any Security is
registered as the owner of such Security for the purpose of receiving payments
of principal of, premium, if any, or interest on such Security and for all other
purposes. None of the Company, any Subsidiary Guarantor, the Trustee, any Paying
Agent or any authenticating agent shall be affected by any notice to the
contrary.
ARTICLE THREE
REDEMPTION
Section 3.01. Notice to Trustee.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of paragraph 6 of the Securities, it shall furnish to the
Trustee, at least 45 days but not more than 60 days before the redemption date,
an Officer's Certificate setting forth the redemption date, the principal amount
of Securities to be redeemed and the redemption price.
Section 3.02. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed in multiples of $1,000 pro rata, by
lot or, if the Securities are listed on any securities exchange, by any other
method that the Trustee considers fair and appropriate and that complies with
the requirements of such exchange. The Trustee shall make the selection from
outstanding Securities not previously called for redemption not less than 30 nor
more than 60 days prior to the redemption date. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000. Securities and portions of them it selects shall be in
amounts of $1,000 or whole multiples of $1,000. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee shall notify the Company promptly
of the Securities or portions of Securities selected for redemption.
Section 3.03. Notice of Redemption.
(a) At least 30 days but not more than 60 days before a redemption
date, the Company shall mail a notice of redemption by first-class mail to each
Holder of Securities to be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
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(2) the redemption price;
(3) the aggregate principal amount of Securities being
redeemed;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered
to the Paying Agent at the address specified in such notice to collect
the redemption price;
(6) that, unless the Company defaults in the payment of the
redemption price or accrued interest, interest on Securities called for
redemption ceases to accrue on and after the redemption and the only
remaining right of the Holders is to receive payment of the redemption
prices upon surrender to the Paying Agent of the Securities;
(7) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after
the redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued;
(8) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(9) the CUSIP number of the Securities.
(b) At the Company's request, the Trustee shall give the notice of
redemption required in Section 3.03(a) in the Company's name and at the
Company's expense; provided, however, that the Company shall deliver to the
Trustee, at least 45 days prior to the redemption date, an Officer's Certificate
requesting that the Trustee give such notice and setting forth the information
to be stated in such notice as provided in Section 3.03(a).
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the redemption date
at the redemption price. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price, plus accrued interest to the redemption
date.
Section 3.05. Deposit of Redemption Price.
Prior to the redemption date, the Company shall deposit with the Paying
Agent funds available on the redemption date sufficient to pay the redemption
price of, and accrued interest on, the Securities to be redeemed on that date.
The Paying Agent shall promptly return to the Company any money so deposited
which is not required for that purpose upon the written request of the Company,
except with respect to monies owed as obligations to the Trustee pursuant to
Article Seven.
If any Security called for redemption shall not be so paid upon
redemption because of the failure of the Company to comply with the preceding
paragraph, interest will continue to be payable on the unpaid principal and
premium, if any, including from the redemption date until such principal and
premium, if any, is paid, and, to the extent lawful, on any interest not paid on
such unpaid principal, in each case at the rate provided in the Securities and
in Section 4.01 hereof.
Section 3.06. Securities Redeemed in Part.
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Upon surrender of a Security that is to be redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder, at the
expense of the Company, a new Security equal in aggregate amount to the
unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
Section 4.01. Payment of Securities.
The Company shall pay the principal of, premium, if any, and interest
on, the Securities on the dates and in the manner provided in the Securities and
this Indenture. Principal, premium, if any, and interest shall be considered
paid on the date due if the Trustee or Paying Agent holds on that date money
deposited by the Company designated for and sufficient to pay all principal,
premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal, and premium, if any,
at the rate borne by the Securities to the extent lawful; and it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
Section 4.02. Commission Reports.
(a) The Company shall file with the Trustee, within 15 days after it
files the same with the Commission, copies of the annual reports and the
information, documents and other reports (or copies of any such portions of any
of the foregoing as the Commission may by rules and regulations prescribe) that
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. If the Company is not subject to the requirements of
such Section 13 or 15(d), the Company shall file with the Trustee, within 15
days after it would have been required to file the same with the Commission,
financial statements, including any notes thereto (and with respect to annual
reports, an auditors' report by a firm of established national reputation), and
a "Management's Discussion and Analysis of Financial Condition and Results of
Operations," both comparable to that which the Company would have been required
to include in such annual reports, information, documents or other reports if
the Company had been subject to the requirements of such Section 13 or 15(d).
The Company and each Subsidiary Guarantor shall also comply with the provisions
of TIA Section 314(a).
(b) If the Company is required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall cause any
annual report furnished to its stockholders generally and any quarterly or other
financial reports furnished by it to its stockholders generally to be filed with
the Trustee and mailed to the Holders at their addresses appearing in the
register of Securities maintained by the Registrar. If the Company is not
required to furnish annual or quarterly reports to its stockholders pursuant to
the Exchange Act, the Company shall cause its financial statements referred to
in Section 4.03(b), including any notes thereto (and with respect to annual
reports, an auditors' report by a firm of established national reputation), to
be so mailed to the Holders within 90 days after the end of each of the
Company's fiscal years and within 60 days after the end of each of the Company's
first three fiscal quarters.
(c) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Trustee may
be required to deliver to Holders under this Section. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
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Section 4.03. Compliance Certificates.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Company and the Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that, to the best of
such Officer's knowledge, the Company and each Subsidiary Guarantor has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions hereof (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Default of which
such Officer may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of such Officer's
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of, premium, if any, or interest, if any,
on the Securities are prohibited or, if such event has occurred, a description
of the event and what action the Company and the Subsidiary Guarantors are
taking or propose to take with respect thereto. Such Officers' Certificate shall
comply with TIA Section 314(a)(4).
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.02 shall be accompanied by a written
statement of the Company's independent public accountants (which shall be a firm
of established national reputation) that in making the examination necessary for
certification of such financial statements nothing has come to their attention
that would lead them to believe that the Company has violated any provisions of
Articles 4 or 5 of this Indenture (to the extent such provisions relate to
accounting matters) or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company and the Subsidiary Guarantors will, so long as any of
the Securities are outstanding, deliver to the Trustee as soon as possible and
in any event within five days after any Officer becomes aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company or any Subsidiary Guarantor proposes to take
with respect thereto.
Section 4.04. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company initially designates The Bank of New York, 101
Barclay Street, 21 West, New York, New York 10286 to be its agent for purposes
of the preceding sentence. The Company will give prompt written notice to the
Trustee of any change in the location of such office or agency. If at any time
the Company shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 13.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
Section 4.05. Corporate Existence.
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Subject to the provisions of the Indenture on mergers, consolidations,
reorganizations, sales of capital stock of Restricted Subsidiaries and releases,
the Company will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and the corporate,
partnership or other existence of each Restricted Subsidiary and all rights
(charter and statutory) and franchises of the Company and the Restricted
Subsidiaries; provided, that the Company shall not be required to preserve the
corporate existence of any Restricted Subsidiary, or any such right or
franchise, if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
Section 4.06. Waiver of Stay, Extension or Usury Laws.
The Company and each Subsidiary Guarantor covenants (to the extent that
each may lawfully do so) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension, or usury law or other law, which would prohibit or forgive the
Company or any Subsidiary Guarantor from paying all or any portion of the
principal of, premium, if any, or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that each may lawfully do so) the Company and each Subsidiary Guarantor hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
Section 4.07. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or property of the Company or any
Restricted Subsidiary; provided, however, that the Company shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
Section 4.08. Maintenance of Properties and Insurance; Line of Business.
(a) The Company shall cause all properties used or necessary in the
conduct of its business or the business of any Restricted Subsidiary to be
maintained and kept in good condition, repair and working order (ordinary wear
and tear excepted) and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section shall prevent the Company from discontinuing the operation or
maintenance of any such property, or disposing of it, if such discontinuance or
disposal is, in the judgment of the Company, desirable in the conduct of its
business and not disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself and
each of its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Company are adequate and appropriate for the conduct
of the business of the Company and such Restricted Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States or
an agency or instrumentality thereof, in such amounts, with such deductibles,
and by such methods as shall be customary, in the reasonable, good faith opinion
of the Company, for corporations similarly situated in the industry.
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(c) For as long as any Securities are outstanding, the Company shall
not, and shall not permit any of its Restricted Subsidiaries to, engage in any
business or activity other than the Principal Business.
Section 4.09. Limitation on Incurrence of Additional Indebtedness.
(a) The Company will not, and will not permit any of the Restricted
Subsidiaries, directly or indirectly, to issue, incur, assume, guarantee, become
liable, contingently or otherwise, with respect to or otherwise become
responsible for the payment of (collectively, "incur") any Indebtedness;
provided, however, that if no Default or Event of Default with respect to the
Securities shall have occurred and be continuing at the time or as a consequence
of the incurrence of such Indebtedness, the Company or the Restricted
Subsidiaries may incur Indebtedness if, on a pro forma basis, after giving
effect to such incurrence and the application of the proceeds therefrom, the
Consolidated Coverage Ratio would have been equal to or greater than 2.0 to 1.0.
(b) Notwithstanding the foregoing, (i) the Company may incur
Indebtedness consisting of the Securities; (ii) the Subsidiary Guarantors may
incur the Guarantees of the Securities; (iii) the Company or any Subsidiary may
incur secured or unsecured Indebtedness outstanding at any time in an aggregate
principal amount not to exceed the greater of (A) $40 million or (B) the
Borrowing Base; (iv) the Company may incur Permitted Company Refinancing
Indebtedness; (v) any Restricted Subsidiary may incur Permitted Subsidiary
Refinancing Indebtedness; and (vi) the Company may incur Indebtedness to any
Restricted Subsidiary, and any Restricted Subsidiary may incur Indebtedness to
the Company or to any Restricted Subsidiary of the Company.
(c) Any Indebtedness of a Person existing at the time such Person
becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition
or otherwise) shall be deemed to be incurred by such Restricted Subsidiary at
the time it becomes a Restricted Subsidiary.
Section 4.10. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(ii) at the time of and immediately after giving effect to
such Restricted Payment, the Company would be able to incur at least
$1.00 of additional Indebtedness pursuant to Section 4.09(a); and
(iii) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (A) 50% of the
Consolidated Net Income of the Company and its Restricted Subsidiaries
(or in the event such Consolidated Net Income shall be a deficit, minus
100% of such deficit) during the period (treated as one accounting
period) subsequent to September 30, 1997 and ending on the last day of
the fiscal quarter immediately preceding the date of such Restricted
Payment; (B) the aggregate Net Cash Proceeds, and the fair market value
of property other than cash (as determined in good faith by the
Company's Board of Directors and evidenced by a Board Resolution),
received by the Company during such period from any Person other than a
Restricted Subsidiary of the Company as a result of the issuance or
sale of Capital Stock of the Company (other than any Disqualified
Stock), other than in connection with the conversion of Indebtedness or
Disqualified Stock; (C) the aggregate Net Cash Proceeds, and the fair
market value of property other than cash (as determined in good faith
by the Company's Board of Directors and evidenced by a Board
Resolution), received by the Company during such period from any Person
other than a Restricted Subsidiary of the Company as a result of the
issuance or sale of any Indebtedness or Disqualified Stock to the
extent that at the time the determination is made such Indebtedness or
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Disqualified Stock, as the case may be, has been converted into or
exchanged for Capital Stock of the Company (other than Disqualified
Stock); (D)(1) in case any Unrestricted Subsidiary has been
redesignated a Restricted Subsidiary, an amount equal to the lesser of
(x) the book value (determined in accordance with GAAP) at the date of
such redesignation of the aggregate Investments made by the Company and
its Restricted Subsidiaries in such Unrestricted Subsidiary and (y) the
fair market value of such Investments in such Unrestricted Subsidiary
at the time of such redesignation, as determined in good faith by the
Board of Directors of the Company, whose determination shall be
conclusive and evidenced by a Board Resolution; or (2) in case any
Restricted Subsidiary has been redesignated an Unrestricted Subsidiary,
minus the greater of (x) the book value (determined in accordance with
GAAP) at the date of redesignation of the aggregate Investments made by
the Company and its Restricted Subsidiaries in such Restricted
Subsidiary and (y) the fair market value of such Investments in such
Restricted Subsidiary at the time of such redesignation, as determined
in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution; (E) without
duplication, with respect to any Investment (other than a Permitted
Investment) of any Person which has previously been made by the Company
or any of its Restricted Subsidiaries, the amount of any such
Investment that has been fully and unconditionally repaid to the
Company or a Restricted Subsidiary, not to exceed the cash amount
received by the Company or such Restricted Subsidiary upon such
repayment or with respect to any Indebtedness of any Person that has
previously been guaranteed by the Company or any of its Restricted
Subsidiaries (other than the Notes or Subsidiary Guarantees), the
amount of any such Indebtedness that has been fully and unconditionally
repaid or for which the guarantees of the Company and each of its
Restricted Subsidiaries which are guarantors thereof have been fully
and unconditionally released from any and all further obligation or
liability with respect thereto, provided in each case that such amount
shall not exceed the aggregate amount of Restricted Payments previously
taken into account with respect to such amount for purposes of
determining the aggregate amount of all Restricted Payments declared or
made after the Issue Date pursuant to this clause (iii); and (F) $30
million.
(b) Notwithstanding the foregoing, the above limitations will not
prevent (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment complied with
the provisions hereof, (ii) the purchase, redemption, acquisition or retirement
of any shares of Capital Stock of the Company in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, other shares of Capital Stock (other than
Disqualified Stock) of the Company; or.(iii) the defeasance, redemption or
retirement of Indebtedness of the Company which is pari passu or subordinate in
right of payment to the Securities, in exchange for, by conversion into, or out
of the net proceeds of the substantially concurrent issue or sale (other than to
a Restricted Subsidiary of the Company) of Capital Stock (other than
Disqualified Stock) of the Company; provided, that no Default or Event of
Default has occurred and is continuing at the time, or shall occur as a result,
of any of the actions contemplated in clause (i) above.
Section 4.11. Limitation on Sale of Assets.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, make any Asset Sales which, in the aggregate, have a fair market value of
$10 million or more in any 12-month period unless:
(i) the Company (or its Restricted Subsidiaries, as the case
may be) receives consideration at the time of such sale or other
disposition at least equal to the fair market value thereof (as
determined in good faith by the Company's Board of Directors and
evidenced by a Board Resolution in the case of any Asset Sales or
series of related Asset Sales having a fair market value of $15 million
or more);
(ii) not less than 85% of the proceeds received by the Company
(or its Restricted Subsidiaries, as the case may be) from each such
Asset Sale consists of (A) cash, (B) cash equivalents which would
constitute Permitted Financial Investments, (C) Publicly Traded Stock
of a Person primarily engaged in the Principal Business or (D) any
combination of the foregoing, provided, however, that (1) the
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amount of (x) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes
thereto) of the Company or such Restricted Subsidiary (other than
liabilities that are by their terms expressly subordinated to the
Securities or any guarantee thereof) that are assumed by the transferee
of any such assets and (y) any notes or other obligations received by
the Company or any such Restricted Subsidiary from such transferee
that, within 90 days following the closing of such sale or disposition,
are converted by the Company or such Restricted Subsidiary into cash
(to the extent of the cash received), shall be deemed to be cash for
purposes of this provision and (2) the aggregate fair market value (as
determined in good faith by the Board of Directors of the Company,
evidenced by a Board Resolution) of all consideration of the type
specified in clause (C) above received by the Company and its
Restricted Subsidiaries from all Asset Sales after the Issue Date shall
not exceed 15% of Consolidated Net Tangible Assets at the time of such
Asset Sale; and
(iii) the Net Available Proceeds received by the Company (or
its Restricted Subsidiaries, as the case may be) from such Asset Sales
are applied in accordance with paragraph (b) or (c) hereof.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may dispose of property and assets of the Company or its Restricted
Subsidiaries in exchange for capital property and capital assets (i) which are
directly related to the Principal Business; (ii) which are of the same type of
property or assets, or which have the same function, as the properties or assets
being disposed of; and (iii) which have an aggregate fair market value equal to
or greater than the aggregate fair market value of the property and assets being
disposed of, provided, however, that (A) in no event may the Company and its
Restricted Subsidiaries, in any 12-month period, dispose of property or assets
pursuant to this paragraph having an aggregate fair market value of $10 million
or more and (B) with respect to any property or assets being disposed of having
a fair market value of $1 million or more, the Board of Directors of the Company
shall have determined in good faith and evidenced by a Board Resolution, that
the aggregate fair market value of the property and assets being received by the
Company and its Restricted Subsidiaries is equal to or greater than the
aggregate fair market value of the property and assets being disposed of.
(b) The Company may, within 360 days following the receipt of Net
Available Proceeds from any Asset Sale, apply such Net Available Proceeds to:
(i) the repayment of Indebtedness of the Company under the Bank Credit Facility
or other Senior Indebtedness of the Company or Senior Indebtedness of a
Subsidiary Guarantor, provided that any such repayment shall result in a
permanent reduction in the principal amount of such Senior Indebtedness in an
amount equal to the principal amount so repaid; or (ii) make an investment in
capital assets used in the Principal Business.
(c) If, upon completion of the 360-day period (the "Trigger Date"), any
portion of the Net Available Proceeds of any Asset Sale shall not have been
applied by the Company as described in clauses 4.11(b)(i) or (ii) and such
remaining Net Available Proceeds, together with any remaining net cash proceeds
from any prior Asset Sale (such aggregate constituting "Excess Proceeds"),
exceeds $10 million, then the Company will be obligated to make an offer (the
"Net Proceeds Offer") to purchase, from all Holders of the Securities and
holders of any then outstanding Pari Passu Indebtedness required to be
repurchased or repaid on a permanent basis in connection with an Asset Sale, an
aggregate principal amount of Securities and any then outstanding Pari Passu
Indebtedness equal to such Excess Proceeds as follows:
(1) Not later than the 30th day following the Trigger Date,
the Company shall (i) give to the Trustee and each Holder of the
Securities in the manner provided in Section 13.02 hereof, a notice (a
"Purchase Notice") offering to purchase from all Holders of the
Securities the maximum principal amount (expressed as a multiple of
$1,000) of Securities that may be purchased out of an amount (the "Net
Proceeds Offer Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding
principal amount of the Securities and the denominator of which is the
sum of the outstanding principal amount of the Securities and any then
outstanding Pari Passu Indebtedness (subject to proration in the event
such amount is less than the aggregate Offered Price (as
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hereinafter defined) of all Securities tendered), and (ii) to the
extent required by any then outstanding Pari Passu Indebtedness and
provided there is a permanent reduction in the principal amount of such
Pari Passu Indebtedness, the Company shall make an offer to purchase
such Pari Passu Indebtedness (the "Pari Passu Offer") in an amount (the
"Pari Passu Indebtedness Amount") equal to the excess of the Excess
Proceeds over the Net Proceeds Offer Amount.
(2) The offer price for the Securities shall be payable in
cash in an amount equal to 100% of the principal amount of the
Securities tendered pursuant to a Net Proceeds Offer, plus accrued and
unpaid interest, if any, to the date such Net Proceeds Offer is
consummated (the "Offered Price"), in accordance with paragraphs (d)
and (e) of this Section. To the extent that the aggregate Offered Price
of the Securities tendered pursuant to a Net Proceeds Offer is less
than the Net Proceeds Offer Amount relating thereto or the aggregate
amount of the Pari Passu Indebtedness that is purchased or repaid
pursuant to the Pari Passu Offer is less than the Pari Passu
Indebtedness Amount (such shortfall constituting a "Net Proceeds
Deficiency"), the Company may use such Net Proceeds Deficiency, or a
portion thereof, for general corporate purposes, subject to the
limitations of Section 4.10 hereof.
(3) If the aggregate Offered Price of Securities validly
tendered and not withdrawn by Holders thereof exceeds the Net Proceeds
Offer Amount, Securities to be purchased will be selected on a pro rata
basis by the Trustee based on the principal amount of Securities so
tendered. Upon completion of a Net Proceeds Offer and a Pari Passu
Offer, the amount of Excess Proceeds shall be reset to zero.
(4) The Purchase Notice shall set forth a purchase date (the
"Net Proceeds Payment Date"), which shall be on a Business Day no
earlier than 30 days nor later than 70 days from the Trigger Date. The
Purchase Notice shall also state (i) that a Trigger Date with respect
to one or more, Asset Sales has occurred and that such Holder has the
right to require the Company to repurchase such Holders Securities at
the Offered Price, subject to the limitations described in the
foregoing paragraph (3), (ii) any information regarding such Net
Proceeds Offer required to be furnished pursuant to Rule 14e-1 under
the Exchange Act and any other securities laws and regulations
thereunder, (iii) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest, (iv) that,
unless the Company defaults in depositing money with the Paying Agent
in accordance with paragraph (e) of this Section 4.11, or payment is
otherwise prevented, any Security, or portion thereof, accepted for
payment pursuant to the Net Proceeds Offer shall cease to accrue
interest after the Net Proceeds Payment Date, and (v) the instructions
a Holder must follow in order to have its Securities repurchased in
accordance with paragraph (d) of this Section.
(d) Notice of a Net Proceeds Offer to purchase the Securities will be
made on behalf of the Company not less than 25 business days nor more than 60
business days before the Net Proceeds Payment Date. Securities tendered to the
Company pursuant to a Net Proceeds Offer will cease to accrue interest after the
Net Proceeds Payment Date. If the Net Proceeds Payment Date is on or after an
interest payment record date and on or before the related interest payment date,
any accrued interest will be paid to the person in whose name a Security is
registered at the close of business on such record date, and no additional
interest will be payable to Holders who tender Securities pursuant to the Net
Proceeds Offer.
(e) On the Net Proceeds Payment Date, the Company will (i) accept for
payment Securities or portions thereof pursuant to the Net Proceeds Offer in an
aggregate principal amount equal to the Net Proceeds Offer Amount or such lesser
amount of Securities as has been tendered, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Securities or portions thereof
so tendered in an aggregate principal amount equal to the lesser of (A) the Net
Proceeds Offer Amount or (B) the aggregate principal amount of all Securities or
portions thereof so tendered, and (iii) deliver, or cause to be delivered to the
Trustee, Securities so accepted together with an Officers' Certificate stating
the aggregate principal amount of Securities or portions thereof tendered to the
Company. If the aggregate principal amount of Securities tendered exceeds the
Net Proceeds Offer Amount, the Trustee will select the Securities to be
purchased (in integral multiples of $1,000) pro rata or by lot based on the
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principal amount of Securities so tendered. The Paying Agent will promptly mail
or deliver to Holders so accepted payment in an amount equal to the purchase
price, and the Company will execute and the Trustee will promptly authenticate
and mail or make available for delivery to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted will be promptly mailed or delivered to the Holder
thereof. The Company will publicly announce the results of the Net Proceeds
Offer on or as soon as practicable after the Net Proceeds Payment Date. For
purposes of this Section 4.11, the Trustee will act as the Paying Agent.
(f) During the period between any Asset Sale and the application of the
Net Available Proceeds therefrom in accordance with this Section 4.11, all Net
Available Proceeds shall be invested in Permitted Financial Investments.
(g) The Company, to the extent applicable and if required by law, will
comply with Section 14 of the Exchange Act and the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act and any other federal
and state securities laws, rules and regulations which may then be applicable to
any offer by the Company to purchase the Securities at the option of the Holders
pursuant to a Net Proceeds Offer.
Section 4.12. Limitation on Liens Securing Indebtedness.
The Company will not, and will not permit any of Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Liens (other than
Permitted Liens) upon any of their respective properties securing (i) any
Indebtedness of the Company (other than Senior Indebtedness of the Company),
unless the Securities are equally and ratably secured or (ii) any Indebtedness
of any of such Subsidiary Guarantor), unless the Subsidiary Guarantor (other
than Senior Indebtedness of Guarantees are equally and ratably secured;
provided, however, that if such Indebtedness is expressly subordinated to the
Securities or the Guarantees, the Lien securing such Indebtedness will be
subordinated and junior to the Lien securing the Securities or the Guarantees,
with the same relative priority as such subordinated Indebtedness of the Company
or a Subsidiary Guarantor will have with respect to the Securities or the
Guarantees, as the case may be.
Section 4.13. Limitation on Payment Restrictions Affecting Restricted
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary of the Company to (i) pay dividends
or make any other distributions on its Capital Stock, or any other interest or
participation in a Restricted Subsidiary, (ii) pay any Indebtedness owed to the
Company or a Restricted Subsidiary of the Company; (iii) make loans or advances
to the Company or a Restricted Subsidiary of the Company; or (iv) transfer any
of its properties or assets to the Company or a Restricted Subsidiary of the
Company (each, a "Payment Restriction"), except for (A) encumbrances or
restrictions with respect to Senior Indebtedness in effect on the Issue Date;
(B) encumbrances under the Bank Credit Facility; (C) consensual encumbrances or
consensual restrictions binding upon any Person at the time such Person becomes
a Restricted Subsidiary of the Company (unless the agreement creating such
consensual encumbrance or consensual restrictions was entered into in connection
with, or in contemplation of, such entity becoming a Subsidiary); (D) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of any Restricted Subsidiary; (E) customary restrictions in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such security agreements and mortgages; (F) customary restrictions in
purchase money obligations for property acquired in the ordinary course of
business restricting the transfer of the property acquired thereby; (G)
consensual encumbrances or consensual restrictions under any agreement that
refinances or replaces any agreement described in clauses (A), (B), (C), (D),
(E) or (F) above, provided that the terms and conditions of any such
restrictions are no less favorable to the Holders of the Securities than those
under the agreement so refinanced or replaced; and (H) any encumbrance or
restriction due to applicable law.
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Section 4.14. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) sell, lease, transfer or otherwise
dispose of any of its properties, assets or securities to, (ii) purchase or
lease any property, assets or securities from, (iii) make any Investment in, or
(iv) enter into or amend any contract or agreement with or for the benefit of,
either (A) an Affiliate of any of them, (B) any Person or Person who is a member
of a group (as such term is used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable) that, directly or indirectly, is the
beneficial holder of 5% or more of any class of equity securities of the
Company, (C) any Person who is an Affiliate of any such holder, or (D) any
officers, directors, or employees of any of the above (each case under (A), (B),
(C) and (D), an "Affiliate Transaction"), in one or a series of related
transactions (to either party) in excess of $1 million per Affiliate
Transaction, except for transactions evidenced by an Officers' Certificate
addressed and delivered to the Trustee stating that such Affiliate Transaction
is made in good faith, the terms of which are fair and reasonable to the Company
and such Restricted Subsidiary, as the case may be, or, with respect to
Affiliate Transactions between the Company and any of its Subsidiaries, to the
Company; provided, that (x) transactions between or among the Company and any of
its Restricted Subsidiaries shall not be deemed to constitute Affiliate
Transactions and (y) with respect to any Affiliate Transaction with an aggregate
value (to either party) in excess of $5 million, the Company must, prior to the
consummation thereof, obtain a written favorable opinion as to the fairness of
such transaction to itself from a financial point of view from an independent
investment banking firm of national reputation.
Section 4.15. Limitation on Future Senior Subordinated Indebtedness.
The Company shall not incur any Indebtedness other than the Securities
that is subordinated in right of payment to any other Indebtedness of the
Company unless such Indebtedness by its terms, is pari passu with or
subordinated to the Securities. No Subsidiary Guarantor shall incur any
Indebtedness other than the Guarantee of such Subsidiary Guarantor that is
subordinated in right of payment to any other Indebtedness of such Subsidiary
Guarantor unless such Indebtedness, by its terms, is pari passu with or
subordinated to the Guarantee of such Subsidiary Guarantor.
Section 4.16. Change of Control.
(a) Within 30 days following the occurrence of any Change of Control,
the Company shall offer (a "Change of Control Offer") to purchase all
outstanding Securities at a purchase price equal to 101% of the aggregate
principal amount of the Securities, plus accrued and unpaid interest to the date
of purchase. The Change of Control Offer shall be deemed to have commenced upon
mailing of the notice described in Section 4.16(b) and shall terminate 20
Business Days after its commencement, unless a longer offering period is then
required by law. Promptly after the termination of the Change of Control Offer
(the "Change of Control Payment Date"), the Company shall purchase and mail or
deliver payment for all Securities tendered in response to the Change of Control
Offer. If the Change of Control Payment Date is on or after an interest payment
record date and on or before the related interest payment date, any accrued
interest will be paid to the Person in whose name a Security is registered at
the close of business on such record date, and no additional interest will be
payable to Holders who tender Securities pursuant to the Change of Control
Offer.
(b) Within 30 days after any Change of Control, the Company (with
notice to the Trustee), or the Trustee at the Company's request, will mail or
cause to be mailed to all Holders on the date of the Change of Control a notice
(the "Change of Control Notice") of the occurrence of such Change of Control and
of the Holders' rights arising as a result thereof. The Change of Control Notice
will contain all instructions and materials necessary to enable Holders to
tender their Securities to the Company. The Change of Control Notice, which
shall govern the terms of the Change of Control Offer, shall state: (1) that the
Change of Control Offer is being made pursuant to this Section 4.16; (2) the
purchase price and the Change of Control Payment Date; (3) that any Security not
tendered
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will continue to accrue interest; (4) that any Security accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest on the
Change of Control Payment Date; (5) that Holders electing to have a Security
purchased pursuant to any Change of Control Offer will be required to surrender
the Security, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice prior to
termination of the Change of Control Offer; (6) that Holders will be entitled to
withdraw their election if the Company, depositary or Paying Agent, as the case
may be, receives, not later than the expiration of the Change of Control Offer,
or such longer period as may be required by law, a facsimile transmission or
letter setting forth the name of the Holder, the certificate or other
identifying number, the principal amount of the Security the Holder delivered
for purchase and a statement that such Holder is withdrawing his election to
have the Security purchased; and (7) that Holders whose Securities are purchased
only in part will be issued Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
(c) On the Change of Control Payment Date. the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Notice, (ii) if the Company appoints a depository or Paying Agent,
deposit with such depository or Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the aggregate principal amount of Securities or portions
thereof tendered to the Company. The depository, the Company or the Paying
Agent, as the case may be, shall promptly mail to the Holder of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Security equal in principal
amount to any unpurchased portion of the Security surrendered. The Company will
publicly announce the results of the Change of Control offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 4.16, the Trustee shall act as the Paying Agent.
(d) The Company, to the extent applicable and if required by law, will
comply with Section 14 of the Exchange Act and the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act and any other federal
and state securities laws, rules and regulations which may then be applicable to
any offer by the Company to purchase the Securities at the option of the Holders
upon a Change of Control.
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01. When Company May Merge, etc.
The Company shall not consolidate with or merge with any Person or
convey, transfer or lease all or substantially all of its property to any
Person, unless:
(1) the Company survives such merger or the Person formed by
such consolidation or into which the Company is merged or that acquires
by conveyance or transfer, or which leases, all or substantially all of
the property of the Company is a corporation organized and existing
under the laws of the United States of America, any state thereof or
the District of Columbia and expressly assumes, by supplemental
indenture, the due and punctual payment of the principal of, premium,
if any, and interest on, all the Securities and the performance of
every other covenant and obligation of the Company under the Indenture;
(2) immediately before and after giving effect to such
transaction no Default or Event of Default exists;
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(3) immediately after giving effect to such transaction on a
pro forma basis, the Consolidated Tangible Net Worth of the Company (or
the surviving or transferee entity) is equal to or greater than the
Consolidated Tangible Net Worth of the Company immediately before such
transaction; and
(4) immediately after giving effect to such transaction on a
pro forma basis, the Company (or the surviving or transferee entity)
would be able to incur $1.00 of additional Indebtedness under the test
described in Section 4.09(a).
In connection with any consolidation. merger, conveyance, transfer or
lease contemplated by this Section 5.01, the Company shall deliver to the
Trustee prior to the consummation of the proposed transaction an Officers'
Certificate to the foregoing effect and an Opinion of Counsel stating that the
proposed transaction and such supplemental indenture comply with this Indenture.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation, merger, lease, conveyance or transfer in
accordance with Section 5.01, the successor Person formed by such consolidation
or into which the Company is merged or to which such lease, conveyance or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same effect
as if such successor had been named as the Company herein and thereafter (except
in the case of a lease) the predecessor corporation will be relieved of all
further obligations and covenants under this Indenture and the Securities.
ARTICLE SIX
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs upon:
(1) default by the Company or any Subsidiary Guarantor in the
payment of principal of, or premium, if any, on the Securities when due
and payable at maturity, upon repurchase pursuant to Section 4.11 or
4.16, upon acceleration or otherwise (whether or not such payment shall
be prohibited by the provisions of Articles Ten or Twelve);
(2) default by the Company or any Subsidiary Guarantor in the
payment of any installment of interest on the Securities when due and
payable and continuance of such default for 30 days (whether or not
such payment shall be prohibited by the provisions of Articles Ten or
Twelve);
(3) default by the Company or any Subsidiary Guarantor in the
deposit of any optional redemption payment, when and as due and payable
pursuant to Article Three;
(4) default on any other Indebtedness of the Company, any
Subsidiary Guarantor or any Restricted Subsidiary if such default
results in the acceleration of the maturity of any such Indebtedness
having a principal amount of $5.0 million or more individually or,
taken together with the principal amount of any other such Indebtedness
in default or the maturity of which has been so accelerated, in the
aggregate;
(5) default in the performance, or breach, of any other
covenant or agreement of the Company or any Subsidiary Guarantor in
this Indenture, the Securities or the Guarantees and failure to
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remedy such default within a period of 60 days after written notice
thereof from the Trustee or Holders of at least 25% in principal amount
of the then outstanding Securities;
(6) the entry by a court of one or more judgments or orders
against the Company, any Subsidiary Guarantor or any Restricted
Subsidiary in an aggregate amount in excess of $5.0 million (net of
applicable insurance coverage by a third party insurer which is
acknowledged in writing by such insurer) that has not been vacated,
discharged, satisfied or stayed pending appeal within 60 days from the
entry thereof,
(7) a Guarantee by a Subsidiary Guarantor shall cease to be in
full force and effect (other than a release of a Guarantee in
accordance with Section 11.04) or any Subsidiary Guarantor shall deny
or disaffirm its obligations with respect thereto;
(8) the Company, any Subsidiary Guarantor or any Restricted
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) admits in writing that it generally is unable to
pay its debts as the same become due; or
(9) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief (with respect to the petition
commencing such case) against the Company, any Subsidiary
Guarantor or any Restricted Subsidiary in an involuntary case
or proceeding,
(B) appoints a Custodian of the Company, any
Subsidiary Guarantor or any Restricted Subsidiary or for all
or substantially all of its respective property, or
(C) orders the liquidation of the Company, any
Subsidiary Guarantor or any Restricted Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Section 6.02. Acceleration.
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If an Event of Default (other than an Event of Default specified in
clauses 8 and 9) under Section 6.01 occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the outstanding Securities may declare the unpaid principal of, premium, if any,
and accrued and unpaid interest on, all the Securities then outstanding to be
due and payable, by a notice in writing to the Company (and to the Trustee, if
given by Holders) and upon any such declaration such principal, premium, if any,
and accrued and unpaid interest shall become immediately due and payable,
notwithstanding anything contained in this Indenture or the Securities to the
contrary. If an Event of Default specified in clauses 8 or 9 above occurs, all
unpaid principal of, and accrued interest on, the Securities then outstanding
will become due and payable, without any declaration or other act on the part of
the Trustee or any Holder.
If (i) (A) the Company or any Subsidiary Guarantor has paid or
deposited with such Trustee a sum sufficient to pay (1) all overdue installments
of interest on all the Securities, (2) the principal of, and premium, if any, on
any Securities that have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed therefor in
the Securities, (3) to the extent that payment of such interest is lawful,
interest on the defaulted interest at the rate or rates prescribed therefor in
the Securities, and (4) all money paid or advanced by the Trustee thereunder and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; (B) all Events of Default, other than the
nonpayment of the principal of any Securities that have become due solely by
such declaration of acceleration, have been cured or waived as provided in the
Indenture; and (C) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction and (ii) the Holders of a majority in
principal amount of then outstanding Securities give written notice to the
Company, the Subsidiary Guarantors and the Trustee of their desire to rescind
and annul a declaration of acceleration and its consequences, then such
declaration of acceleration shall be deemed rescinded and annulled. No such
rescission will affect any subsequent Event of Default or impair any right
consequent thereon.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue, in its own name and as trustee of an express trust, any available remedy
by proceeding at law or in equity to collect the payment of principal or
interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
Section 6.04 Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of at least a majority
in principal amount of Securities then outstanding by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default or Event of Default in payment of principal or interest on the
Securities, including any optional redemption payments or Change of Control or
Net Proceeds Offer payments.
Section 6.05. Control by Majority.
The Holders of a majority in principal amount of the Securities then
outstanding will have the right, by an instrument or concurrent instruments in
writing executed and delivered to the Trustee, to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee under this Indenture or exercising any trust or power conferred on such
Trustee, provided that (i) such direction is not in conflict with any
rule of law or with this Indenture and (ii) the Trustee may take any other
action deemed proper by such Trustee that is not inconsistent with such
direction.
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Section 6.06. Limitation on Remedies.
No Holder of any of the Securities will have any right to institute any
proceeding, judicial or otherwise, or for the appointment of a receiver or
trustee or pursue any remedy under this Indenture, unless:
(1) such Holder has previously given notice to the Trustee of
a continuing Event of Default,
(2) the Holders of not less than 25% in principal amount of
the outstanding Securities have made written request to such Trustee to
pursue such remedy, including, if applicable, to institute proceedings
in respect of such Event of Default in its own name as Trustee under
the Indenture,
(3) such Holder or Holders have offered to such Trustee
reasonable indemnity and security against the costs, expenses and
liabilities to be incurred in compliance with such request,
(4) such Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any proceeding,
and
(5) no direction inconsistent with such written request has
been given to such Trustee during such 60-day period by the Holders of
a majority in principal amount of the outstanding Securities.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over other Holders.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the Holder of
any Securities will have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Securities on the
stated maturity therefor and to institute suit for the enforcement of any such
payment, and such right may not be impaired without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium, if any, or
interest specified in Section 6.01(l), (2) or (3) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any Subsidiary Guarantor for the whole amount of
principal, premium, if any, and interest remaining unpaid with respect to the
Securities, and interest on overdue principal and premium, if any, and, to the
extent lawful, interest on overdue interest, and such further amounts as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation and expenses of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
(a) The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Holders allowed in any judicial proceedings relative to the
Company, the Subsidiary Guarantors, their creditors or their property and may
collect and receive any money or other property payable or deliverable on any
such claims and to distribute the same.
(b) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders of Senior Indebtedness to the extent required by
Article Ten;
Third: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable
on the Securities for principal and interest, respectively;
and
Fourth: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorney's fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. The foregoing shall not apply to a suit by the Trustee, a suit by a
holder pursuant to Section 6.07 hereof, or a suit by Holders or more than 10% in
principal amount of the then Outstanding Securities.
ARTICLE SEVEN
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such rights and powers vested in it by this Indenture and use the
same degree of care and skill in such exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth (or incorporated by reference) in this Indenture
and no implied covenants or obligations shall be read into this
Indenture against Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine such certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein).
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(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph (c) does not limit the effect of paragraph
(b) of this Section.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by an officer of the Trustee, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05, and the Trustee shall be
entitled from time to time to request such a direction.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall be under no obligation and may refuse to perform
any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may conclusively rely on and shall be protected in
acting or refraining from acting upon any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee shall not
be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(f) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the Trustee,
and such notice references the Securities and this Indenture.
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Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Subsidiaries or Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default occurs and is continuing and if it is actually known to
the Trustee, the Trustee shall mail to each Holder pursuant to Section 13.02 a
notice of the Default within 90 days after the occurrence thereof. Except in the
case of a Default in any payment on any Security, the Trustee may withhold the
notice if and so long as the board of directors, executive committee or a trust
committee of its directors and/or officers in good faith determines that
withholding the notice is in the interests of Holders.
Section 7.06. Reports by Trustee to Holders.
Within 60 days after each April 15, beginning with April 15, 1998, the
Trustee shall mail to each Holder a brief report dated as of such April 15 that
complies with TIA Section 313(a), but only if such report is required in any
year under TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the Commission and each stock exchange on which the Securities are
listed. The Company shall promptly notify the Trustee in writing if the
Securities become listed on any national securities exchange or of any delisting
thereof.
Section 7.07. Compensation and Indemnity.
The Company and the Subsidiary Guarantors jointly and severally agree
to pay the Trustee from time to time such compensation as the Company and the
Trustee shall from time to time agree in writing for its services rendered by it
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust). The Company and
the Subsidiary Guarantors jointly and severally agree to reimburse the Trustee
upon request for all reasonable out-of-pocket expenses, disbursements and
advances incurred by it. Such expenses may include the reasonable compensation
and expenses of the Trustee's agents and counsel.
The Trustee shall not be under any obligation to institute any suit, or
take any remedial action under this Indenture, or to enter any appearance or in
any way defend any suit in which it may be a defendant, or to take any steps in
the execution of the trusts created hereby or thereby or in the enforcement of
any rights and powers under this Indenture, until it shall be indemnified to its
satisfaction against any and all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provisions of this
Indenture, including compensation for services, costs, expenses, outlays,
counsel fees and other disbursements, and against all liability not due to its
negligence or willful misconduct. The Company and the Subsidiary Guarantors
jointly and severally agree to indemnify each of the Trustee and any predecessor
trustee and their agents for and to hold them harmless against any and all loss,
liability, damage, claim or expense, including taxes (other than taxes based on
the income of Trustee) incurred by it in connection with the acceptance and
administration of the trust and its duties hereunder
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as Trustee, Registrar and/or Paying Agent including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Trustee shall
notify the Company and the Subsidiary Guarantors of any claim for which it may
seek indemnity; however. unless the position of the Company is prejudiced by
such failure, the failure of the Trustee to promptly notify the Company shall
not limit its right to indemnification. The Company shall defend each such claim
and the Trustee shall cooperate in the defense. The Trustee may retain separate
counsel if the Trustee shall have been reasonably advised by such counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the Company and in the reasonable judgment
of such counsel it is advisable for the Trustee to employ separate counsel, and
the Company shall reimburse the Trustee for the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent.
Neither the Company nor the Subsidiary Guarantors shall be obligated to
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee through the Trustee's negligence, willful misconduct or breach of its
duties under this Indenture.
To secure the payment obligations of the Company and the Subsidiary
Guarantors in this Section, the Trustee shall have a lien prior to that of the
Holders of the Securities on all money or property held or collected by the
Trustee for any amount owing it or any predecessor trustee pursuant to this
section, except that held in trust to pay principal of and interest on
particular Securities.
When the Trustee incurs expenses or renders services after the
occurrence of any Event of Default specified in Sections 6.01(8) or (9), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section shall survive the termination of this
Indenture.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company and the Subsidiary
Guarantors. The Holders of a majority in principal amount of the Securities may
remove the Trustee by so notifying the Trustee, in writing. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee becomes incapable of acting as Trustee
hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company and the Subsidiary
Guarantors. Immediately after that, the retiring Trustee shall transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Holder.
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If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee (at the expense of
the Company), the Company or the Holders of a majority in principal amount of
the Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee. Any successor Trustee shall comply with
TIA Section 310(a)(5).
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust assets to, another corporation, the
successor corporation without any further act shall be the successor Trustee;
provided such corporation or association shall be otherwise eligible and
qualified under this Article.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall always have a combined
capital and surplus of at least $100,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall also comply with TIA
Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
Section 8.01. Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect (subject to
Section 8.05) when all outstanding Securities theretofore authenticated and
issued hereunder have been delivered (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.07) to the Trustee for cancellation and the Company or the
Subsidiary Guarantors have paid all sums payable hereunder and under the
Securities.
(b) In addition to the provisions of Section 8.01(a), at the Company's
option, either (i) the Company and all Subsidiary Guarantors shall be deemed to
have been discharged from their respective obligations with respect to the
Securities and the provisions of this Indenture (subject to Section 8.05) on the
91st day after the applicable conditions set forth below have been satisfied or
(ii) the Company and all Subsidiary Guarantors shall cease to be under any
obligation to comply with any term, provision or condition set forth in Sections
4.02, 4.03, 4.0 through 4.16 and 5.01 and Articles Ten and Eleven with respect
to the Securities at any time after the applicable conditions set forth below
have been satisfied:
(1) the Company or any Subsidiary Guarantor shall have
deposited or caused to be deposited irrevocably with the Trustee as
trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders (i) U.S. Legal Tender
or (ii) U.S. Government Obligations, which through the payment of
interest and principal in respect thereof in accordance with their
terms will provide (without any reinvestment of such interest or
principal), not later than one day before the due date of any payment,
U.S. Legal Tender or (iii) a combination of (i) and (ii), in an amount
sufficient, in the opinion (with respect
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to (ii) and (iii)) of a nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee at or prior to the time of such deposit, to
pay and discharge each installment of principal of, premium, if any,
and interest on the outstanding Securities on the dates such
installments are due;
(2) the Company shall have delivered to the Trustee an
Officers' Certificate certifying as to whether the Securities are then
listed on a national securities exchange;
(3) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Officers'
Certificate to the effect that the Company's exercise of its option
under this Section 8.01 would not cause the Securities to be delisted;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of
such deposit and such deposit will not result in a breach or violation
of, or constitute a default under, any other instrument to which the
Company or a Subsidiary Guarantor is a party or by which any of them is
bound, as evidenced to the Trustee in an Officers' Certificate
delivered to the Trustee concurrently with such deposit;
(5) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that Holders will not recognize income, gain
or loss for federal income tax purposes as a result of the Company's
exercise of its option under this Section 8.01 and will be subject to
federal income tax on the same amount and in the same manner and at the
same time as would have been the case if such option had not been
exercised, and, in the case of the Securities being discharged,
accompanied by a ruling to that effect received from or published by
the Internal Revenue Service (it being understood that (A) such Opinion
of Counsel shall also state that such ruling is consistent with the
conclusions reached in such Opinion of Counsel and (B) the Trustee
shall be under no obligation to investigate the basis of correctness of
such ruling);
(6) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Company's exercise of its option
under this Section 8.01 will not result in any of the Company, the
Trustee or the trust created by the Company's deposit of funds
hereunder becoming or being deemed to be an "investment company" under
the Investment Company Act of 1940, as amended;
(7) the Company or any Subsidiary Guarantor shall have paid or
duly provided for payment of all amounts then due to the Trustee
pursuant to Section 7.07; and
(8) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for in this Section 8.01 relating to the
satisfaction and discharge of this Indenture have been complied with.
Section 8.02. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with the provisions of the Securities and this Indenture to the
payment of principal of, premium, if any, and interest on the Securities.
Section 8.03. Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company upon
written request any money or securities held by them at any time in excess of
amounts then required to pay principal of or interest on the Securities. The
Trustee and the Paying Agent shall pay to the Company upon written request any
money held by
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them for the payment of principal or interest that remains unclaimed for two
years; provided, however, that the Trustee or such Paying Agent before being
required to make any such repayment, may at the expense of the Company cause to
be published once in a newspaper of general circulation in The City of New York
or mail to each such Holder notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication or mailing any unclaimed balance of such money then
remaining will be paid to the Company. After repayment to the Company, any
Holder entitled to such money shall thereafter, as an unsecured general
creditor, look (unless an applicable abandoned property law designates another
Person) only to the Company for payment, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease.
Section 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and the Subsidiary Guarantors' obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8,01; provided. however, that if the Company or any Subsidiary
Guarantor has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company or such Subsidiary
Guarantor shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
Section 8.05. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture and of
the Securities referred to in Section 8.01(a) and (b), the respective
obligations of the Company, the Subsidiary Guarantors and the Trustee under
Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.04, 6.07, 7.07, 7.08, 8.02,
8.03, 8.04, 11.03 and 11.04 and Article Three shall survive until the Securities
are no longer outstanding, and thereafter the obligations of the Company and the
Trustee under Sections 7.07, 8.02 and 8.03 and 8.04 shall survive. Nothing
contained in this Article Eight shall abrogate any of the obligations or duties
of the Trustee under this Indenture.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders.
The Company, the Subsidiary Guarantors and the Trustee may modify,
amend or supplement this Indenture or the Securities without notice to or
consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Sections 5.01 or 11.02;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(4) to reflect the addition or release of any Subsidiary
Guarantor, as provided for by this Indenture;
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(5) to comply with any requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
TIA; or
(6) to make any change that would provide any additional
benefit or rights to the Holders or that does not adversely affect the
rights of any Holder.
Upon the request of the Company and the Subsidiary Guarantors,
accompanied by a Board Resolution of the Company and a resolution of the board
of directors, board of trustees or managing partners of each Subsidiary
Guarantor authorizing the execution of any such supplemental indenture, and upon
receipt by the Trustee of the documents described in Section 9.06, the Trustee
may, but shall not be obligated to, join with the Company and the Subsidiary
Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and make any further appropriate
agreements and stipulations that may be therein contained. After an amendment or
waiver under this Section becomes effective, the Company shall mail to the
Holders of each Security affected thereby a notice briefly describing the
amendment or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
Section 9.02. With Consent of Holders.
Except as provided below in this Section 9.02, the Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
with the written consent (including consents obtained in connection with a
tender offer or exchange offer for Securities or a solicitation of consents in
respect of Securities, provided that in each case such offer or solicitation is
made to all Holders of then outstanding Securities on equal terms) of the
Holders of at least a majority in principal amount of the then outstanding
Securities.
Upon the request of the Company and the Subsidiary Guarantors,
accompanied by a Board Resolution of the Company and a resolution of the board
of directors, board of trustees or managing partners of each Subsidiary
Guarantor authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of the Holders as
aforesaid, and upon receipt by the Trustee of the Opinion of Counsel documents
described in Section 9.06, the Trustee may, but shall not be obligated to, join
with the Company and the Subsidiary Guarantors in the execution of such
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
The Holders of a majority in principal amount of the then outstanding
Securities may waive compliance in a particular instance by the Company or the
Subsidiary Guarantors with any provision of this Indenture or the Securities
(including waivers obtained in connection with a tender offer or exchange offer
for Securities or a solicitation of consents in respect of Securities, provided
that in each case such offer or solicitation is made to all Holders of the then
outstanding Securities on equal terms). However, without the consent of each
Holder affected, an amendment or waiver under this Section may not:
(1) reduce the percentage of principal amount of Securities
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(2) reduce the rate or change the time for payment of
interest, including defaulted interest, on the Securities;
(3) reduce the principal amount of any Security or change the
Maturity Date of the Securities;
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(4) reduce the redemption price, including premium, if any,
payable upon the redemption of any Security or change the time at which
any Security may be redeemed;
(5) reduce the repurchase price, including premium, if any,
payable upon the repurchase of any Security pursuant to Section 4.11 or
4.16, or change the time at which any Security may or shall be
repurchased thereunder;
(6) except as otherwise provided in this Indenture, waive a
continuing Default or Event of Default in the payment of the principal
of, premium, if any, or interest on the Securities;
(7) make any Security payable in money other than that stated
in the Security;
(8) impair the right to institute suit for the enforcement of
principal of, premium, if any, or interest on any Security pursuant to
Sections 6.07 or 6.08, except as limited by Section 6.06; or
(9) make any change in Section 6.04 or Section 6.07 or in this
sentence of this Section 9.02.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of record
of any Securities with respect to which such consent is required or sought as of
a date identified by the Trustee in a notice furnished to Holders in accordance
with the terms of this Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
A consent to an amendment, supplement or waiver by a Holder of a
Security shall bind the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security. However,
until an amendment, supplement or waiver becomes effective, any such Holder or
subsequent Holder may revoke the consent as to his Security or portion of a
Security. For such revocation to be effective, the Trustee must receive the
notice of revocation before the date the amendment, supplement or waiver becomes
effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment or
waiver. If the Company elects to fix a record date for such purpose, the record
date shall be fixed at (i) the later of 30 days prior to the first solicitation
of such consent or the date of the most recent list of Holders furnished to the
Trustee prior to such solicitation pursuant to Section 2.05, or (ii) such other
date as the Company shall designate. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons. shall be entitled to consent to such amendment or waiver
or to revoke any consent previously given, whether or not such Persons continue
to be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consent from the Holders of the
principal amount of Securities required hereunder for such amendment or waiver
to be effective also shall have been given and not revoked within such 90-day
period.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it makes a change described in any of clauses (1)
through (9) of Section 9.02. In that case the amendment, supplement or
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waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
Section 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Section 9.06. Trustee Protected.
The Trustee shall sign any amendment or supplement or waiver authorized
pursuant to this Article. In signing such amendment or supplement or waiver the
Trustee shall be entitled to receive, and (subject to Article Seven) shall be
fully protected in relying upon, an Opinion of Counsel stating that such
amendment or supplement or waiver is authorized or permitted by and complies
with this Indenture. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
ARTICLE TEN
SUBORDINATION OF SECURITIES
Section 10.01. Securities Subordinated to Senior Indebtedness.
The Company, for itself and it successors, and each Holder, by his
acceptance of Securities, agrees that the payment of the principal of, premium,
if any, and interest on the Securities is subordinated, to the extent and in the
manner provided in this Article Ten, to the prior payment in full of all Senior
Indebtedness of the Company (hereinafter in this Article Ten referred to as
"Senior Indebtedness"). The Securities shall rank pari passu in right of payment
with all Pari Passu Indebtedness of the Company.
This Article Ten shall constitute a continuing offer to all Persons who
become holders of, or continue to hold, Senior Indebtedness, and such provisions
are made for the benefit of the holders of Senior Indebtedness, and such holders
are made obligees hereunder and any one or more of them may enforce such
provisions.
Section 10.02. No Payment on Securities in Certain Circumstances.
Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration or otherwise, unless and until all principal thereof, premium, if
any, interest thereon and other amounts due thereon shall first be paid in full,
no payment shall be made by or on behalf of the Company with respect to the
principal of, premium, if any, interest on or other amounts owing on the
Securities (except that, subject to applicable law, Holders may receive
Subordinated Securities of the Company).
Upon the happening of any default in the payment of any principal of or
interest on or other amounts due on any Senior Indebtedness (a "Payment
Default"), then, unless and until such default shall have been cured or waived
or shall have ceased to exist, no payment shall be made by or on behalf of the
Company with respect to the principal of, premium, if any, interest on or other
amounts owing on the Securities.
Upon the happening of any default or event of default (other than a
Payment Default) (including any event which with the giving of notice or the
lapse of time or both would become an event of default and including any
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default or event of default which would result upon any payment with respect to
the Securities) with respect to any Designated Senior Indebtedness, as such
default or event of default is defined therein or in the instrument or agreement
or other document under which it is outstanding, then upon written notice
thereof given to the Company and the Trustee by a holder or holders of any such
Designated Senior Indebtedness or their Representative ("Payment Notice"), no
payment shall be made by or on behalf of the Company with respect to the
principal of, premium, if any, interest on or other amounts owing on the
Securities during the period (the "Payment Blockage Period") commencing on the
date of such receipt of such Payment Notice and ending on the earlier of (i) the
date, if any, on which such default is cured or waived or ceases to exist or
(ii) the date, if any, on which the Designated Senior Indebtedness to which such
default relates is discharged, provided, however, that no default or event of
default (other than a Payment Default) shall prevent the making of any payment
for more than 179 days after the Payment Notice shall have been given.
Notwithstanding the foregoing, (i) not more than one Payment Notice shall be
given within a period of 360 consecutive days, (ii) no event of default which
existed or was continuing on the date of any Payment Notice shall be made the
basis for the giving of a subsequent Payment Notice unless all such events of
default shall have been cured or waived for a period of at least 180 consecutive
days after such date, and (iii) if the Company or the Trustee receives any
Payment Notice, a similar notice relating to or arising out of the same default
or facts giving rise to such default (whether or not such default is on the same
issue of Designated Senior Indebtedness) shall not be effective for purposes of
this paragraph.
The Company shall resume payments of principal of, premium, if any, and
interest on the Securities (i) in the case of a Payment Default, upon the date
such Payment Default is cured or waived by the holders of Senior Indebtedness to
which such Payment Default relates and (ii) in the case of a default or event of
default (other than a Payment Default) with respect to Designated Senior
Indebtedness, on the earlier of (A) the date such default or event of default is
cured or (B) the expiration of the Payment Blockage Period with respect thereto
if, in the case of this clause (B), this Article Ten otherwise does not prohibit
such payment.
In furtherance of the provisions of Section 10.01, in the event that,
notwithstanding the foregoing provisions of this Section 10.02, any payment
(other than a payment in the form of Subordinated Securities) with respect to
the principal of, premium, if any, or interest on the Securities shall be made
by or on behalf of the Company, and received by the Trustee, by any Holder or by
any such Paying Agent (or, if the Company is acting as its own Paying Agent,
money for any such payment shall be segregated and held in trust), at a time
when such payment was prohibited by the provisions of this Section 10.02, then,
unless and until such payment is no longer prohibited by this Section 10.02,
such payment (subject to the provisions of Section 10.06 and 10.07) shall be
received and held in trust by the Trustee or such Holder or Paying Agent for the
benefit of and shall be immediately paid over to the holders of Senior
Indebtedness or their Representative, ratably according to the aggregate amounts
remaining unpaid on account of the principal of, premium, if any, and interest
on the Senior Indebtedness held or represented by each, for application to the
payment of all Senior Indebtedness in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the benefit of the
holders of Senior Indebtedness.
The provisions of this Section 10.02 shall not modify or limit in any
way the application of Section 10.03.
The Company shall give prompt written notice to the Trustee of any
default in the payment of any Senior Indebtedness or any acceleration under any
Senior Indebtedness or under any agreement pursuant to which Senior Indebtedness
may have been issued. Failure to give such notice shall not affect the
subordination of the Securities to the Senior Indebtedness or the application of
the other provisions provided in this Article Ten.
Section 10.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of
the Company.
In the event of any Insolvency or Liquidation Proceeding with respect
to the Company, all amounts payable in respect of any Senior Indebtedness shall
first be paid in full before the Holders are entitled to receive any direct or
indirect payment or distribution of any cash, property or securities (other than
Subordinated Securities of
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the Company) on account of principal of or interest on the Securities or any
other payment with respect to the Securities.
The holders of Senior Indebtedness shall be entitled to receive
directly, for application to the payment of Senior Indebtedness (to the extent
necessary to pay in full all Senior Indebtedness, whether or not due, including
specifically, without limitation, all Post-Commencement Interest, whether or not
allowed as a claim in such Insolvency or Liquidation Proceedings, after giving
effect to any substantially concurrent payment or distribution to the holders of
Senior Indebtedness on account of Senior Indebtedness), any payment or
distribution of any kind or character, whether in cash, property or securities
(other than Subordinated Securities of the Company), including any payment or
distribution which may be payable or deliverable by reason of the payment of any
other Indebtedness of the Company being subordinated to the payment of the
Securities which may be payable or deliverable in respect of the Securities in
any such Insolvency or Liquidation Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section 10.03, the Trustee or any Paying Agent or the Holder of any Security
shall have received any payment from or distribution of assets of the Company or
the estate created by the commencement of any such Insolvency or Liquidation
Proceeding, of any kind or character in respect of the Securities, whether in
cash, property or securities (other than Subordinated Securities of the
Company), including any payment or distribution which may be payable or
deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Securities, before all Senior
Indebtedness (whether or not due including specifically, without limitation, all
Post-Commencement Interest, whether or not allowed as a claim in such Insolvency
or Liquidation Proceeding) is paid in full, then and in such event such payment
or distribution shall be received and held in trust by the Trustee, any such
Paying Agent or Holder for and shall be paid over to the holders of Senior
Indebtedness (to the extent necessary to pay in full all such Senior
Indebtedness, whether or not due, including specifically, without limitation,
all Post-Commencement Interest thereon, whether or not allowed as a claim in
such Insolvency or Liquidation Proceeding), after giving effect to any
substantially concurrent payment or distribution to the holders of Senior
Indebtedness on account of Senior Indebtedness, for application to the payment
in full of such Senior Indebtedness.
The Company shall give prompt written notice to the Trustee of any
Insolvency or Liquidation Proceeding with respect to it.
Section 10.04. Holders to Be Subrogated to Rights of Holders of Senior
Indebtedness.
After all amounts payable under or in respect of Senior Indebtedness
(whether or not due) are paid in full, the Holders shall be subrogated (without
any duty on the part of the holders of Senior Indebtedness to warrant, create,
effectuate, preserve or protect such subrogation), to the extent of the payments
or distributions made to the holders of Senior Indebtedness pursuant to the
provisions of this Article Ten (equally and ratably with the holders of all
other indebtedness of the Company which by its express terms is subordinate and
subject in right of payment to Senior Indebtedness to substantially the same
extent as the Securities are so subordinate and subject in right of payment and
which is entitled to like rights and subrogation), to the rights of the holders
of Senior Indebtedness to receive payments and distributions of cash, property
and securities applicable to the Senior Indebtedness, until the principal of and
interest on the Securities shall be paid in full. For the purpose of such
subrogation no such payments or distributions to the holders of Senior
Indebtedness by or on behalf of the Company, or by or on behalf of the Holders
by virtue of this Article Ten, which otherwise would have been made to the
Holders shall, as between the Company and the Holders, be deemed to be payment
by the Company to or on account of the Senior Indebtedness, it being understood
that the provisions of this Article Ten are and are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and the
holders of Senior Indebtedness, on the other hand.
Section 10.05. Obligations of the Company Unconditional.
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Nothing contained in this Article Ten or elsewhere in this Indenture or
in any Security is intended to or shall impair, as between the Company and the
Holders, the obligations of the Company, which are absolute and unconditional,
to pay to the Holders the principal of and interest on the Securities as and
when the same shall become due and payable in accordance with their terms, or is
intended to or shall effect the relative rights of the Holders and creditors of
the Company, other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or any Holder from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article Ten, of the holders
of Senior Indebtedness in respect of cash, property or securities of the Company
received upon the exercise of any such remedy. Upon any distribution of assets
of the Company referred to in this Article Ten, the Trustee, subject to the
provisions of Section 7.01, and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
Insolvency or Liquidation Proceeding is pending, or a certificate of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Ten.
Section 10.06. Trustee Entitled to Assume Payments, Not Prohibited in Absence of
Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until the Trustee or any Paying Agent shall have received
written notice at the address specified in Section 13.02 thereof from the
Company or from one or more holders of Senior Indebtedness or from any
Representative therefor and, prior to the receipt of any such written notice,
the Trustee, subject to the provisions of Section 7.01, shall be entitled in all
respects conclusively to assume that no such fact exists. Nothing in this
Section 10.06 is intended to or shall relieve any Holder from the obligations
imposed under Sections 10.02 and 10.03 with respect to money or other
distributions received in violation of the provisions thereof.
Section 10.07. Application by Trustee of Assets Deposited With It.
All money and U.S. Government Obligations deposited in trust with the
Trustee pursuant to and in accordance with Section 8.01 shall be for the sole
benefit of the Holders and shall not be subject to this Article Ten. Otherwise,
any deposit of assets by the Company with the Trustee or any Paying Agent
(whether or not in trust) for the payment of principal of premium, if any, or
interest on any Securities shall be subject to the provisions of this Article
Ten; provided that, if prior to the second Business Day preceding the date on
which by the terms of this Indenture any such assets may become distributable
for any purpose (including without limitation, the payment of either principal
of or interest on any Security) the Trustee or such Paying Agent shall not have
received with respect to such assets the written notice provided for in Section
10.06, then the Trustee or such Paying Agent shall have full power and authority
to receive such assets and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such date. The preceding sentence shall be construed
solely for the benefit of the Trustee and each Paying Agent and shall not
otherwise affect the rights of holders of Senior Indebtedness.
Section 10.08. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.
No right of any present or future holder of any Senior Indebtedness to
enforce the subordination provisions in this Article Ten shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or be otherwise charged with.
The holders of Senior Indebtedness may extend, renew, modify or amend the terms
of the Senior
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Indebtedness or any security therefor and release, sell or exchange such
security and otherwise deal freely with the Company, all without affecting the
liabilities and obligations of the parties to this Indenture or the Holders.
Section 10.09. Holders Authorize Trustee to Effectuate Subordination of
Securities.
Each Holder of Securities by his acceptance thereof (i) authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Ten and to protect the rights of the Holders pursuant to this Indenture,
and (ii) appoints the Trustee his attorney-in-fact for such purpose, including
in the event of any Insolvency or Liquidation Proceeding with respect to the
Company, the timely filing of a claim for the unpaid balance of his Securities
in the form required in said proceeding and the causing of such claim to be
approved. If the Trustee shall not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Indebtedness
or their Representative shall have the right to file an appropriate claim for
and on behalf of the Holders. Nothing herein contained shall be deemed to
authorize the Trustee or any holder of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder, or to authorize the
Trustee or any holder of Senior Indebtedness or their Representative to vote in
respect of the claim of any Holder in any such proceeding.
Section 10.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article Ten in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
Section 10.11. Article Ten Not to Prevent Events of Default.
The failure to make a payment of principal of or interest on the
Securities by reason of any provision of this Article Ten shall not be construed
as preventing the occurrence of a Default or an Event of Default.
Section 10.12. Payment.
A payment with respect to a Security or with respect to principal of or
interest on a Security shall include, without limitation, payment of principal
of (and premium, if any) and interest on any Security, any depositing of funds
under Article Eight, any payment on account of any mandatory or optional
repurchase or redemption of any Security (including payments pursuant to Article
Three or Section 4.10 or Section 4.16) and any payment or recovery on any claim
(whether Section 4.10 or Section 4.16) and any payment or recovery on any claim
(whether for rescission damages and whether based on contract, tort, duty
imposed by law, or any other theory of liability) relating to or arising out of
the offer, sale or purchase of any Security, provided that any such payment,
deposit, other payment or recovery (i) not prohibited pursuant to this Article
Ten at the time actually made shall not be subject to any recovery by any holder
of Senior Indebtedness or Representative therefor or other Person pursuant to
this Article Ten at any time thereafter and (ii) made by or from any Person
other than the Company shall not be subject to any recovery by any holder of
Senior Indebtedness or Representative therefor or other Person pursuant to
this Article Ten at any time thereafter except to the extent such Person
recovers any such amount paid from the Company, whether pursuant to rights of
indemnity, rescission or otherwise.
Section 10.13 Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness. With respect to the holders of Senior
Indebtedness, the Trustee undertakes to perform or to observe only such of its
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covenants or obligations as are specifically set forth in this Article and no
implied covenants or obligations with respect to holders of Senior Indebtedness
shall be read into this Indenture against the Trustee.
Nothing in this Article shall apply to the claims of, or payments to,
the Trustee under or pursuant to Section 7.07.
ARTICLE ELEVEN
GUARANTEES
Section 11.01. Unconditional Guarantee.
Each Subsidiary Guarantor hereby, jointly and severally, unconditionally
guarantees (such guarantee to be referred to herein as the "Guarantee") to each
Holder and to the Trustee the due and punctual payment of the principal of,
premium, if any, and interest on the Securities and all other amounts due and
payable under this Indenture and the Securities by the Company whether at
maturity, by acceleration, redemption, repurchase or otherwise, including,
without limitation, interest on the overdue principal of, premium, if any, and
interest on the Securities, to the extent lawful, all in accordance with the
terms hereof and thereof; subject, however, to the limitations set forth in
Article Eleven and Article Twelve.
Failing payment when due of any amount so guaranteed for whatever
reason, the Subsidiary Guarantors will be jointly and severally obligated to pay
the same immediately. Each Subsidiary Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture. the absence of
any action to enforce the same, any waiver or consent by any Holder of the
Securities with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each Subsidiary Guarantor hereby waives diligence,
presentment, demand of payments filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that this Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture and in this Guarantee.
If any Holder or the Trustee is required by any court or otherwise to return to
the Company, any Subsidiary Guarantor, or any custodian, trustee, liquidator or
other similar official acting in relation to the Company or any Subsidiary
Guarantor, any amount paid by the Company or any Subsidiary Guarantor to the
Trustee or such Holder, this Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Subsidiary Guarantor agrees
it shall not be entitled to any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby. Each Subsidiary Guarantor further agrees that, as
between each Subsidiary Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article Six,
such obligations (whether or not due and payable) shall forthwith become due and
payable by each Subsidiary Guarantor for the purpose of this Guarantee.
The guarantee of each Subsidiary Guarantor herein shall be, in the
manner and to the extent set forth in Article Twelve, subordinated in right of
payment to the prior payment when due of the principal of, premium, if any,
accrued and unpaid interest and all other amounts owing on all existing and
future Senior Indebtedness of such Subsidiary Guarantor and of the Company, as
the case may be, and senior to the right of payment of principal of, premium, if
any, and accrued and unpaid interest on all existing and future Subordinated
Indebtedness of such Subsidiary Guarantor.
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Section 11.02. Subsidiary Guarantors May Consolidate. etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Subsidiary Guarantor with or into
the Company or another Subsidiary Guarantor or shall prevent any sale or
conveyance of all or substantially all of its assets to the Company or another
Subsidiary Guarantor.
(b) The Company may not sell the Capital Stock of a Subsidiary
Guarantor, and a Subsidiary Guarantor may not consolidate with or merge into or
sell all or substantially all of its assets (in a single transaction or series
of related transactions) to any Person other than the Company or another
Subsidiary Guarantor (whether or not affiliated with the Company or the
Subsidiary Guarantor), unless (i) with respect to a consolidation or merger of
such Subsidiary Guarantor, either (A)(1) the surviving entity is a Subsidiary of
the Company or, as a result of the transaction, becomes a Subsidiary of the
Company, (2) the surviving entity remains a Restricted Subsidiary of the Company
or, simultaneously with the consummation of the transaction, is designated as a
Restricted Subsidiary of the Company, (3) immediately after giving effect to
such transaction on a pro forma basis, the Consolidated Tangible Net Worth of
the surviving entity is equal to or greater than the Consolidated Tangible Net
Worth of such Subsidiary Guarantor immediately before such transaction, (4)
immediately after giving effect to such transaction on a pro forma basis, the
Company would be able to incur $1.00 of additional Indebtedness under the test
described in Section 4.09(a), (5) if the surviving entity is not the Subsidiary
Guarantor, the surviving entity agrees to assume such Subsidiary Guarantor's
Guarantee and all its obligations pursuant to this Indenture in accordance with
the provisions of Section 11.03, and (6) such transaction does not (x) violate
any covenant in the Indenture or (y) result in a Default or an Event of Default
immediately thereafter that is continuing or (B)(1) such transaction is made in
accordance with the covenant in Section 4.11 and (2) such transaction does not
(x) violate any other covenant in the Indenture or (y) result in a Default or
Event of Default immediately thereafter that is continuing and (ii) with respect
to the sale of the Capital Stock or all or substantially all of the assets of
such Subsidiary Guarantor, (A) such transaction is made in accordance with the
covenant in Section 4.11 and (B) such transaction does not (x) violate any other
covenants in the Indenture or (y) result in a Default or Event of Default
immediately thereafter that is continuing. In the case of any such
consolidation, merger, sale or conveyance involving the assumption by the
successor entity of a Subsidiary Guarantor's obligations under the Indenture,
such successor entity shall assume such obligations by supplemental indenture
executed and delivered to the Trustee in accordance with the provisions of
Section 11.03. Upon execution and delivery of such supplemental indenture, such
successor entity shall succeed to and be substituted for the Subsidiary
Guarantor with the same effect as if it had been named herein as a Subsidiary
Guarantor.
Section 11.03. Addition of Subsidiary Guarantors.
(a) The Company agrees to cause each Subsidiary that shall become a
Restricted Subsidiary after the Issue Date to execute and deliver a supplemental
indenture pursuant to which such Restricted Subsidiary shall guarantee the
payment of the Securities pursuant to the terms hereof.
(b) Any Person who is not a Subsidiary Guarantor on the Issue Date may
become a Guarantor by executing and delivering to the Trustee (i) a supplemental
indenture in form and substance satisfactory to the Trustee, which subjects such
Person to the provisions (including the representations and warranties) of this
Indenture as a Subsidiary Guarantor and (ii) an Opinion of Counsel and Officers'
Certificate to the effect that such supplemental indenture has been duly
authorized and executed by such Person and constitutes the legal, valid, binding
and enforceable obligation of such Person (subject to such customary exceptions
concerning creditors' rights and equitable principles as may be acceptable to
the Trustee and provided that no opinion need be rendered concerning the
enforceability of the Guarantee). Section 11.04. Release of a Subsidiary
Guarantor.
A Subsidiary Guarantor shall be deemed released from all of its
Guarantee and obligations in this Indenture upon (i) (A) the sale of the Capital
Stock or all or substantially all of the assets of such Subsidiary Guarantor, or
the
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consolidation or merger of such Subsidiary Guarantor, made in accordance
with the provisions of either Section 11.02(b)(i)(B) or Section 11.02(b)(ii) or
(B) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary,
provided that such designation is made in accordance with the provisions of this
Indenture, and (ii) receipt of a request by the Company accompanied by an
Officers' Certificate and an Opinion of Counsel certifying that all conditions
specified in this Indenture for such release have been satisfied in accordance
with the provisions of this Indenture. Upon receipt of the items specified in
clause (ii) of the preceding sentence, the Trustee shall deliver to the Company
an appropriate instrument evidencing such release. Any Subsidiary Guarantor not
so released remains liable for the full amount of principal of and interest on
the Securities as provided in this Article Eleven.
Section 11.05. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of any federal, state or foreign
law. To effectuate the foregoing intention. the Holders and each Subsidiary
Guarantor hereby irrevocably agree that the obligations of each Subsidiary
Guarantor under the Guarantee shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Subsidiary Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Subsidiary Guarantor in respect of the
obligations of such other Subsidiary Guarantor under its Guarantee or pursuant
to Section 11.06, result in the obligations of such Subsidiary Guarantor under
the Guarantee not constituting a fraudulent conveyance or fraudulent transfer
under federal, state or foreign law.
Section 11.06. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under the Guarantee, such Funding Guarantor shall be
entitled to a contribution from each other Subsidiary Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Subsidiary Guarantor (including
the Funding Guarantor) for all payments, damages and expenses incurred by the
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Subsidiary Guarantor's obligations with respect to the
Guarantee.
Section 11.07. Execution and Delivery of Guarantee.
To further evidence the Guarantees set forth in Section 11.01, each
Subsidiary Guarantor hereby agrees that a notation relating to such Guarantee,
in substantially the form of Exhibit A-1, shall be endorsed on each Security
authenticated and delivered by the Trustee and executed by either manual or
facsimile signature of two Officers of each Subsidiary Guarantor.
Each of the Subsidiary Guarantors hereby agrees that its Guarantee set
forth in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Security a notation relating to such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Security no longer holds that office at the time the Trustee authenticates such
security or at any time thereafter, such Subsidiary Guarantor's Guarantee of
such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Subsidiary Guarantor.
Section 11.08. Severability.
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In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, that portion of such provision that is not invalid, illegal or
unenforceable shall remain in effect, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 11.09. Consent to Jurisdiction and Service of Process.
Each Subsidiary Guarantor that is not organized under the laws of the
United States or any state thereof (each a "Non-U.S. Subsidiary Guarantor")
hereby appoints the principal office of CT Corporation System in The City of New
York which, on the date hereof, is located at 1633 Broadway, New York, New York
10019, as the authorized agent thereof (the "Authorized Agent") upon whom
process may be served in any action, suit or proceeding arising out of or based
on this Indenture or the Securities which may be instituted in the Supreme Court
of the State of New York or the United States District Court for the Southern
District of New York, in either case in The Borough of Manhattan, The City of
New York, by the Holder of any Security, and each Non-U.S. Subsidiary Guarantor
hereby waives any objection which it may now have to the laying of venue of any
such proceeding and expressly and irrevocably accepts and submits, for the
benefit of the Holders from time to time of the Securities, to the nonexclusive
jurisdiction of any such court in respect of any such action, suit or
proceeding, for itself and with respect to its properties, revenues and assets.
Such appointment shall be irrevocable unless and until the appointment of a
successor authorized agent for such purpose, and such successor's acceptance of
such appointment, shall have occurred. Each Non-U.S. Subsidiary Guarantor agrees
to take any and all actions, including the filing of any and all documents and
instruments, that may be necessary to continue such appointment in full force
and effect as aforesaid. Service of process upon the Authorized Agent with
respect to any such action shall be deemed, in every respect, effective service
of process upon any such Non-U.S. Subsidiary Guarantor. Notwithstanding the
foregoing, any action against any Non-U.S. Subsidiary Guarantor arising out of
or based on any Security may also be instituted by the Holder of such Security
in any court in the jurisdiction of organization of such Non-U.S. Subsidiary
Guarantor, and such Non-U.S. Subsidiary Guarantor expressly accepts the
jurisdiction of any such court in any such action. The Company shall require the
Authorized Agent to agree in writing to accept the foregoing appointment as
agent for service of process.
Section 11.10. Waiver of Immunity.
To the extent that any Non-U.S. Subsidiary Guarantor or any of its
properties, assets or revenues may have or may hereafter become entitled to, or
have attributed to it, any right of immunity, on the grounds of sovereignty or
otherwise, from any legal action, suit or proceeding, from the giving of any
relief in any thereof, from set-off or counterclaim, from the jurisdiction of
any court, from service of process, from attachment upon or prior to judgment,
from attachment in aid of execution of judgment, or from execution of judgment,
or other legal process or proceeding for the giving of any relief or for the
enforcement of any judgment, in any jurisdiction in which proceedings may at any
time be commenced, with respect to its obligations, liabilities or any other
matter under or arising out of or in connection with this Indenture or the
Securities, such Non-U.S. Subsidiary Guarantor, to the maximum extent permitted
by law, hereby irrevocably and unconditionally waives, and agrees not to plead
or claim, any such immunity and consents to such relief and enforcement.
Section 11.11. Judgment Currency.
Each Non-U.S. Subsidiary Guarantor agrees to indemnify the Trustee and
each Holder against any loss incurred by it as a result of any judgment or order
against such Non-U.S. Subsidiary being given or made and expressed and paid In a
currency (the "Judgment Currency") other than United States dollars and as a
result of any variation as between (i) the rate of exchange at which the United
States dollar amount is converted into the Judgment Currency for the purpose of
such judgment or order and (ii) the spot rate of exchange in The City of New
York at which the Trustee or such Holder on the date of payment of such judgment
or order is able to purchase United States dollars with the amount of the
Judgment Currency actually received by the Trustee or such Holder.
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The foregoing indemnity shall constitute a separate and independent obligation
of each Non-U.S. Subsidiary Guarantor and shall continue in full force and
effect notwithstanding any such judgment or order as aforesaid. The term "spot
rate of exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of, or conversion into, United States dollars.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEES
Section 12.01. Guarantees Subordinated to Senior Indebtedness.
Each Subsidiary Guarantor, for itself and its successors, and each
Holder, by his acceptance of Securities, agrees that the Guarantees of such
Subsidiary Guarantor are subordinated, to the extent and in the manner provided
in this Article Twelve, to the prior payment in full of all Senior Indebtedness
of such Subsidiary Guarantor (hereinafter in this Article Twelve referred to as
"Senior Indebtedness"). The Guarantees shall rank pari passu in right of payment
with all guarantees by a Subsidiary Guarantor of Pari Passu Indebtedness of the
Company.
This Article Twelve shall constitute a continuing offer to all Persons
who become holders of, or continue to hold, Senior Indebtedness, and such
provisions are made for the benefit of the holders of Senior Indebtedness, and
such holders are made obligees hereunder and any one or more of them may enforce
such provisions.
Section 12.02. No Payment on Guarantees in Certain Circumstances.
Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration or otherwise, unless and until all principal thereof, premium, if
any, interest thereon and other amounts due thereon shall first be paid in full,
no payment shall be made by or on behalf of any Subsidiary Guarantor pursuant to
the Guarantees with respect to the principal of, premium, if any, interest on or
other amounts owing on the Securities.
Upon the happening of any default in the payment of any principal of,
premium, if any, or interest on or other amounts due on any Senior Indebtedness
(a "Payment Default"), then, unless and until such default shall have been cured
or waived or shall have ceased to exist, no payment shall be made by or on
behalf of any Subsidiary Guarantor pursuant to the Guarantees with respect to
the principal of, premium, if any, interest on or other amounts owing on the
Securities (except that, subject to applicable law, Holders may receive
Subordinated Securities of Subsidiary Guarantors).
Upon the happening of any default or event of default (other than a
Payment Default) (including any event which with the giving of notice or the
lapse of time or both would become an event of default and including any default
or event of default which would result upon any payment pursuant to the
Guarantees) with respect to any Senior Indebtedness of a Subsidiary Guarantor,
as such default or event of default is defined therein or in the instrument or
agreement or other document under which it is outstanding, then upon written
notice thereof given to the Subsidiary Guarantors and the Trustee by a holder or
holders of any Designated Senior Indebtedness or their Representative ("Payment
Notice"), no payment shall be made by or on behalf of the Subsidiary Guarantors
pursuant to the Guarantees with respect to the principal of, premium, if any,
interest on or other amounts owing on the Securities during the period (the
"Payment Blockage Period") commencing on the date of such receipt of such
Payment Notice and ending on the earlier of (i) the date, if any, on which such
default is cured or waived or ceases to exist or (ii) the date, if any, on which
the Designated Senior Indebtedness to which such default relates is discharged;
provided, however, that no default or event of default (other than a Payment
Default) shall prevent the making of any payment pursuant to the Guarantees for
more than 179 days after the Payment Notice shall have been given.
Notwithstanding the foregoing, (i) not more than one Payment Notice shall be
given within a period of 360 consecutive days, and (ii) no event of default
which existed or was continuing on the date of any Payment Notice shall be made
the basis for the giving of a subsequent Payment Notice unless all such events
of default shall have
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been cured or waived for a period of at least 180 consecutive days after such
date, and (iii) if any Subsidiary Guarantor or the Trustee receives any Payment
Notice, a similar notice relating to or arising out of the same default or facts
giving rise to such default (whether or not such default is on the same issue of
Designated Senior Indebtedness) shall not be effective for purposes of this
paragraph.
The Subsidiary Guarantors shall resume payments of principal of,
premium, if any, and interest on the Guarantees (i) in the case of a Payment
Default, upon the date such Payment Default is cured or waived by the holders of
Senior Indebtedness to which such Payment Default relates and (ii) in the case
of a default or event of default (other than a Payment Default) with respect to
Designated Senior Indebtedness, on the earlier of (A) the date such default or
event of default is cured or (B) the expiration of the Payment Blockage Period
with respect thereto if, in the case of this clause (B), this Article Twelve
otherwise does not prohibit such payment.
In furtherance of the provisions of Section 12.01, in the event that,
notwithstanding the foregoing provisions of this Section 12.02, any payment
(other than a payment in the form of Subordinated Securities of Subsidiary
Guarantors) with respect to the principal of, premium, if any or interest on the
Securities shall be made by or on behalf of any Subsidiary Guarantor, and
received by the Trustee, by any Holder or by any Paying Agent (or, if the
Company is acting as its own Paying Agent, money for any such payment shall be
segregated and held in trust), at a time when such payment was prohibited by the
provisions of this Section 12.02, then, unless and until such payment is no
longer prohibited by this Section 12.02, such payment (subject to the provisions
of Sections 12.06 and 12.07) shall be received and held in trust by the Trustee
or such Holder or Paying Agent for the benefit of and shall be immediately paid
over to the holders of Senior Indebtedness or their Representative, ratably
according to the aggregate amounts remaining unpaid on account of the principal
of, premium, if any, and interest on the Senior Indebtedness held or represented
by each, for application to the payment of all Senior Indebtedness in accordance
with its terms, after giving effect to any concurrent payment or distribution to
or for the benefit of the holders of Senior Indebtedness.
The provisions of this Section 12.02 shall not modify or limit in any
way the application of Section 12.03.
Each Subsidiary Guarantor shall give prompt written notice to the
Trustee of any default in the payment of any Senior Indebtedness of such
Subsidiary Guarantor or any acceleration under any such Senior Indebtedness or
under any agreement pursuant to which such Senior Indebtedness may have been
issued. Failure to give such notice shall not affect the subordination of the
Guarantees to the Senior Indebtedness or the application of the other provisions
provided in this Article Twelve.
Section 12.03. Guarantees Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of
a Subsidiary Guarantor.
In the event of any Insolvency or Liquidation Proceeding with respect to
any Subsidiary Guarantor, all amounts payable in respect of any Senior
Indebtedness of such Subsidiary Guarantor shall first be paid in full before the
Holders are entitled to receive any direct or indirect payment or distribution
of any cash, property or securities (other than Subordinated Securities of
Subsidiary Guarantors) pursuant to the Guarantees on account of principal of,
premium, if any, or interest on the Securities or any other payment with respect
to the Securities.
The holders of Senior Indebtedness shall be entitled to receive
directly, for application to the payment of Senior Indebtedness (to the extent
necessary to pay in full all Senior Indebtedness, whether or not due, including
specifically, without limitation, all Post-Commencement Interest, whether or not
allowed as a claim in such insolvency or Liquidation Proceeding, after giving
effect to any substantially concurrent payment or distribution to the holders of
Senior Indebtedness on account of Senior Indebtedness), any payment or
distribution of any kind or character, whether in cash, property or securities
(other than Subordinated Securities of Subsidiary Guarantors), including any
payment or distribution which may be payable or deliverable by reason of the
payment of any other payment of any other indebtedness of such Subsidiary
Guarantor being subordinated to the payment of the
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Guarantees) which may be payable or deliverable in respect of the Guarantees in
any such Insolvency or Liquidation Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section 12.03, the Trustee or any Paying Agent or the Holder of any Security
shall have received any payment from or distribution of assets of such
Subsidiary Guarantor or the estate created by the commencement of any such
Insolvency or Liquidation Proceeding, of any kind or character in respect of the
Guarantees, whether in cash, property or securities (other than Subordinated
Securities of Subsidiary Guarantors), including any payment or distribution
which may be payable or deliverable by reason of the payment of any other
indebtedness of such Subsidiary Guarantor being subordinated to the payment of
the Guarantees, before all Senior Indebtedness (whether or not due including
specifically, without limitation, all Post-Commencement Interest, whether or not
allowed as a claim in such Insolvency or Liquidation Proceeding) is paid in
full, then and in such event such payment or distribution shall be received and
held in trust by the Trustee, any such Paying Agent or Holder for and shall be
paid over to the holders of Senior Indebtedness (to the extent necessary to pay
in full all such Senior Indebtedness, whether or not due, including
specifically, without limitation, all Post Commencement Interest thereon,
whether or not allowed as a claim in such Insolvency or Liquidation Proceeding),
after giving effect to any substantially concurrent payment or distribution to
the holders of Senior Indebtedness on account of Senior Indebtedness, for
application to the payment in full of such Senior Indebtedness.
The Company and each Subsidiary Guarantor shall give prompt written
notice to the Trustee of any Insolvency or Liquidation Proceeding with respect
to such Subsidiary Guarantor.
Section 12.04. Holders to Be Subrogated to Rights of Holders of Senior
Indebtedness.
After all amounts payable under or in respect of Senior Indebtedness
(whether or not due) are paid in full, the Holders shall be subrogated (without
any duty on the part of the holders of Senior Indebtedness to warrant, create,
effectuate, preserve or protect such subrogation), to the extent of the payments
or distributions made to the holders of Senior Indebtedness pursuant to the
provisions of this Article Twelve (equally and ratably with the holders of all
other indebtedness of any Subsidiary Guarantor which by its express terms is
subordinate and subject in right of payment to Senior Indebtedness to
substantially the same extent as the Guarantees are so subordinated and subject
in right of payment and which is entitled to like rights and subrogation), to
the rights of the holders of Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness, until the principal of and interest on the Securities shall be
paid in full. For the purpose of such subrogation no such payments or
distributions to the holders of Senior Indebtedness by or on behalf of the
Company, or by or on behalf of the Holders by virtue of this Article Twelve,
which otherwise would have been made to the Holders shall, as between any
Subsidiary Guarantor and the Holders, be deemed to be payment by such Subsidiary
Guarantor to or on account of the Senior Indebtedness, it being understood that
the provisions of this Article Twelve are and are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and the
holders of Senior Indebtedness, on the other hand.
Section 12.05. Guarantees Unconditional.
Except as otherwise provided herein, nothing contained in this
Indenture or in any Guarantee is intended to or shall impair, as between the
Subsidiary Guarantors and the Holders, the Guarantees, which are absolute and
unconditional, as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Subsidiary Guarantors, other than the holders of
the Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Twelve, of the holders of Senior Indebtedness in respect of
cash, property or securities of any Subsidiary Guarantor received upon the
exercise of any such remedy. Upon any distribution of assets of any Subsidiary
Guarantor referred to in this Article Twelve, the Trustee, subject to the
provisions of Section 7.01, and the Holders
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shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such Insolvency or Liquidation Proceedings is
pending, or a certificate of the liquidating trustee or agent or other Person
making any distribution to the Trustee or to the Holders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of such Subsidiary
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Twelve.
Section 12.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of
Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until the Trustee or any Paying Agent shall have received
written notice at the address specified in Section 13.02 thereof from the
Company or a Subsidiary Guarantor or from one or more holders of Senior
Indebtedness or from any Representative therefor and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Section 7.01,
shall be entitled in all respects conclusively to assume that no such fact
exits. Nothing in this Section 12.06 is intended to or shall relieve any Holder
from the obligations imposed under Sections 12.02 and 12.03 with respect to
money or other distributions received in violation of the provisions thereof.
Section 12.07. Application by Trustee of Assets Deposited With It.
All money and U.S. Government Obligations deposited in trust with the
Trustee pursuant to and in accordance with Section 8.01 shall be for the sole
benefit of the Holder and shall not be subject to this Article Twelve.
Otherwise, any deposit of assets by any Subsidiary Guarantor pursuant to the
Guarantees with the Trustee or any Paying Agent (whether or not in trust) for
the payment of principal of or interest on any Securities shall be subject to
the provisions of this Article Twelve; provided that, if prior to the second
Business Day preceding the date on which by the terms of this Indenture any such
assets may become distributable for any purpose (including without limitation,
the payment of either principal of or interest on any Security) the Trustee or
such Paying Agent shall not have received with respect to such assets the
written notice provided for in Section 12.06, then the Trustee or such Paying
Agent shall have full power and authority to receive such assets and to apply
the same to the purpose for which they were received, and shall not be affected
by any notice to the contrary which may be received by it on or after such date.
The preceding sentence shall be construed solely for the benefit of the Trustee
and each Paying Agent and shall not otherwise affect the rights of holders of
Senior Indebtedness,
Section 12.08. Subordination Rights Not Impaired by Acts or Omissions of the
Subsidiary Guarantors or Holders of Senior Indebtedness.
No right of any present or future holder of any Senior Indebtedness to
enforce the subordination provisions in this Article Twelve shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Subsidiary Guarantor or by any act or failure to act by any such holder, or
by any noncompliance by the Company with the terms of this Indenture, regardless
of any knowledge thereof which any such holder may have or be otherwise charged
with. The holders of Senior Indebtedness may extend, renew, modify or amend the
terms of the Senior Indebtedness or any security therefor and release, sell or
exchange such security and otherwise deal freely with the Subsidiary Guarantors,
all without affecting the liabilities and obligations of the parties to this
Indenture or the Holders.
Section 12.09. Holders Authorize Trustee to Effectuate Subordination of
Securities.
Each Holder of Securities by his acceptance thereof (i) authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Twelve and to protect the rights of the Holders pursuant to this
Indenture, and (ii) appoints the Trustee his attorney-in-fact for such purpose,
including in the event of any Insolvency or Liquidation Proceeding with respect
to any
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Subsidiary Guarantor, the timely filing of a claim of the unpaid balance
of his Securities pursuant to the Guarantees in the form required in said
proceeding and the causing of such claim to be approved. If the Trustee shall
not file a proper claim or proof of debt in the form required in such proceeding
prior to 30 days before the expiration of the time to file such claim or claims,
then the holders of the Senior Indebtedness or their Representative shall have
the right to file an appropriate claim for and on behalf of the Holders. Nothing
herein contained shall be deemed to authorize the Trustee or any holder of
Senior Indebtedness or their Representative to authorize or consent to or accept
or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities, the Guarantees or the rights
of any Holder, or to authorize the Trustee or any holder of Senior Indebtedness
or their Representative to vote in respect of the claim of any Holder in any
such proceeding.
Section 12.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article Twelve in respect of any Senior Indebtedness at any time held by it to
the same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
Section 12.11. Payment.
A payment pursuant to the Guarantees with respect to a Security or with
respect to principal of, premium, if any, or interest on a Security shall
include, without limitation, payment of principal of, premium, if any, and
interest on any Security, any depositing of funds under Article Four, any
payment on account of any mandatory or optional repurchase or redemption of any
Security (including payments pursuant to Article Three or Section 4.10 or
Section 4.16) and any payment or recovery on any claim (whether for rescission
or damages and whether based on contract, tort, duty imposed by law, or any
other theory of liability) relating to or arising out of the offer, sale or
purchase of any Security, provided that any such payment, deposit, other payment
or recovery (i) not prohibited pursuant to this Article Twelve at the time
actually made shall not be subject to any recovery by any holder of Senior
Indebtedness or Representative therefor or other Person pursuant to this Article
Twelve at any time thereafter and (ii) made by or from any Persons other than
any Subsidiary Guarantor shall not be subject to any recovery by any holder of
Senior Indebtedness or Representative therefor or other Person pursuant to this
Article Twelve at any time thereafter except to the extent such Person recovers
any such amount paid from such Subsidiary Guarantor, whether pursuant to rights
of indemnity, rescission or otherwise.
Section 12.12. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness. With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants or
obligations as are specifically set forth in this Article and no implied
covenants or obligations with respect to holders of Senior Indebtedness shall be
read into this Indenture against the Trustee.
ARTICLE THIRTEEN
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of TIA Section 318(c), the imposed duties shall
control.
Section 13.02. Notices.
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<PAGE> 68
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by certified or registered mail (return
receipt requested), telecopier or overnight air courier guaranteeing next day
delivery, addressed as follows:
If to the Company or any Subsidiary Guarantor:
Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Attention: Treasurer
If to the Trustee:
The Bank of New York
101 Barclay Street, 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
The Company or any Subsidiary Guarantor or the Trustee by notice to the
other may designate additional or different addresses for subsequent notices or
communications.
All notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication mailed to a Holder shall be mailed to him
by first-class mail at this address as it appears on the registration books of
the Registrar and shall be sufficiently given to him if so mailed within the
time prescribed. Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above, it
is duly given, whether or not the addressee receives it. If the Company or any
Subsidiary Guarantor mails notice or communications to Holders it shall mail a
copy to the Trustee and each Agent at the same time.
Section 13.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Subsidiary Guarantors, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
Section 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture (except with
respect to the initial issuance of the Securities), the Company or such
Subsidiary Guarantor, as the case may be, shall furnish to the Trustee:
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(1) an Officers' Certificate (which shall include the statements set
forth in Section 13.05) stating that, in the opinion of the signers, the
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, such conditions precedent have been complied with.
Section 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such covenant or condition has been complied with.
Section 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or for a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules for its
functions.
Section 13.07. Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday, or a day on which banks and
trust companies in The City of New York are not required by law or executive
order to be open. If a payment date is a Legal Holiday at a place of payment,
payment may be made at the place on the next succeeding day that is not a Legal
Holiday, without additional interest.
Section 13.08. Governing Law.
THIS INDENTURE AND THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT
THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company, any Subsidiary Guarantor or any other Subsidiary.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
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Section 13.10. No Recourse Against Others.
All liability described in paragraph 18 of the Securities of any director,
officer, employee or stockholder, as such, of the Company, the Subsidiary
Guarantors or the Trustee is waived and released.
Section 13.11. Successors.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 13.12. Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
instrument.
Section 13.13. Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
GIANT INDUSTRIES, INC.
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
THE BANK OF NEW YORK, as Trustee
By: /s/ Walter N. Gitlin
-------------------------------
Name: Walter N. Gitlin
Title: Vice President
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SUBSIDIARY GUARANTORS
Giant Industries Arizona, Inc.,
an Arizona corporation
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
Giant Exploration & Production Company,
a Texas corporation
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
Ciniza Production Company,
a New Mexico corporation
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
Giant Stop-N-Go of New Mexico, Inc.,
a New Mexico corporation
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
Giant Four Corners, Inc.,
an Arizona corporation
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
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Phoenix Fuel Co., Inc.
an Arizona corporation
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
San Juan Refining Company,
a New Mexico corporation
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
Giant Mid-Continent, Inc.,
an Arizona corporation
By: /s/ A. Wayne Davenport
-------------------------------
Name: A. Wayne Davenport
Title: Vice President
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<PAGE> 74
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
GIANT INDUSTRIES, INC.
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend]
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND UNDER APPLICABLE STATE
SECURITIES LAWS, AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER
OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM
IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
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<PAGE> 75
["IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS
SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.]"
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<PAGE> 76
9% SENIOR SUBORDINATED NOTE DUE 2007
No._______________ $__________________
CUSIP No. 374508 AB 5
Giant Industries, Inc., a Delaware corporation, promises to pay to
__________________________________ or registered assigns the principal sum of
__________________________________________ Dollars on , 2007.
Interest Payment Dates: and
Record Dates: and
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
In Witness Whereof, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
[Seal] GIANT INDUSTRIES, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
Dated:___________________
Certificate of Authentication:
The Bank of New York,
as Trustee, certifies that this is one of
the Securities referred to in the within-
mentioned Indenture.
By:_____________________________________
Authorized Signatory
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<PAGE> 77
[REVERSE OF SECURITY]
GIANT INDUSTRIES, INC.
9% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. Giant Industries, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
9% per annum from __________, 1997 until maturity; provided, however, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
interest will accrue on this security at a rate of __% per annum from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. The
Company will pay interest semiannually on ________________ and ____________ of
each year (each an "Interest Payment Date"), or if any such day is not a
Business Day, on the next succeeding Business Day. Interest on the Securities
will accrue from the most recent Interest Payment Date on which interest has
been paid or, if no interest has been paid, from _____________, 1997; provided,
that if there is no existing Default in the payment of interest, and if this
Security is authenticated between a record date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be ____________, 1998. The Company shall pay
interest on overdue principal and premium, if any, from time to time on demand
at a rate equal to the interest rate then in effect; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment. The Company will pay interest on the Securities to
the persons who are registered holders of Securities at the close of business on
the record date immediately preceding the Interest Payment Date, even if such
Securities are cancelled after the record date and on or before the Interest
Payment Date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal of, premium, if any, and
interest on the Securities in money of the United States of America that at the
time of payment is legal tender for payment of public and private debts.
However, the Company may pay such amounts by check payable in such money. It may
mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without notice. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
4. Indenture. The Company issued the Securities under an Indenture, dated
as of ___________, 1997 (the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbb) as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. The Securities are
limited to $150,000,000 aggregate principal amount.
5. Ranking and Guarantees. The Securities are general senior subordinated
unsecured obligations of the Company. The Company's obligation to pay principal,
premium, if any, and interest with respect to the Securities is unconditionally
guaranteed on a senior subordinated basis, jointly and severally, by the
Subsidiary Guarantors pursuant to Article Eleven of the Indenture. Certain
limitations to the obligations of the Subsidiary Guarantors are set forth in
further detail in the Indenture.
6. Optional Redemption. At any time on or after _______, 2002, the Company
may, at its option, redeem all or any portion of the Securities at the
redemption prices (expressed as percentages of the principal
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<PAGE> 78
amount of the Securities) set forth below, plus, in each case, accrued interest
thereon to the applicable redemption date, if redeemed during the 12-month
period beginning of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 %
2003 %
2004 %
2005 and thereafter 100.00%
</TABLE>
In addition, at any time and from time to time on or prior to September 1,
2002, the Company may redeem in the aggregate up to 35% of the aggregate
principal amount of the Notes originally issued with the proceeds of one or more
Public Equity Offerings, at a redemption price (expressed as a percentage of
principal amount) of ____%, plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the aggregate initial principal amount
of the Notes must remain outstanding after each such redemption. In order to
effect the foregoing redemption, the Company must mail notice of redemption in
accordance with the terms of the Indenture no later than 60 days after the
related Public Equity Offering and must consummate such redemption within 90
days of the closing of the Public Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed to the
Holder's registered address at least 30 days but not more than 60 days before
the redemption date to each Holder of Securities to be redeemed. If less than
all Securities are to be redeemed, the Trustee shall select pro rata or by lot
the Securities to be redeemed in multiples of $1,000. Securities in
denominations larger than $1,000 may be redeemed in part. On and after the
redemption date interest ceases to accrue on Securities or portions of them
called for redemption (unless the Company shall default in the payment of the
redemption price or accrued interest).
8. Change of Control. In the event of a Change of Control of the Company,
the Company shall be required to make an offer to purchase pro rata or by lot
all or any portion of each Holder's Securities, at 101% of the principal amount
thereof, plus accrued interest to the Change of Control Payment Date.
9. Net Proceeds Offer. In the event of certain Asset Sales, the Company
may be required to make a Net Proceeds Offer to purchase pro rata or by lot all
or any portion of each Holder's Securities, at 100% of the principal amount of
the Securities plus accrued interest to the Net Proceeds Payment Date.
10. Restrictive Covenants. The Indenture imposes certain limitations on,
among other things, the ability of the Company to merge or consolidate with any
other Person or sell, lease or otherwise transfer all or substantially all of
its properties or assets, and the ability of the Company and its Restricted
Subsidiaries to dispose of certain assets, to pay dividends and make certain
other distributions and payments, to make certain investments or redeem, retire,
repurchase or acquire for value shares of Capital Stock, to incur additional
Indebtedness or incur encumbrances against certain property and to enter into
certain transactions with Affiliates, all subject to certain limitations
described in the Indenture.
11. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 (or, in the case of Securities
sold to institutional "accredited investors" as described in Rule 501(a) (1),
(2), (3) or (7) under the Securities Act in a transaction intended to be exempt
from registration under the Securities Act, minimum denominations of $500,000)
and whole multiples of $1,000. A Holder may transfer or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not transfer or exchange any Securities selected for redemption.
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Also, it need not transfer or exchange any Securities for a period of 15 days
before the mailing of a notice of redemption of Securities to be redeemed.
12. Persons Deemed Owners. The registered Holder of a Security may
be treated as the owner of it for all purposes and neither the Company, any
Subsidiary Guarantor, the Trustee nor any Agent shall be affected by notice
to the contrary.
13. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee or Paying Agent will pay the money
back to the Company at its written request. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
14. Amendment, Supplement, Waiver. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Securities, and
any past default or noncompliance with any provision may be waived with the
consent of the Holders of a majority in principal amount of the Securities.
Without the consent of any Holder, the Company may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency or to provide for uncertificated Securities in addition to
certificated Securities or to make any change that does not adversely affect the
rights of any Holder.
15. Successor Corporation. When a successor corporation assumes all the
obligations of its predecessor under the Securities and the Indenture, the
predecessor corporation will be released from those obligations.
16. Defaults and Remedies. An event of default generally is: default by
the Company or any Subsidiary Guarantor for 30 days in payment of interest on
the Securities; default by the Company or any Subsidiary Guarantor in payment of
principal of or premium, if any, on the Securities; default by the Company or
any Subsidiary Guarantor in the deposit of any optional redemption payment when
due and payable; defaults resulting in acceleration prior to maturity of certain
other Indebtedness; failure by the Company or any Subsidiary Guarantor for 60
days after notice to comply with any of its other agreements in the Indenture;
certain final judgments against the Company or Subsidiaries; a failure of any
Guarantee of a Subsidiary Guarantor to be in full force and effect or denial by
any Subsidiary Guarantor of its obligations with respect thereto; and certain
events of bankruptcy or insolvency. Subject to certain limitations in the
Indenture, if an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Securities
may declare all the Securities to be due and payable immediately, except that in
the case of an Event of Default arising from certain events of bankruptcy,
insolvency or reorganization relating to the Company, all outstanding Securities
shall become due and payable immediately without further action or notice.
Holders may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee may require indemnity and security satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power. The Company must
furnish an annual compliance certificate to the Trustee.
17. Trustee Dealings with Company and Subsidiary Guarantors. The Bank of
New York, the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, the Subsidiary Guarantors or their respective Subsidiaries or
Affiliates with the same rights it would have if it were not Trustee.
18. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company, any Subsidiary Guarantor or the Trustee,
shall not have any liability for any obligations of the Company, any Subsidiary
Guarantor or the Trustee, under the Securities or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
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<PAGE> 80
19. Authentication. This Security shall not be valid until the
Trustee or an authenticating agent signs the certificate of authentication on
the other side of this Security.
20. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants
by the entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Securities as a convenience to Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
This Security shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of law principles.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to: Giant Industries, Inc.,
23733 North Scottsdale Road, Scottsdale, Arizona 85255, Attention:
Treasurer.
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<PAGE> 81
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
________________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint____________________________ as agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
________________________________________________________________________________
Your Signature:________________________________________________________________
(Sign exactly as your name appears on the other side of this
Security)
Your Name:_____________________________________________________________________
Date:__________________________
Signature Guarantee:___________________________________________________________
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<PAGE> 82
CERTIFICATE OR TRANSFER (TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER RESTRICTED NOTES)
This certificate relates to $_________ principal amount of Securities held in
(check applicable space)______ book-entry or_______ definitive form by the
undersigned.
The undersigned (check one box below):
/ / has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depository a Security
or Securities in definitive, registered form of authorized denominations
and an aggregate principal amount equal to its beneficial interest in such
Global Note (or the portion thereof indicated above); or
/ / has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
The undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
(1) / / acquired for the undersigned's own account, without
Transfer (in satisfaction of Section 2.06(a)(ii)(A) of the
Indenture); or
(2) / / transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933, as amended; or
(3) / / transferred pursuant to and in compliance with Rule
904 under the Securities Act of 1933, as amended; or
(4) / / transferred pursuant to and in compliance with Rule
144 under the Securities Act of 1933, as amended; or
(5) / / transferred pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof, provided, however, that (i) if box (3) is
checked, the Company and the Trustee will require the delivery of the
certification set forth as Annex A to this Security and such other evidence
(which may include an opinion of counsel) reasonably satisfactory to them as to
the compliance with Rule 904 under the Securities Act and (ii) if box (2) or (4)
is checked, the Company or the Trustee may require evidence reasonably
satisfactory to them as to the compliance with the restrictions set forth in the
legend on the face of this Security.
__________________________________________
Signature
Signature Guarantee: __________________________________________
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<PAGE> 83
ANNEX A
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
__________________,______
The Bank of New York
Attention: Corporate Trust Trustee Administration
Ladies and Gentlemen:
In connection with our proposed sale of certain ____% Senior Subordinated
Notes due 2007 (the "Securities") of Giant Industries, Inc., a Delaware
corporation (the "Company"), we represent that:
(i) the offer of the Securities was not made to a person in the
United States;
(ii) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S under the U.S. Securities Act of 1933, as applicable; and
(iv) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S under the U.S. Securities Act of 1933.
Very truly yours,
__________________________________________
[Name]
By:_______________________________________
Name:
Title:
Address:
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<PAGE> 84
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.11, or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.11 [ ] Section 4.16 [ ]
If you want to have only part of this Security purchased by the Company
pursuant to Section 4.11, or Section 4.16 of the Indenture, state the amount (in
integral multiples of $ 1,000):
$_________________________
Date:_____________________ Signature:____________________________________
(Sign exactly as your name appears on the
other side of this Security)
Name:__________________________________________________________________________
Signature Guarantee:___________________________________________________________
A-11
<PAGE> 85
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture), jointly and
severally, have unconditionally guaranteed the due and punctual payment of the
principal of, premium, if any, and interest on the Securities, and all other
amounts due and payable under the Indenture and the Securities by the Company,
whether at maturity, acceleration, redemption, repurchase or otherwise,
including, without limitation, the due and punctual payment of interest on the
overdue principal of, premium, if any, and interest on the Securities, to the
extent lawful.
The obligations of the Subsidiary Guarantors pursuant to the Guarantee are
subject to the terms and limitations set forth in Articles Eleven and Twelve of
the Indenture, and reference is made thereto for the precise terms of the
Guarantee.
SUBSIDIARY GUARANTORS
Giant Industries Arizona, Inc.,
an Arizona corporation
Attest:________________________ By:______________________________________
Name:
Title:
Giant Exploration & Production
Company, a Texas corporation
Attest:________________________ By:______________________________________
Name:
Title:
Ciniza Production Company,
a New Mexico corporation
Attest:________________________ By:______________________________________
Name:
Title:
Giant Stop-N-Go of New Mexico, Inc.,
a New Mexico corporation
A-12
<PAGE> 86
Attest:_________________________ By:______________________________________
Name:
Title:
Giant Four Corners, Inc.,
an Arizona corporation
Attest:_________________________ By:______________________________________
Name:
Title:
Phoenix Fuel Co., Inc.
an Arizona corporation
Attest:_________________________ By:______________________________________
Name:
Title:
San Juan Refining Company,
a New Mexico corporation
Attest:_________________________ By:______________________________________
Name:
Title:
Giant Mid-Continent, Inc.
an Arizona corporation
Attest:_________________________ By:______________________________________
Name:
Title:
A-13
<PAGE> 87
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
<TABLE>
<CAPTION>
======================================================================================
DATE OF EXCHANGE AMOUNT OF AMOUNT OF PRINCIPAL SIGNATURE OF
DECREASE IN INCREASE IN AMOUNT OF THIS AUTHORIZED
PRINCIPAL PRINCIPAL GLOBAL NOTE SIGNATORY OF
AMOUNT OF THIS AMOUNT OF FOLLOWING SUCH TRUSTEE OR
GLOBAL NOTE THIS GLOBAL DECREASE OR NOTES
NOTE INCREASE CUSTODIAN
======================================================================================
<S> <C> <C> <C> <C>
======================================================================================
</TABLE>
A-14
<PAGE> 88
EXHIBIT B
*[FORM OF FACE OF EXCHANGE NOTE AND
**AND PRIVATE EXCHANGE NOTE]
9% SENIOR SUBORDINATED NOTE DUE 2007
No._________________ $__________________
CUSIP No. 374508 AB 5
Giant Industries, Inc., a Delaware corporation, promises to pay to
___________________________________ or registered assigns the principal sum of
__________________________ Dollars on , 2007.
Interest Payment Dates: and
Record Dates: and
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
In Witness Whereof, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
[Seal] GIANT INDUSTRIES, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
Dated:_________________________
Certificate of Authentication:
The Bank of New York, as Trustee,
certifies that this is one of the Securities
referred to in the within-mentioned Indenture.
By:_______________________________________
___________
* If the Note is to be issued in global form, add the Global Notes Legend
from Exhibit A and the attachment to Exhibit A captioned "[TO BE ATTACHED TO
GLOBAL NOTES] - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE."
** If the Note is a Private Exchange Note issued in a Private Exchange to
the Initial Purchasers holding an unsold portion of its initial allotment, add
the restricted securities legend from Exhibit A and include the "Certificate of
Transfer (To be Delivered upon Exchange or Registration of Transfer of
Restricted Notes)" from Exhibit A.
B-1
<PAGE> 89
Authorized Signatory
[REVERSE OF SECURITY]
GIANT INDUSTRIES, INC.
9% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. Giant Industries, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
9% per annum from _______ , 1997 until maturity. The Company will pay interest
semiannually on ______________ and ______________ of each year (each an
"Interest Payment Date"), or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Securities will accrue from the most
recent Interest Payment Date on which interest has been paid or, if no interest
has been paid, from , 1997; provided, that if there is no existing Default in
the payment of interest, and if this Security is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be
________________ , 1998. The Company shall pay interest on overdue principal and
premium, if any, from time to time on demand at a rate equal to the interest
rate then in effect; it shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Securities to
the persons who are registered holders of Securities at the close of business on
the record date immediately preceding the Interest Payment Date, even if such
Securities are cancelled after the record date and on or before the Interest
Payment Date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal of, premium, if any, and
interest on the Securities in money of the United States of America that at the
time of payment is legal tender for payment of public and private debts.
However, the Company may pay such amounts by check payable in such money. It may
mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without notice. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
4. Indenture. The Company issued the Securities under an Indenture, dated
as of __________________, 1997 (the "Indenture"), among the Company, the
Subsidiary Guarantors and the Trustee. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbb) as in effect on the date of the Indenture. Notwithstanding anything
to the contrary herein, the Securities are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The Securities are limited to $150,000,000 aggregate principal amount.
5. Ranking and Guarantees. The Securities are general senior subordinated
unsecured obligations of the Company. The Company's obligation to pay principal,
premium, if any, and interest with respect to the Securities is unconditionally
guaranteed on a senior subordinated basis, jointly and severally, by the
Subsidiary Guarantors pursuant to Article Eleven of the Indenture. Certain
limitations to the obligations of the Subsidiary Guarantors are set forth in
further detail in the Indenture.
6. Optional Redemption. At any time on or after __________ , 2002, the
Company may, at its option, redeem all or any portion of the Securities at the
redemption prices (expressed as percentages of the principal amount of the
Securities) set forth below, plus, in each case, accrued interest thereon to the
applicable redemption date, if redeemed during the 12-month period beginning
_____________ of the years indicated below:
B-2
<PAGE> 90
<TABLE>
<CAPTION>
Year Percentage
---- -----------
<S> <C>
2002 %
2003 %
2004 %
2005 and thereafter 100.00%
</TABLE>
In addition, at any time and from time to time on or prior to September 1,
2002, the Company may redeem in the aggregate up to 35% of the aggregate
principal amount of the Notes originally issued with the proceeds of one or more
Public Equity Offerings, at a redemption price (expressed as a percentage of
principal amount) of ____%, plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the aggregate initial principal amount
of the Notes must remain outstanding after each such redemption. In order to
effect the foregoing redemption, the Company must mail notice of redemption in
accordance with the terms of the Indenture no later than 60 days after the
related Public Equity Offering and must consummate such redemption within 90
days of the closing of the Public Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed to the
Holder's registered address at least 30 days but not more than 60 days before
the redemption date to each Holder of Securities to be redeemed. If less than
all Securities are to be redeemed, the Trustee shall select pro rata or by lot
the Securities to be redeemed in multiples of $1,000. Securities in
denominations larger than $1,000 may be redeemed in part. On and after the
redemption date interest ceases to accrue on Securities or portions of them
called for redemption (unless the Company shall default in the payment of the
redemption price or accrued interest).
8. Change of Control. In the event of a Change of Control of the Company,
the Company shall be required to make an offer to purchase pro rata or by lot
all or any portion of each Holder's Securities, at 101% of the principal amount
thereof, plus accrued interest to the Change of Control Payment Date.
9. Net Proceeds Offer. In the event of certain Asset Sales, the Company
may be required to make a Net Proceeds Offer to purchase pro rata or by lot all
or any portion of each Holder's Securities, at 100% of the principal amount of
the Securities plus accrued interest to the Net Proceeds Payment Date.
10. Restrictive Covenants. The Indenture imposes certain limitations on,
among other things, the ability of the Company to merge or consolidate with any
other Person or sell, lease or otherwise transfer all or substantially all of
its properties or assets, and the ability of the Company and its Restricted
Subsidiaries to dispose of certain assets, to pay dividends and make certain
other distributions and payments, to make certain investments or redeem, retire,
repurchase or acquire for value shares of Capital Stock, to incur additional
Indebtedness or incur encumbrances against certain property and to enter into
certain transactions with Affiliates, all subject to certain limitations
described in the Indenture.
11. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 (or, in the case of Securities
sold to institutional "accredited investors" as described in Rule 501(a) (1),
(2), (3) or (7) under the Securities Act in a transaction intended to be exempt
from registration under the Securities Act, minimum denominations of $500,000)
and whole multiples of $1,000. A Holder may transfer or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not transfer or exchange any Securities selected for redemption.
B-3
<PAGE> 91
Also, it need not transfer or exchange any Securities for a period of 15 days
before the mailing of a notice of redemption of Securities to be redeemed.
12. Persons Deemed Owners. The registered Holder of a Security may be
treated as the owner of it for all purposes and neither the Company, any
Subsidiary Guarantor, the Trustee nor any Agent shall be affected by notice to
the contrary.
13. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee or Paying Agent will pay the money
back to the Company at its request. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
14. Amendment, Supplement, Waiver. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Securities, and
any past default or noncompliance with any provision may be waived with the
consent of the Holders of a majority in principal amount of the Securities.
Without the consent of any Holder, the Company may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency or to provide for uncertificated Securities in addition to
certificated Securities or to make any change that does not adversely affect the
rights of any Holder.
15. Successor Corporation. When a successor corporation assumes all the
obligations of its predecessor under the Securities and the Indenture, the
predecessor corporation will be released from those obligations.
16. Defaults and Remedies. An event of default generally is: default by
the Company or any Subsidiary Guarantor for 30 days in payment of interest on
the Securities; default by the Company or any Subsidiary Guarantor in payment of
principal of or premium, if any, on the Securities; default by the Company or
any Subsidiary Guarantor in the deposit of any optional redemption payment when
due and payable; defaults resulting in acceleration prior to maturity of certain
other Indebtedness; failure by the Company or any Subsidiary Guarantor for 60
days after notice to comply with any of its other agreements in the Indenture;
certain final judgments against the Company or Subsidiaries; a failure of any
Guarantee of a Subsidiary Guarantor to be in full force and effect or denial by
any Subsidiary Guarantor of its obligations with respect thereto; and certain
events of bankruptcy or insolvency. Subject to certain limitations in the
Indenture, if an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Securities
may declare all the Securities to be due and payable immediately, except that in
the case of an Event of Default arising from certain events of bankruptcy,
insolvency or reorganization relating to the Company, all outstanding Securities
shall become due and payable immediately without further action or notice.
Holders may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee may require indemnity and security satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power. The Company must
furnish an annual compliance certificate to the Trustee.
17. Trustee Dealings with Company and Subsidiary Guarantors. The Bank of
New York, the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, the Subsidiary Guarantors or their respective Subsidiaries or
Affiliates with the same rights it would have if it were not Trustee.
18. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company, any Subsidiary Guarantor or the Trustee,
shall not have any liability for any obligations of the Company, any Subsidiary
Guarantor or the Trustee, under the Securities or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
B-4
<PAGE> 92
19. Authentication. This Security shall not be valid until the
Trustee or an authenticating agent signs the certificate of authentication on
the other side of this Security.
20. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants
by the entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Securities as a convenience to Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
This Security shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of law principles.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to: Giant Industries, Inc.,
23733 North Scottsdale Road, Scottsdale, Arizona 85255, Attention:
Treasurer.
B-5
<PAGE> 93
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
________________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________ as agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Your Signature:_________________________________________________________________
(Sign exactly as your name appears on the other side of this
Security)
Your Name:______________________________________________________________________
Date:____________________
Signature Guarantee:____________________________________________________________
B-6
<PAGE> 94
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.11, or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.11 [ ] Section 4.16 [ ]
If you want to have only part of this Security purchased by the Company
pursuant to Section 4.11, or Section 4.16 of the Indenture, state the amount (in
integral multiples of $ 1,000):
$_______________________
Date:___________________ Signature:_______________________________
(Sign exactly as your name appears on the other side of this Security)
Name:___________________________________________________________________________
Signature Guarantee:____________________________________________________________
B-7
<PAGE> 95
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture), jointly and
severally, have unconditionally guaranteed the due and punctual payment of the
principal of, premium, if any, and interest on the Securities, and all other
amounts due and payable under the Indenture and the Securities by the Company,
whether at maturity, acceleration, redemption, repurchase or otherwise,
including, without limitation, the due and punctual payment of interest on the
overdue principal of, premium, if any, and interest on the Securities, to the
extent lawful.
The obligations of the Subsidiary Guarantors pursuant to the Guarantee are
subject to the terms and limitations set forth in Articles Eleven and Twelve of
the Indenture, and reference is made thereto for the precise terms of the
Guarantee.
SUBSIDIARY GUARANTORS
Giant Industries Arizona, Inc.,
an Arizona corporation
Attest:_______________________ By:_____________________________________
Name:
Title:
Giant Exploration & Production
Company, a Texas corporation
Attest:_______________________ By:_____________________________________
Name:
Title:
Ciniza Production Company,
a New Mexico corporation
Attest:________________________ By:_____________________________________
Name:
Title:
Giant Stop-N-Go of New Mexico, Inc.,
a New Mexico corporation
B-8
<PAGE> 96
Attest:________________________ By:_____________________________________
Name:
Title:
Giant Four Corners, Inc.,
an Arizona corporation
Attest:_________________________ By:_____________________________________
Name:
Title:
Ciniza Production Company,
a New Mexico corporation
Attest:__________________________ By:_____________________________________
Name:
Title:
Giant Stop-N-Go of New Mexico, Inc.,
a New Mexico corporation
Attest:_________________________ By:_____________________________________
Name:
Title:
Giant Four Corners, Inc.,
an Arizona corporation
Attest:_________________________ By:_____________________________________
Name:
Title:
Phoenix Fuel Co., Inc.
an Arizona corporation
B-9
<PAGE> 97
Attest:_________________________ By:_____________________________________
Name:
Title:
San Juan Refining Company,
a New Mexico corporation
Attest:_________________________ By:_____________________________________
Name:
Title:
Giant Mid-Continent, Inc.
an Arizona corporation
Attest:__________________________ By:_____________________________________
Name:
Title:
B-10
<PAGE> 1
EXHIBIT 10.31
GIANT INDUSTRIES, INC.
9% Senior Subordinated Notes Due 2007
REGISTRATION RIGHTS AGREEMENT
August 21, 1997
UBS Securities LLC
Donaldson, Lufkin & Jenrette
Securities Corporation
BancAmerica Securities, Inc.
Jefferies & Company, Inc.
c/o UBS Securities LLC
299 Park Avenue
New York, New York 10171-0026
Ladies and Gentlemen:
Giant Industries, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to UBS Securities LLC, Donaldson, Lufkin & Jenrette Securities
Corporation, BancAmerica Securities, Inc. and Jefferies & Company, Inc.
(collectively, the "Initial Purchasers"), upon the terms set forth in a purchase
agreement of even date herewith (the "Purchase Agreement"), $150,000,000
aggregate principal amount of its 9% Senior Subordinated Notes Due 2007 (the
"Notes"). The Notes will be issued pursuant to an Indenture, dated as of August
26, 1997 (the "Indenture") between the Company and NBD Bank, National
Association (the "Trustee"). The obligations of the Company with respect to the
Notes will be guaranteed, on a joint and several basis, by the entities listed
on Annex A hereto (the "Subsidiary Guarantors") on the terms and conditions set
forth in the Indenture. For purposes of this Agreement, the term "Notes" shall
include the related guarantees thereof of the Subsidiary Guarantors. As an
inducement to the Initial Purchasers, the Company and the Subsidiary Guarantors
agree with the Initial Purchasers, for the benefit of the holders of the Notes
(including, without limitation, the Initial Purchasers), the Exchange Notes (as
defined below) and the Private Exchange Notes (as defined below) (collectively
the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own cost, prepare
and, not later than 60 days after (or if the 60th day is not a business day, the
first business day thereafter) the date of original issue of the Notes (the
"Issue Date"), file with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to a proposed offer (the "Registered
Exchange Offer") to the Holders of Transfer Restricted Notes (as defined in
Section 6 hereof), who are not prohibited by any law or policy of the Commission
from participating in the Registered Exchange Offer, to issue and deliver to
such Holders, in exchange for the Notes, a like aggregate principal amount of
debt securities (the "Exchange Notes") of the Company issued under the Indenture
and identical in all material respects to the Notes (except for the transfer
restrictions relating to the Notes and provisions relating to the matters
described in Section 6 hereof) and the related guarantees of the Subsidiary
Guarantors identical in all material respects to the guarantees of the Notes to
be made by the Subsidiary Guarantors pursuant to the Indenture. For purposes of
this Agreement, the term "Exchange Notes" shall include the related guarantees
thereof of the Subsidiary Guarantors. The Company shall use its best efforts to
cause such Exchange Offer Registration Statement to become effective under the
Securities Act within 120 days (or if the 120th day is not a business day, the
first business day thereafter) after the Issue Date of the Notes and shall keep
the Exchange Offer Registration Statement effective for not less than 30 days
(or longer, if required by applicable law) after the date notice of the
Registered Exchange Offer is mailed to the Holders (such period being called the
"Exchange Offer Registration Period").
<PAGE> 2
If the Company effects the Registered Exchange Offer, the Company will be
entitled to close the Registered Exchange Offer 30 days after the commencement
thereof provided that the Company has accepted all the Notes theretofore validly
tendered in accordance with the terms of the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Notes electing to exchange the Notes
for Exchange Notes (assuming that such Holder is not an affiliate of the Company
within the meaning of the Securities Act, acquires the Exchange Notes in the
ordinary course of such Holder's business and has no arrangements with any
person to participate in the distribution of the Exchange Notes and is not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer) to trade such Exchange Notes from and after their
receipt without any limitations or restrictions under the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), subject as to
an Exchanging Dealer (as defined below) to the provisions of the next paragraph
below, and without material restrictions under the securities laws of the
several states of the United States.
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Notes, acquired for its own account as a result of market
making activities or other trading activities, for Exchange Notes (an
"Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex B hereto on the cover, in Annex C hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex D hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Notes received by such
Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial
Purchaser that elects to sell Exchange Notes acquired in exchange for Notes
constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective, and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; provided, however, that (i) in the case
where such prospectus and any amendment or supplement thereto must be delivered
by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser
of 180 days and the date on which all Exchanging Dealers and the Initial
Purchasers have sold all Exchange Notes held by them (unless such period is
extended pursuant to Section 3(l) below) and (ii) the Company shall make such
prospectus and any amendment or supplement thereto, available to any
broker-dealer for use in connection with any resale of any Exchange Notes for a
period of not less than 90 days after the consummation of the Registered
Exchange Offer. The Company shall be deemed not to have used its best efforts to
keep the Exchange Offer Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
Securities covered thereby not able to offer and sell such securities during
that period, unless such action is required by applicable law.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Notes acquired by it as part of its initial distribution, the
Company, simultaneously with the delivery of the Exchange Notes pursuant to the
Registered Exchange Offer, shall issue and deliver to such Initial Purchaser
upon the written request of such Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by such Initial Purchaser, a like principal amount
of debt securities of the Company issued under the Indenture and identical in
all material respects (including the existence of restrictions on transfer under
the Securities Act and the securities laws of the several states of the United
States but excluding provisions relating to the matters described in Section 6
hereof) to the Notes (the "Private Exchange Notes") and the related guarantees
of the Subsidiary Guarantors identical in all material respects to the
guarantees of the Notes to be made by the Subsidiary Guarantors pursuant to the
Indenture. For purposes of this Agreement, the term "Private Exchange Notes"
shall include the related guarantees thereof by the Subsidiary
2
<PAGE> 3
Guarantors. The Notes, the Exchange Notes and the Private Exchange Notes are
herein collectively called the "Securities."
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date notice
thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
To the extent permitted by law, the Company shall, upon request of UBS
Securities LLC, inform the Initial Purchasers of the names and addresses of the
Holders to whom the Registered Exchange Offer is made, and the Initial
Purchasers shall have the right to, and, if requested by the Company, shall,
contact such Holders and otherwise facilitate the tender of Notes in the
Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer or
the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Notes validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(ii) deliver to the Trustee for cancellation all the Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of the Notes, Exchange Notes or Private Exchange Notes, as the case
may be, equal in principal amount to the Notes of such Holder so accepted
for exchange.
The Indenture will provide that the Exchange Notes will not be subject to
the transfer restrictions set forth in the Indenture and that all the Securities
will vote and consent together on all matters as one class and that none of the
Securities will have the right to vote or consent as a class separate from one
another on any matter.
Interest on each Exchange Note and Private Exchange Note issued pursuant
to the Registered Exchange Offer and in the Private Exchange will accrue from
the last interest payment date on which interest was paid on the Notes
surrendered in exchange therefor or, if no interest has been paid on the Notes,
from the date of original issue of the Notes.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes within the meaning of the Securities Act,
(iii) such Holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is
not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes and (v) if such Holder is a broker-dealer, that it will receive
Exchange Notes for its own account in exchange for Notes that were acquired as a
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<PAGE> 4
result of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes.
The Registered Exchange Offer shall not be subject to any conditions,
other than (1) that the Registered Exchange Offer, or the making of any exchange
by a Holder, does not violate applicable law or any applicable interpretation of
the staff of the Commission, (2) that no action or proceeding shall have been
instituted or threatened in any court or by or before any governmental agency or
body with respect to the Registered Exchange Offer, (3) that there shall not
have been adopted or enacted any law, statute, rule or regulation prohibiting or
limiting the Registered Exchange Offer, (4) that there shall not have been
declared by United States federal or New York state authorities a banking
moratorium, (5) that trading on the New York Stock Exchange or generally in the
United States over-the-counter market shall not have been suspended by order of
the Commission or any other governmental authority and (6) such other conditions
as may be reasonably acceptable to UBS Securities LLC which, in the Company's
judgment, would reasonably be expected to impair the ability of the Company to
proceed with the Registered Exchange Offer. The Exchange Offer shall be subject
to the further condition that no stop order, injunction or similar order shall
have been issued or obtained by the Commission or any state securities authority
suspending the effectiveness of the Exchange Offer Registration Statement and no
proceedings shall have been initiated or, to the knowledge of the Company,
threatened for that purpose.
Prior to effectiveness of the Exchange Offer Registration Statement, the
Company shall, if requested by the staff of the Commission, provide a
supplemental letter to the Commission (i) stating that the Company is
registering the Registered Exchange Offer in reliance on the position of the SEC
enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and
Morgan Stanley and Co., Inc. (available June 5, 1991) and (ii) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the Exchange Notes and that, to the
best of the Company's information and belief, each Holder participating in the
Registered Exchange Offer is acquiring the Exchange Notes in its ordinary course
of business and has no arrangement or understanding with any Person to
participate in the distribution of the Exchange Notes received in the Registered
Exchange Offer.
If in the opinion of counsel to the Company (which may be in-house
counsel) there is a question as to whether the Registered Exchange Offer is
permitted by applicable law, the Company hereby agrees to seek a no-action
letter or other favorable decision from the Commission allowing the Company to
consummate the Registered Exchange Offer. In connection therewith, the Company
hereby agrees to pursue the issuance of such a decision to the Commission staff
level, but shall not be required to take action to effect a change of stated or
recognized Commission policy. The Company hereby agrees, however, to (i)
participate in telephonic conferences with the Commission and the staff of the
Commission, (ii) deliver to the staff of the Commission an analysis prepared by
counsel to the Company (which may be in-house counsel) setting forth the legal
bases, if any, upon which such counsel has concluded that the Registered
Exchange Offer should be permitted and (iii) diligently pursue a resolution
(which need not be favorable) by the staff of the Commission of such submission.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
120 days of the Issue Date, (iii) any Initial Purchaser so requests with respect
to the Notes (or the Private Exchange Notes) not eligible, pursuant to
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<PAGE> 5
applicable law or applicable interpretation of the staff of the Commission, to
be exchanged for Exchange Notes in the Registered Exchange Offer and held by it
following consummation of the Registered Exchange Offer or (iv) any Holder
(other than an Exchanging Dealer) is not eligible, pursuant to applicable law or
applicable interpretation of the staff of the Commission, to participate in the
Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Notes on the date of the
exchange, the Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as practicable (but in no
event more than 30 days after so required or requested pursuant to this Section
2) file with the Commission and thereafter shall use its best efforts to cause
to be declared effective a registration statement (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statement, a
"Registration Statement") on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Notes by the Holders
thereof from time to time in accordance with the methods of distribution set
forth in the Shelf Registration Statement (as determined by Holders of a
majority in aggregate principal amount of Securities eligible for inclusion in
the Shelf Registration Statement) and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); provided, however, that no Holder
(other than an Initial Purchaser) shall be entitled to have the Securities held
by it covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all the provisions of this Agreement applicable to such
Holder.
(b) The Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the prospectus included
therein to be lawfully delivered by the Holders of the relevant Securities, for
a period of two years (or for such longer period if extended pursuant to Section
3(l) below) from the date of its effectiveness or such shorter period that will
terminate when (i) the Notes covered by the Shelf Registration Statement can be
sold pursuant to Rule 144 without any limitations under clauses (c), (e), (f)
and (h) of Rule 144 (or any successor rule thereof), (ii) all Securities covered
by the Shelf Registration Statement have been sold in the manner contemplated
therein, or (iii) a subsequent Shelf Registration Statement covering all of the
Securities has been declared effective; provided, however, that the Company
shall not be obligated to keep the Shelf Registration Statement effective if (i)
the Company determines, in its reasonable judgment, upon advice of counsel, as
authorized by a resolution of its Board of Directors, that the continued
effectiveness and usability of the Shelf Registration Statement would (x)
require the disclosure of material information, which the Company has a bona
fide business reason for preserving as confidential, or (y) interfere with any
financing, acquisition, corporate reorganization or other material transaction
involving the Company or any of its subsidiaries or its parent, provided that
the failure to keep the Shelf Registration Statement effective and usable for
offers and sales of Securities for such reasons shall last no longer than 45
days in any 12-month period (whereafter Additional Interest (as defined in
Section 6(a)) shall accrue and be payable), and (ii) the Company promptly
thereafter complies with the requirements of Section 3(l) hereof, if applicable.
Any such period during which the Company is excused from keeping the Shelf
Registration Statement effective and usable for offers and sales of Securities
is referred to herein as a "Suspension Period." A Suspension Period shall
commence on and include the date that the Company gives notice that the
registration statement is no longer effective or the prospectus included therein
is no longer usable for offers and sales of Securities and shall end on the
earlier to occur of (1) the date on which each seller of Securities covered by
the Shelf Registration Statement either receives the copies of the supplemented
or amended prospectus contemplated by Section 3(l) hereof or is advised in
writing by the Company that use of the prospectus may be resumed and (2) the
expiration of 45 days in any 12-month period during which one or more Suspension
Periods has been in effect. The Company shall be deemed not to have used its
best efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action (other than actions which
trigger a Suspension Period) that would result in Holders of Securities covered
thereby not being able to offer and sell such securities during that period,
unless such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company (i) shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, (A) to comply
in all material respects with the applicable requirements of the Securities Act
and the rules and regulations of the Commission and (B) not to contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein
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<PAGE> 6
or necessary in order to make the statements therein not misleading and (ii)
shall cause any Prospectus forming part of the Shelf Registration Statement, and
any supplement to such Prospectus (as amended or supplemented from time to
time), not to contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable,
any Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to the
filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that an Initial Purchaser (with respect to any portion
of an unsold allotment from the original offering) is participating in the
Registered Exchange Offer or the Shelf Registration, the Company shall use its
best efforts to reflect in each such document when so filed with the Commission,
such comments as such Initial Purchaser reasonably may propose; (ii) include the
information set forth in Annex B hereto on the cover, in Annex C hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section and in Annex D hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement and
include the information set forth in Annex E hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; (iii) if requested by an
Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement; (iv) include within
the prospectus contained in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," reasonably acceptable to the Initial
Purchasers, which shall contain a summary statement of the positions taken or
policies made by the staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Exchange Notes received by such broker-dealer in the
Registered Exchange Offer (a "Participating Broker-Dealer"), whether such
positions or policies have been publicly disseminated by the staff of the
Commission or such positions or policies, in the reasonable judgment of the
Initial Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in the
case of a Shelf Registration Statement, include the names of the Holders who
propose to sell Securities pursuant to the Shelf Registration Statement, as
selling securityholders and any other information related to such Holders as
required under the rules and regulations of the Commission.
(b) The Company shall give written notice to the Initial Purchasers, the
Holders of the Securities and any Participating Broker-Dealer from whom the
Company has received prior written notice that it will be a Participating
Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation, of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
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(v) of the happening of any event that requires the Company to make
changes in the Registration Statement or the prospectus in order that the
Registration Statement or the prospectus do not contain an untrue
statement of a material fact nor omit to state a material fact required to
be stated therein or necessary to make the statements therein (in the case
of the prospectus, in the light of the circumstances under which they were
made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal, at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall, to the extent permitted by law, use its best
efforts to (i) prepare and file with the Commission such amendments and
post-effective amendments to each Registration Statement as may be necessary
under applicable law to keep such Registration Statement effective for the
applicable period, (ii) cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed (if required) pursuant
to Rule 424 under the Securities Act, and (iii) comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
each Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof.
(e) The Company, in the case of a Shelf Registration, shall (i) notify
each Holder of Securities, at least ten (10) business days prior to filing the
Shelf Registration Statement with the Commission, that the Shelf Registration
Statement is proposed to be filed and advising such Holders that the
distribution of Securities will be made in accordance with the method selected
by Holders of a majority in aggregate principal amount of Securities eligible
for inclusion in the Shelf Registration Statement and (ii) furnish to each
Holder of Securities included within the coverage of the Shelf Registration,
without charge, at least one copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits thereto (including
those, if any, incorporated by reference other than exhibits to such
incorporated documents unless such exhibits are specifically incorporated by
reference into such incorporated documents but excluding any portions of
exhibits for which the Company has obtained confidential treatment).
(f) The Company shall deliver to each Exchanging Dealer and each Initial
Purchaser, and to any other Holder who so requests, without charge, at least one
copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if any
Initial Purchaser or any such Holder requests, all exhibits thereto (including
those, if any, incorporated by reference other then exhibits to such
incorporated documents unless such exhibits are specifically incorporated by
reference into such incorporated documents but excluding any portions of
exhibits for which the Company has obtained confidential treatment).
(g) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of the Securities in connection with the offering and sale of the Securities
covered by the prospectus, or any amendment or supplement thereto, included in
the Shelf Registration.
(h) The Company shall deliver to each Initial Purchaser, any Exchanging
Dealer, any Participating Broker-Dealer and such other persons required to
deliver a prospectus following the Registered Exchange Offer, without charge, as
many copies of the final prospectus included in the Exchange Offer Registration
Statement and any amendment or supplement thereto as such persons may reasonably
request. The Company consents, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto by any Initial
Purchaser, if necessary, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Notes covered by the
prospectus, or any amendment or supplement thereto, included in the Registered
Exchange Offer.
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(i) The Company shall (i) in the case of an Exchange Offer, furnish to
one firm of legal counsel for the Initial Purchasers and (ii) in the case of a
Shelf Registration, furnish to one firm of legal counsel for the Holders of
Securities covered thereby copies of any request received by or on behalf of the
Company from the Commission or any state securities authority for amendments or
supplements to the relevant Registration Statement and Prospectus or for
additional information.
(j) Prior to any public offering of the Securities pursuant to any
Registration Statement, the Company shall register or qualify or cooperate with
the Holders of the Securities included therein and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification or pre-emption of such registration or
qualification by federal law) of the Securities for offer and sale under the
securities or "blue sky" laws of such states of the United States as any Holder
of the Securities reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Registration Statement;
provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so qualified
or (ii) take any action that would subject it to general service of process or
to taxation in any jurisdiction where it is not then so subject.
(k) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing the
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders may request a reasonable period of time prior to sales of the
Securities pursuant to such Registration Statement.
(l) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company is
required to maintain an effective Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to the Registration
Statement or supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Notes or purchasers
of Securities, the prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If the Company notifies the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b)
above to suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Initial Purchasers, the Holders of the
Securities and any such Participating Broker-Dealers shall suspend use of such
prospectus, and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration Statement
provided for in Section 1 above shall each be extended by the number of days
from and including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer shall have received such amended or supplemented
prospectus pursuant to this Section 3(l).
(m) The Company shall (i) a reasonable time prior to the filing of any
Exchange Offer Registration Statement, any Prospectus forming a part thereof,
any amendment to an Exchange Offer Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the Initial
Purchasers, and make such changes in any such document prior to the filing
thereof as UBS Securities LLC or one firm of legal counsel to the Initial
Purchasers may reasonably request, (ii) in the case of a Shelf Registration, a
reasonable time prior to filing any Shelf Registration Statement, any Prospectus
forming a part thereof, any amendment to such Shelf Registration Statement or
amendment or supplement to such Prospectus, provide copies of such document to
UBS Securities LLC, one firm of legal counsel appointed by UBS Securities LLC to
represent the Holders participating in such Shelf Registration, the managing
underwriters of an underwritten offering of Registrable Securities, if any, and
their counsel, and make such changes in any such document prior to the filing
thereof as UBS Securities, Inc., such one firm of legal counsel for the Holders,
such managing underwriters or their counsel may reasonably request, and (iii)
cause the representatives of the Company to be available for discussion of such
document as shall be reasonably requested by UBS Securities LLC, one firm of
legal counsel to the Holders, the managing underwriters and their counsel. The
Company shall not at any time make any filing of any such document of which UBS
Securities LLC, one firm of legal counsel to the Holders, the managing
underwriters and their counsel shall not have previously been advised and
furnished a copy or to which UBS Securities LLC, one firm of legal counsel to
the Holders, the
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<PAGE> 9
managing underwriters and their counsel shall reasonably object; provided,
however, that the provisions of this paragraph (m) shall not apply to any
document filed by the Company pursuant to the Exchange Act which is incorporated
or deemed to be incorporated by reference in any Registration Statement or
Prospectus.
(n) In the case of a Shelf Registration and if requested by the managing
underwriters, if any, or by Holders of a majority in aggregate principal amount
of the Securities eligible for inclusion in the Shelf Registration Statement,
(i) as soon as practicable incorporate in a prospectus supplement or
post-effective amendment such information or revisions to information therein
relating to the underwriters or selling Holders as the managing underwriters, if
any, or such Holders or their counsel reasonably request to be included or made
therein, (ii) make all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment, and (iii) if required, supplement or make amendments
to such Shelf Registration Statement.
(o) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Notes, the Exchange
Notes or the Private Exchange Notes, as the case may be, and provide the
applicable trustee with printed certificates for the Notes the Exchange Notes or
the Private Exchange Notes, as, the case may be, in a form eligible for deposit
with The Depository Trust Company.
(p) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Registered
Exchange Offer or the Shelf Registration and will make generally available to
its security holders (or otherwise provide in accordance with Section 11(a) of
the Securities Act) an earnings statement satisfying the provisions of Section
11(a) of the Securities Act, no later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective date
of the Registration Statement, which statement shall cover such 12-month period.
(q) The Company shall cause the indenture to be qualified under the Trust
Indenture Act of 1939, as amended, in a timely manner and containing such
changes, if any, as shall be necessary for such qualification. In the event that
such qualification would require the appointment of a new trustee under the
Indenture, the Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.
(r) The Company may require each Holder of Securities to be sold pursuant
to the Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of the Securities as the Company may
from time to time reasonably require for inclusion in the Shelf Registration
Statement, and the Company may exclude from such registration the Securities of
any Holder that unreasonably fails to furnish such information within a
reasonable time after receiving such request.
(s) In the case of any Shelf Registration, if the Securities are to be
sold in an underwritten offering, the Company shall, if requested by Holders of
a majority in aggregate principal amount of Securities eligible for inclusion in
the Shelf Registration Statement, enter into an underwriting agreement in
customary form and cooperate to take such other actions as may be reasonably
requested in connection therewith.
(t) In the case of any Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf Registration
Statement and any attorney, accountant or other agent retained by the Holders of
the Securities or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to supply all
relevant information reasonably requested by the Holders of the Securities or
any such underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons to conduct a reasonable investigation within the meaning of Section
11 of the Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial Purchasers
by the Initial Purchasers and on behalf of the other parties by one counsel
designated by and on behalf of such other parties as described in Section 4
hereof.
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(u) In the case of any Shelf Registration, the Company, if requested by
any Holder of Securities covered thereby, shall cause (i) its counsel to deliver
an opinion and updates thereof relating to the Securities in customary form and
subject to customary exceptions addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the initial opinion, the
effective date of such Shelf Registration Statement (it being agreed that the
matters to be covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries incorporated
in the United States; the qualification of the Company and such subsidiaries to
transact business as foreign corporations; the due authorization, execution and
delivery of the relevant agreement of the type referred to in Section 3(s)
hereof; the due authorization, execution, authentication and issuance, and the
validity and enforceability, of the applicable Securities; the absence of
material legal or governmental proceedings involving the Company and its
subsidiaries; the absence of governmental approvals required to be obtained in
connection with the Shelf Registration Statement, the offering and sale of the
applicable Securities, or any agreement of the type referred to in Section 3(s)
hereof, the compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture Act, respectively;
and, as of the date of the opinion and as of the effective date of the Shelf
Registration Statement or most recent post-effective amendment thereto, as the
case may be, a statement of such counsel that it has no reason to believe that
such Shelf Registration Statement or the prospectus included therein, as then
amended or supplemented, or any documents incorporated by reference therein
contained an untrue statement of a material fact or omitted to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of any such documents, in the light of the
circumstances existing at the time that such documents were filed with the
Commission under the Exchange Act)), (ii) its officers to execute and deliver
all customary documents and certificates and updates thereof requested by any
underwriters of the applicable Securities, and (iii) its independent public
accountants and the independent public accountants with respect to any other
entity for which financial information is provided in the Shelf Registration
Statement to provide to the selling Holders of the applicable Securities and any
underwriter therefor a comfort letter in customary form and covering matters of
the type customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation as
contemplated by Statement of Auditing Standards No. 72.
(v) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Company shall
cause (i) its counsel (which may be in-house counsel) to deliver to such Initial
Purchaser or such Participating Broker-Dealer a signed opinion in the form set
forth in Sections 8(d) and 8(e) of the Purchase Agreement with such changes as
are customary in connection with the preparation of a Registration Statement and
(ii) its independent public accountants and the independent public accountants
with respect to any other entity for which financial information is provided in
the Registration Statement to deliver to such Initial Purchaser or such
Participating Broker-Dealer a comfort letter, in customary form, meeting the
requirements as to the substance thereof as set forth in Section 8(g) of the
Purchase Agreement, with appropriate date changes.
(w) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Company (or to such
other person or entity as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall mark,
or cause to be marked, on the Notes so exchanged that such Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall the Notes be marked as paid or otherwise
satisfied.
(x) The Company will use its best efforts to either (i) confirm that the
ratings obtained for the Notes prior to the initial sale of such Notes will
apply to the Securities covered by a Registration Statement or (ii) cause the
Securities covered by a Registration Statement to be rated with the appropriate
rating agencies, if so requested by Holders of a majority in aggregate principal
amount of Securities covered by such Registration Statement, or by the managing
underwriters, if any.
(y) In the event that any broker-dealer registered under the Exchange Act
shall underwrite any Securities or participate as a member of an underwriting
syndicate or selling group or "participate in the
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distribution" (within the meaning of the Conduct Rules (the "Rules") of the
National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the Company will assist such
broker-dealer in complying with the requirements of the Rules, including,
without limitation, by (i) if such Rules, including Rule 2720 thereto, shall so
require, engaging a "qualified independent underwriter" (as defined in Rule
2720) to participate in the preparation of the Registration Statement relating
to such Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such Registration
Statement is an underwritten offering or is made through a placement or sales
agent, to recommend the yield of such Securities, (ii) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 5 hereof and (iii) providing such information
to such broker-dealer as may be required in order for such broker-dealer to
comply with the requirements of the Rules.
(z) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a Registration
Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of Andrews
& Kurth L.L.P., counsel for the Initial Purchasers, incurred in connection with
the Registered Exchange Offer), whether or not any Registration Statement is
filed or becomes effective, and, in the event of a Shelf Registration, shall
bear or reimburse the Holders of the Securities covered thereby for the
reasonable fees and disbursements of one firm of counsel designated by the
Holders of a majority in principal amount of the Securities covered thereby to
act as counsel for the Holders of the Securities in connection therewith. In
addition, the Company shall, or shall cause the Subsidiary Guarantors to, bear
all fees and expenses of the Subsidiary Guarantors incurred in connection with
the performance of the obligations of the Subsidiary Guarantors under this
Agreement. Except as provided in the preceding sentence and in Section 5 hereof,
each Holder (including the Initial Purchasers) shall pay all underwriting
discounts and commissions, transfer taxes and fees and expenses of counsel, if
any, relating to the sale or disposition of such Holders' Securities pursuant to
the Exchange Offer Registration Statement or the Shelf Registration Statement.
5. Indemnification. (a) The Company agrees to indemnify and hold harmless
each Holder of the Securities, any Participating Broker-Dealer and each person,
if any, who controls such Holder or such Participating Broker-Dealer within the
meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of any prospectus, in the
light of the circumstances under which they are made) not misleading, and shall
reimburse, as incurred, the Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action in respect thereto; provided,
however, that (i) the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in a Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein and (ii) with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus
relating to a Shelf Registration Statement, the indemnity agreement contained in
this subsection (a) shall not inure to the benefit of any Holder or
Participating Broker-Dealer from whom the person asserting such losses, claims,
damages or liabilities purchased the Securities concerned, to the extent that a
prospectus relating to such Securities was required to be delivered by such
Holder or
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<PAGE> 12
Participating Broker-Dealer under the Securities Act in connection
with such purchase and any such loss, claim, damage or liability of such Holder
or Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at, or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus if the Company
had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company also shall indemnify underwriters, selling
brokers, dealer-managers and similar securities industry professionals
participating in the distribution (as described in such Registration Statement),
their officers and directors and each person who controls such persons within
the meaning of the Securities Act or the Exchange Act to the same extent as
provided above with respect to the indemnification of the Holders of the
Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein (in the case of any
prospectus, in the light of the circumstances under which they are made) not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company or any such
controlling person for any legal or other expenses reasonably incurred by the
Company or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof;
provided, however, that no such Holder shall be liable for any claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Securities pursuant to such Registration Statement. This indemnity agreement
will be in addition to any liability which such Holder may otherwise have to the
Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above to the extent that the
indemnifying party is not materially prejudiced thereby. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof the indemnifying party will not
be liable to such indemnified party under this Section 5 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof. Notwithstanding
the election of the indemnifying party to assume defense of such action or
proceeding, the indemnified party shall have the right, at its own expense, to
employ one additional firm as separate counsel and to participate in the defense
of the action or proceeding; provided, that the indemnifying party shall pay the
reasonable fees and expenses of such separate counsel reasonably satisfactory to
the indemnifying party if (i) the indemnifying party shall have failed to employ
counsel to represent the indemnified party in a reasonably timely manner or (ii)
the defendants in any such action or proceeding include both the indemnified
party and the indemnifying party and counsel to the indemnified party shall have
concluded and notified the indemnifying party that in its reasonable judgment
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them.
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<PAGE> 13
In no event shall the indemnifying parties be liable for the fees and expenses
of more than one counsel (in addition to any local counsel) (which counsels
shall be selected by UBS Securities LLC or, in the event that UBS Securities LLC
is not an indemnified party, by a majority in interest of the indemnified
parties) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action in
respect of which such indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless such
settlement (i) is for money damages only, (ii) includes an unconditional release
of such indemnified party from all liability on any claims that are the subject
matter of such action, and (iii) does not include a statement as to or an
admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 5 is unavailable
or insufficient to hold harmless an indemnified party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the exchange of the Notes, pursuant to the
Registered Exchange Offer, or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and the indemnified party on the other in connection with the
statements or emissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified person, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), each person, if any, who controls such indemnified party
within the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as such indemnified party and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act shall have the same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iii) below a "Registration Default"):
(i) If by October 27, 1997, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement has been filed with the
Commission;
(ii) If by January 23, 1998, neither the Registered Exchange Offer
is consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
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<PAGE> 14
(iii) If after either the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective (other than during
a Suspension Period with respect to a Shelf Registration Statement) (A)
such Registration Statement thereafter ceases to be effective (unless all
Securities have been previously exchanged or the obligation to maintain
the effectiveness of such Registration Statement has expired); or (B) such
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Notes during the periods specified herein because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to
comply with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Notes over and above the interest set
forth in the title of the Notes from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
Registration Defaults have been cured, at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs to but excluding the date on which such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) of Section 6(a) above will be payable in cash on the regular interest
payment dates with respect to the Notes. The amount of Additional Interest will
be determined by multiplying the applicable Additional Interest rate by the
principal amount of the Notes, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.
(d) "Transfer Restricted Notes" means each Security until (i) the date on
which such Security has been exchanged by a person other than a broker-dealer
for a freely transferrable Exchange Note in the Registered Exchange Offer, (ii)
following the exchange by a broker-dealer in the Registered Exchange Offer of a
Security for an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Security has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Security is distributed to
the public pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange Act
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Transfer Restricted Notes,
make publicly available other information so long as necessary to permit sales
of Transfer Restricted Notes pursuant to Rules 144 and 144A. The Company
covenants that it will take such further action as any Holder of Transfer
Restricted Notes may reasonably request, all to the extent required from time to
time to enable such Holder to sell Transfer Restricted Notes without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144
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<PAGE> 15
and 144A (including the requirements of Rule 144A(d)(4)). The Company will
provide a copy of this Agreement to prospective purchasers of Notes identified
to the Company by the Initial Purchasers upon request. Upon the request of any
Holder of Transfer Restricted Notes, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations. If any of the Transfer Restricted Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
administer the offering ("Managing Underwriters") will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Notes to be included in such offering, subject to the approval of such Managing
Underwriters by the Company which shall not be unreasonably withheld.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company;
(2) if to the Initial Purchasers, to:
UBS Securities LLC
299 Park Avenue
New York, New York 10171-0026
Fax No.: (212) 821-6119
Attention: Legal Department
with a copy to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Fax No.: (713) 220-4285
Attention: Thomas P. Mason
(3) if to the Company, to:
Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
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<PAGE> 16
Fax No.: (602) 585-8985
Attention: Morgan Gust
with a copy to:
Fennemore Craig
3003 N. Central Avenue, Suite 2600
Phoenix, Arizona 85012-2913
Fax No.: (602) 916-5507
Attention: Karen McConnell
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and the Initial Purchasers and their respective successors and assigns,
including, without limitation and without the need for an express assignment,
subsequent holders of the Securities.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(j) Guarantees. Each of the Guarantors agrees to take all such actions
necessary to include its guarantee of the Notes or the Exchange Notes in any
Exchange Offer Registration Statement or Shelf Registration Statement to the
extent required under the Securities Act and to take such other action as may be
required in order for the Company to comply with its obligations hereunder.
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<PAGE> 17
If the foregoing is in accordance with, your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the several Initial Purchasers and the Company in accordance with its
terms.
Very truly yours,
GIANT INDUSTRIES, INC.
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
GIANT INDUSTRIES ARIZONA, INC.
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
GIANT EXPLORATION & PRODUCTION COMPANY
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
PHOENIX FUEL CO., INC.
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
SAN JUAN REFINING COMPANY
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
GIANT MID-CONTINENT, INC.
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
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<PAGE> 18
CINIZA PRODUCTION COMPANY
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
GIANT STOP-N-GO OF NEW MEXICO, INC.
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
GIANT FOUR CORNERS, INC.
By: /s/ A. Wayne Davenport
--------------------------
Name: A. Wayne Davenport
Title: Vice President
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
UBS SECURITIES LLC
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA SECURITIES, INC.
JEFFERIES & COMPANY, INC.
By: UBS Securities LLC
By /s/ Susan Ward
--------------------------
Name: Susan Ward
Title: Managing Director
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<PAGE> 19
ANNEX A
Giant Industries Arizona, Inc. (an Arizona corporation)
Giant Exploration & Production Company (a Texas corporation)
Phoenix Fuel Co., Inc. (an Arizona corporation)
San Juan Refining Company (a New Mexico corporation)
Giant Mid-Continent, Inc. (an Arizona corporation)
Ciniza Production Company (a New Mexico corporation)
Giant Stop-N-Go of New Mexico, Inc. (a New Mexico corporation)
Giant Four Corners, Inc. (an Arizona corporation)
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<PAGE> 20
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must agree that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Notes where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
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<PAGE> 21
ANNEX C
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
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<PAGE> 22
ANNEX D
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must agree that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Existing
Notes where such Existing Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 199 , all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.*
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- --------
* In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
22
<PAGE> 23
ANNEX E
// CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
----------------------------------------------------------------
Address:
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If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it agrees that it will
deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so agreeing and by delivering a prospectus, the undersigned will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
23
<PAGE> 1
EXHIBIT 10.32
U.S. $150,000,000
GIANT INDUSTRIES, INC.
9% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
August 21, 1997
UBS Securities LLC
Donaldson, Lufkin & Jenrette Securities Corporation
BancAmerica Securities, Inc.
Jefferies & Company, Inc.
c/o UBS Securities LLC
299 Park Avenue
New York, NY 10171-0026
Dear Sirs:
Giant Industries, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to UBS Securities LLC ("UBS"), Donaldson, Lufkin & Jenrette Securities
Corporation, BancAmerica Securities, Inc. and Jefferies & Company, Inc. (the
"Purchasers") U.S. $150,000,000 principal amount of 9% Senior Subordinated Notes
due 2007 (the "Notes"). The Notes are to be issued pursuant to an Indenture
dated as of August 26, 1997 (the "Indenture"), among the Company, each of the
Company's subsidiaries, which are listed on the signature pages hereto, as
guarantors of the Notes (the "Subsidiary Guarantors" and, together with the
Company the "Sellers"), and The Bank of New York, as indenture trustee (the
"Trustee"). This is to confirm the agreement between the Sellers and the
Purchasers concerning the issue and purchase of the Notes.
Holders (including subsequent transferees) of the Notes will have
the registration rights set forth in the Registration Rights Agreement of even
date herewith (the "Registration Rights Agreement") between the Sellers and the
Purchasers. Pursuant to the Registration Rights Agreement, the Company has
agreed to file with the Securities and Exchange Commission (the "Commission")
(i) a registration statement under the Securities Act of 1933, as amended (the
"Securities Act") registering the offering of senior subordinated notes (the
"Exchange Notes") identical in all material respects to the Notes (except that
the Exchange Notes will not contain terms with respect to transfer restrictions)
to be offered in exchange for the Notes and (ii) under
<PAGE> 2
certain circumstances, a shelf registration statement pursuant to Rule 415 under
the Securities Act.
It is understood that (a) the Purchasers will offer and resell some
or all of the Notes in the United States to "qualified institutional buyers" in
reliance on Rule 144A under the Securities Act, and to institutional "accredited
investors", within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, and (b) the Purchasers or affiliates thereof may resell a
portion of the Notes outside the United States to certain persons in reliance on
Regulation S under the Securities Act.
1. Representations and Warranties. The Company and each
Subsidiary Guarantor jointly and severally represent, warrant and agree that:
(a) The Company has prepared a preliminary confidential offering
memorandum dated August 8, 1997 and a confidential offering memorandum
dated the date hereof relating to the Notes. Copies of such preliminary
confidential offering memorandum and such confidential offering memorandum
have been delivered by the Company to the Purchasers. As used in this
Agreement, "Offering Memorandum" means such preliminary confidential
offering memorandum and such confidential offering memorandum as amended
or supplemented. The preliminary confidential offering memorandum, as of
its date, and the Offering Memorandum does not, as of the date hereof, and
will not, as of the date of any amendment or supplement thereto or as of
the Delivery Date (as defined in Paragraph 4), contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that the Sellers make
no representation or warranty as to information contained in the Offering
Memorandum in reliance upon and in conformity with written information
furnished to the Sellers by or on behalf of any Purchaser expressly for
inclusion therein and identified in Section 7(g) hereof.
(b) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with full corporate power and authority to own, lease and operate its
properties and conduct its business as presently conducted and as
described in the Offering Memorandum; and the Company is duly qualified as
a foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure to so qualify would not have a material adverse effect
on the assets, liabilities, results of operations, condition (financial or
otherwise), earnings, business affairs or prospects of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
(c) The Subsidiary Guarantors are the only direct or indirect
subsidiaries, whether wholly or partially owned, of the Company. Each of
the Subsidiary Guarantors
<PAGE> 3
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
conduct its business as presently conducted and as described in the
Offering Memorandum and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure
to so qualify would not have a material adverse effect on the assets,
liabilities, results of operations, condition (financial or otherwise),
earnings, business affairs or prospects of such Subsidiary Guarantor. All
the issued and outstanding capital stock of each such Subsidiary Guarantor
is owned by the Company or another Subsidiary Guarantor, free and clear of
any security interest, mortgage, pledge, lien, charge or other encumbrance
(each, a "Lien").
(d) The execution, delivery and performance by the Sellers of this
Agreement, the Registration Rights Agreement, the Indenture, the Notes and
the guarantees of the Notes by the Subsidiary Guarantors (the
"Guarantees") and the consummation of the transactions contemplated herein
and therein have been duly authorized by all necessary corporate action
and will not conflict with or constitute a breach of, or a default or the
loss of any material benefit under, or the termination of, or result in
the creation or imposition of any Lien upon any property or assets of any
Seller pursuant to any contract, indenture, mortgage, loan agreement,
note, lease, license or other instrument (each a "Contract") to which any
Seller is a party or by which any of them may be bound or to which any of
the property or assets of any of them is subject, nor will such action
result in any violation of the provisions of the charter or bylaws of any
Seller or, subject to compliance by the Purchasers with Paragraph 11, any
applicable law, administrative regulation or administrative or court order
or decree applicable to any Seller. Except as contemplated by the
Registration Rights Agreement or as may be required under the Securities
Act or the Trust Indenture Act, no consent, approval, authorization or
order of, or notice to or filing with, any United States Federal or state
governmental agency or body or any court of the United States or of any
state thereof is required of the Sellers in connection with the
transactions contemplated by this Agreement.
(e) This Agreement has been duly and validly executed and delivered
by each Seller and constitutes a legal, valid and binding agreement of
each Seller, enforceable against each Seller in accordance with its terms,
except to the extent that the enforceability thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing. The Indenture
has been duly authorized and, when executed and delivered by the Sellers
(assuming due execution and delivery by the Trustee), will constitute a
legal, valid and binding agreement of each Seller, enforceable against
each
-3-
<PAGE> 4
Seller, in accordance with its terms, except to the extent that the
enforceability thereof may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
relating to creditors' rights generally and (B) general principles of
equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing. The Registration Rights Agreement has been duly and validly
executed and delivered by each Seller and constitutes a legal, valid and
binding agreement of each Seller, enforceable against each Seller in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles
of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing.
(f) The Notes have been duly authorized for issuance and sale as
contemplated by this Agreement, the Indenture and the Offering Memorandum
and, on the Delivery Date, will have been duly executed by the Company
and, when issued, authenticated and delivered in the manner provided for
in this Agreement and the Indenture against payment of the consideration
therefor specified in the Offering Memorandum, the Notes, which will be
substantially in the form heretofore delivered to you, will constitute
legal, valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, and will be entitled to the
benefits provided by the Indenture, except to the extent that the
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing; and the Notes will constitute senior subordinated debt
obligations of the Company. The Guarantees have been duly authorized for
issuance as contemplated by this Agreement, the Indenture and the Offering
Memorandum and, on the Delivery Date, will have been duly executed by the
Subsidiary Guarantors and, when issued and delivered in the manner
provided for in this Agreement and the Indenture, will constitute legal,
valid and binding obligations of the Subsidiary Guarantors enforceable
against the respective Subsidiary Guarantors in accordance with their
terms, except to the extent that the enforceability thereof may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law) and an implied covenant
of good faith and fair dealing; and the Guarantees will constitute senior
subordinated obligations of the Subsidiary Guarantors.
(g) No Seller is in violation of its charter or bylaws and no Seller
is in default in the performance or observance of any obligation,
agreement, covenant or condition
-4-
<PAGE> 5
contained in any Contract or any applicable law, administrative regulation
or administrative or court order or decree, which violation or default
would, singly or in the aggregate, have a Material Adverse Effect.
(h) The Sellers possess such certificates, authorizations or permits
issued by the appropriate regulatory or other governmental agencies or
bodies as are necessary to conduct the business as now conducted by the
Company and as described in the Offering Memorandum, except where the
failure to possess any such certificate, authorization or permit would
not, singly or in the aggregate, have a Material Adverse Effect; and
neither the Company nor any Subsidiary Guarantor has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect.
(i) To the best of the Company's knowledge, Deloitte & Touche LLP,
the accountants who have audited and reported upon the financial
statements and supporting schedules of the Company included in the
Offering Memorandum, are independent public accountants with respect to
the Company and its subsidiaries within the meaning of the Securities Act
and the United States Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the applicable rules and regulations promulgated
thereunder (the "Rules and Regulations").
(j) The financial statements of the Company and its consolidated
subsidiaries included in the Offering Memorandum present fairly the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates indicated and the results of their operations
for the periods specified; such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis, except for footnotes to the unaudited financial
statements and provided that the unaudited financial statements are
subject to normal year-end adjustments.
(k) Since the respective dates as of which information is given in
the Offering Memorandum, and except as otherwise stated therein, (i) there
has been no material adverse change in the assets, liabilities, results of
operations, condition (financial or otherwise), earnings, business affairs
or prospects of the Company and its subsidiaries, taken as a whole, (ii)
there have been no transactions entered into by the Company that are
material to the Company and (iii) except for regular quarterly dividends,
there has been no dividend declared, paid or made by the Company on any
class of its capital stock.
(l) Subject to compliance by the Purchasers with Paragraph 11, no
consent, approval, authorization, order or decree of any court or
governmental agency or body is required in connection with the issuance
and sale of the Notes or the consummation by the Sellers of any other
transaction contemplated by this Agreement except as has been
-5-
<PAGE> 6
obtained and is in effect and except as may be required by the securities
or Blue Sky laws of any state of the United States in connection with the
sale of the Notes.
(m) No registration of the Notes under the Securities Act and no
qualification of an indenture under the United States Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), is required in connection
with the offer and sale of the Notes in the manner contemplated by the
Offering Memorandum and this Agreement (other than pursuant to the terms
of the Registration Rights Agreement).
(n) No strike, work stoppage or other similar labor dispute with the
employees of any Seller exists or, to the knowledge of any Seller, is
threatened, which would have a Material Adverse Effect.
(o) There is no action, suit or proceeding before or by any court or
governmental agency or body now pending, or, to the knowledge of any
Seller, threatened against or affecting any Seller which is not disclosed
in the Offering Memorandum, and which, if adversely determined, would
result in a Material Adverse Effect or would prevent or hinder the
consummation of all the transactions contemplated by this Agreement.
(p) Except as set forth in the Offering Memorandum and except for
matters that would not have a Material Adverse Effect, (i) neither the
property nor the operations of any Seller are in violation of any
environmental law or any order of any governmental authority; (ii) no
Seller is in violation of or subject to any pending, or to any Seller's
knowledge, threatened, action, suit, investigation, inquiry or proceeding
by any governmental authority or to any remedial obligations under any
environmental law; (iii) all notices, permits or similar authorizations,
if any, required to be obtained or filed in connection with the property
or business of the Sellers, including, without limitation, past or present
emission, discharge, treatment, storage, disposal or release of a
Hazardous Material (as defined below) into the environment, have been duly
obtained or filed; (iv) the Company has taken or is taking all steps
required by law to determine and has determined in connection with each
such matter that no Hazardous Materials have been disposed of or otherwise
released and there has been no threatened release of any Hazardous
Material from, on or to any property of any Seller; and (v) no Seller has
any present or contingent liability in connection with any release or
threatened release of any Hazardous Material into the environment, whether
on or off its property. The term "Hazardous Material" means any oil
(including petroleum products, crude oil and any fraction thereof), solid
waste, "hazardous substance" or "hazardous waste" (as defined in Section
101(14) of the Comprehensive Environmental Response, Compensation and
Liability Act, Section 1004(5) of the Resource Conservation and Recovery
Act and any regulations promulgated thereunder), or other hazardous
material that is regulated by a local, state or federal governmental
authority charged with protection of the environment.
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<PAGE> 7
(q) Except as described in the Offering Memorandum, all tax returns
required to be filed by any Seller in any jurisdiction or with any tribal
authority have been filed, other than those filings being contested in
good faith, and all material taxes, including withholding taxes, penalties
and interest, assessments, fees and other charges due or claimed to be due
from such entities have been paid, other than those being contested in
good faith and for which adequate reserves have been provided or those
currently payable without penalty or interest.
(r) All the issued and outstanding shares of the capital stock of
the Company have been duly authorized and validly issued and are fully
paid and non-assessable.
(s) The Notes, the Guarantees and the Indenture conform in all
material respects to the respective statements relating thereto contained
in the Offering Memorandum.
(t) No holder of any security of the Company has the right to have
any security owned by such holder registered under the Securities Act by
reason of the issue or sale of the Notes.
(u) Except as otherwise described in the Offering Memorandum,
neither the Company nor any of its affiliates nor any person acting on
behalf of the Company has, within the six months prior to the date of this
Agreement, offered or sold (regardless of whether such offers or sales
constitute a distribution within the meaning of Regulation M under the
Exchange Act) any Notes, any securities of the same class and/or series as
the Notes, or any immediately convertible into or exchangeable for Notes,
nor will any such offers or sales be made without the prior written
consent of UBS at any time prior to the date that is 90 days after the
completion of the offering of the Notes contemplated hereby. The Company
has not taken and will not take, directly or indirectly, any action
prohibited by Regulation M. The Company has not entered into any
contractual arrangement which provides for the distribution of the Notes
other than this Agreement.
(v) Neither the Company nor any of its affiliates nor any persons
authorized to act on behalf of the Company or any such affiliates (other
than the Purchasers or any person acting on their behalf as to whom the
Sellers do not warrant or covenant) have engaged or will engage in any
directed selling efforts (within the meaning of Regulation S) with respect
to the Notes and the Company, each such affiliate and each person
authorized by the Company to act on behalf of any of them has complied and
will comply with any applicable offering restrictions requirement of
Regulation S.
(w) Neither the Company nor any of its affiliates nor any person
authorized by the Company to act on behalf of the Company or any such
affiliate has offered or sold, or
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<PAGE> 8
will offer or sell, the Notes by means of any form of general solicitation
or general advertising (within the meaning of Rule 502(c) of Regulation D
under the Securities Act), including, but not limited to, (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over television or
radio or (ii) any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising.
(x) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Notes are listed on any
national securities exchange registered under Section 6 of the Exchange
Act or quoted in a U.S. "automated inter-dealer quotation system" (as such
term is used in Rule 144A(d)(3)).
(y) The Company is not and will not as a result of the offer and
sale of the Notes be (i) an "investment company" or a company "controlled"
by an investment company within the meaning of the United States
Investment Company Act of 1940, as amended, (ii) a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" thereof within
the meaning of the United States Public Utility Holding Company Act of
1935, as amended, or (iii) subject to regulation under the United States
Federal Power Act or any federal or state statute or regulation limiting
its ability to incur indebtedness for borrowed money.
(z) The Company is not actively considering any plan or transaction
that, if consummated, would result in any mandatory requirement to redeem,
or make an offer to purchase, the Notes pursuant to the terms thereof.
(aa) The Company is a reporting issuer (within the meaning of
Regulation S under the Securities Act).
2. Purchase and Offering of the Notes. On the basis of the
representations and warranties contained in, and upon the terms and subject to
conditions of, this Agreement, the Company agrees to issue and sell to the
Purchasers and the Purchasers agree, severally and not jointly, to purchase and
pay for the respective principal amounts of Notes set forth opposite the name of
the several Purchasers in Schedule I hereto at a price equal to the issue price
of 100% of the principal amount of the Notes (the "Issue Price"). The sale of
the Notes to the Purchasers will be made without registration of the Notes under
the Securities Act, in reliance on the exemption therefrom provided by Section
4(2) of the Securities Act.
3. Commissions and Fees. The Company agrees to pay to the
Purchasers a commission of 2% of the principal amount of the Notes in
consideration of the agreement by the Purchasers to purchase the Notes. The
Purchasers shall be entitled to deduct such commissions from the purchase
price of the Notes.
-8-
<PAGE> 9
4. Delivery and Payment. Payment of the purchase price for the
Notes shall be made by the Purchasers to the Company or its order in U.S.
dollars in same-day funds by 11:00 A.M., New York City time, on August 26, 1997
or at such later date and time as may be determined by agreement between the
Company and UBS. This date and time are sometimes referred to as the "Delivery
Date". Such payment shall be made against delivery of one or more certificates
in global or definitive form for the Notes in such denominations and registered
in such names as the Purchasers request upon notice to the Company at least two
business days prior to the Delivery Date.
5. Covenants. The Company agrees as follows:
(a) The Company shall furnish promptly to each of the Purchasers a
copy of the Offering Memorandum and each amendment and supplement thereto
and shall deliver promptly to the Purchasers such number of copies of the
Offering Memorandum and each amendment and supplement thereto as the
Purchasers may reasonably request.
(b) If at any time prior to the completion, as determined by the
Purchasers, of the distribution of the Notes, any event occurs as a result
of which the Offering Memorandum would contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading, the Company will promptly so notify the
Purchasers and will prepare and furnish to the Purchasers, subject to
Paragraph 5(c), copies of such amendments or supplements to the Offering
Memorandum as may be necessary so that the statements in the Offering
Memorandum as so amended or supplemented will not contain any such untrue
statement or omit to state any such material fact or be misleading and so
that the Offering Memorandum, as so amended or supplemented, will comply
with applicable law.
(c) Within a reasonable amount of time prior to any proposed
publication of any amendment or supplement to the Offering Memorandum, the
Company shall furnish a copy thereof to the Purchasers and shall not
publish or use any such amendment or supplement to which the Purchasers or
their counsel shall reasonably object.
(d) The Company shall comply with the terms of the Indenture and the
Offering Memorandum and shall promptly notify the Purchasers if the
Company discovers that any of its representations contained in this
Agreement is not, at any time prior to the completion of the distribution
of the Notes, true and correct, or if the Company has at any such time
breached any of its obligations hereunder.
(e) If, at any time prior to two years after the Delivery Date, the
Company is neither subject to Section 13 or 15(d) of the Exchange Act nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act,
the Company shall furnish, as soon as available, to the Purchasers, and,
upon request of a holder of Notes, to such holder and
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<PAGE> 10
any prospective purchaser designated by such holder, copies of the
information required to be delivered to holders and prospective purchasers
of any Notes which constitute "restricted securities" under Rule 144 under
the Securities Act in order to permit compliance with Rule 144A under the
Securities Act.
(f) Neither the Company nor any of its affiliates will take,
directly or indirectly, any action designed to or which constitutes or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Notes at any time prior to the Purchasers
notifying the Company of the completion of the distribution of the Notes.
(g) The Company will endeavor to qualify the Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions as the
Purchasers shall reasonably request and to continue such qualification in
effect so long as reasonably required for resale by the Purchasers of the
Notes; provided that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action that would subject it to general service
of process or to taxation in any jurisdiction where it is not then so
subject.
(h) So long as the Notes are outstanding, the Company will promptly
furnish to the Purchasers copies of all reports or other communications
(financial or other) furnished by the Company or the Trustee to holders of
Notes, and copies of filings including financial statements furnished to
or filed with the Commission or any national securities exchange by the
Company.
(i) The Company will take all action that is appropriate or
necessary to assure that its offerings of other securities will not be
integrated, for purposes of the registration requirements of the
Securities Act, with the offerings contemplated hereby.
(j) If requested by the Purchasers, the Company shall use its best
efforts to permit the Notes to be designated PORTAL securities in
accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. (the "NASD") relating to the
trading in the PORTAL Market; unless so requested by the Purchasers, the
Company will not take any action to permit the Notes to be designated
PORTAL securities without the Purchasers' consent, which shall not be
unreasonably withheld.
(k) The Company shall use its best efforts to assist the Purchasers
in arranging to cause the Notes to be eligible for settlement through the
facilities of The Depository Trust Company ("DTC").
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<PAGE> 11
(l) The Company shall, if requested by the Purchasers, use its best
efforts to cause the Notes to be eligible for settlement through the
facilities of Cedel Bank, societe anonyme ("Cedel"), and the Euroclear
System ("Euroclear").
6. Costs and Expenses. The Company agrees (whether or not the
transactions contemplated hereby are consummated) to pay all costs and expenses
(including any taxes) incident to the authorization, issuance, sale and delivery
of the Notes or relating to the preparation of this Agreement, the Registration
Rights Agreement, the Indenture and the Offering Memorandum, including, without
limitation: (i) all costs, expenses and taxes in connection with the
preparation, issue, exchange and delivery of the Notes, including any stamp or
similar issue tax and any related interest or penalties incident to the
authorization and issue of the Notes, and the sale and delivery of the Notes to
the Purchasers; (ii) all fees and expenses of counsel for the Company and other
advisors engaged by the Company; (iii) all fees and expenses of the Trustee and
any registrar and paying and transfer agents; (iv) all fees and expenses
incurred in connection with any rating of the Notes; (v) all fees of DTC, Cedel
and Euroclear; (vi) expenses in connection with the qualification of the Notes
for sale as contemplated by Paragraph 5(g), including but not limited to all
filing fees (but excluding fees and expenses of counsel for the Purchasers); and
(vii) all listing fees and expenses in connection with any listing of the Notes
on any securities exchange or The NASDAQ Stock Market, Inc. The Purchasers will
pay for all fees and expenses of counsel for the Purchasers and other advisors
engaged by the Purchasers incurred in connection with the offering of the Notes,
expenses incurred to print the Offering Memorandum and the travel and other
out-of-pocket expenses of the Purchasers and the Company incurred in connection
with "road show" presentations; provided that, in the event this Agreement is
terminated pursuant to Paragraph 10(i), the Company will pay all such fees and
expenses.
7. Indemnification.
(a) The Sellers, jointly and severally, shall indemnify and hold
harmless each Purchaser and its affiliates and each person, if any, who
controls any Purchaser or its affiliates within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act and each director,
officer, employee or agent of any Purchaser or its affiliates (each a
"Purchaser Indemnified Party"), from and against any loss, claim, damage
or liability, joint or several, and any action in respect thereof, to
which any Purchaser Indemnified Party may become subject, insofar as such
loss, claim, damage, liability or action (i) arises out of, or is based
upon, or relates to any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum, or which arises out
of, or is based upon, the omission or alleged omission to state in the
Offering Memorandum a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or (ii) arises out of, or is based upon, or relates to any
breach of a representation, warranty or agreement of the Sellers set forth
herein, and shall promptly reimburse each Purchaser Indemnified Party for
any legal and other expenses reasonably incurred, as such legal and other
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<PAGE> 12
expenses are incurred, by such Purchaser Indemnified Party in
investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action; provided that the Sellers shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, or relates to any
untrue statement or alleged untrue statement or omission or alleged
omission made in the Offering Memorandum in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Purchaser expressly for inclusion therein and identified in
Section 7(g) hereof. The foregoing indemnity agreement is in addition to
any liability which the Sellers may otherwise have to any Purchaser
Indemnified Party.
(b) Each Purchaser shall severally and not jointly indemnify and
hold harmless the Company and its affiliates, any person who controls the
Company or its affiliates within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, and each director,
officer, employee and agent of the Company or its affiliates (each a
"Company Indemnified Party"), from and against any loss, claim, damage or
liability, joint or several, and any action in respect thereof, to which
any Company Indemnified Party may become subject, insofar as such loss,
claim, damage, liability or action (i) arises out of, or is based upon, or
relates to any untrue statement or alleged untrue statement of a material
fact contained in the Offering Memorandum, or which arises out of, or is
based upon, or relates to the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Purchaser expressly for inclusion therein
and identified in Section 7(g) hereof, or (ii) arises out of, or is based
upon, or relates to any breach of a representation, warranty or agreement
of such Purchaser set forth herein, and shall promptly reimburse such
Company Indemnified Party for any legal and other expenses reasonably
incurred by such Company Indemnified Party in investigating or defending
or preparing to defend against any such loss, claim, damage, liability or
action. The foregoing indemnity agreement is in addition to any liability
which a Purchaser may otherwise have to any such Company Indemnified
Party.
(c) Promptly after receipt by an indemnified party under this
Paragraph 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Paragraph 7, notify the
indemnifying party in writing of the claim or the commencement of the
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Paragraph 7 except to the extent it has been materially prejudiced by such
failure and provided, further, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may
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<PAGE> 13
have to an indemnified party otherwise than under this Paragraph 7. If any
such claim or action shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein, and, to the extent that it wishes,
jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified
party under this Paragraph 7 for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof
other than reasonable costs of investigation; provided, however, that any
indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment thereof has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the indemnifying party and in the reasonable judgment of such counsel
it is advisable for such indemnified party to employ separate counsel or
(iii) the indemnifying party has failed to assume the defense of such
action and employ counsel reasonably satisfactory to the indemnified
party, in which case, if such indemnified party notifies the indemnifying
party in writing that it elects to employ separate counsel at the expense
of the indemnifying party, the indemnifying party shall not have the right
to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (plus separate
local counsel, if retained by the indemnified party) at any time for all
such indemnified parties, which firm shall be designated in writing by
UBS, if the indemnified parties under this Paragraph 7 are Purchaser
Indemnified Parties, or by the Company, if the indemnified parties under
this Paragraph 7 are Company Indemnified Parties.
(d) No indemnifying party shall be liable for any settlement
effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with such consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless each indemnified party from
and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is a party
and indemnity could have been sought hereunder by such indemnified party,
unless such settlement is (i) for money damages only, (ii) includes an
unconditional release of such indemnified party from all liability on any
claims that are
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<PAGE> 14
the subject matter of such proceeding and (iii) does not include a
statement as to or an admission of fault, culpability or a failure to act
by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Paragraph 7 shall
for any reason be unavailable to or insufficient to hold harmless any
indemnified party under Paragraph 7(a) or 7(b) hereof in respect of any
loss, claim, damage or liability, or any action in respect thereof,
referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the aggregate amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the
Sellers on the one hand and the Purchasers on the other from the offering
of the Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Sellers on the one hand and the Purchasers
on the other with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations. The relative benefits
received by the Sellers on the one hand and the Purchasers on the other
with respect to such offering shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Notes (obtained by
subtracting accrued interest, if any, but before deducting expenses)
received by the Sellers bear to the total commissions received by the
Purchasers with respect to such offering. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Sellers on the one hand or the
Purchasers on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in
respect thereof, referred to above in this Paragraph 7(e) shall be deemed
to include, for purposes of this Paragraph 7(e), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Paragraph 7, each affiliate of a Purchaser and each person, if any, who
controls any of the Purchasers within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as each of the Purchasers, and each director,
officer, employee or agent of the Company, each affiliate of the Company
and each person, if any, who controls the Company or any affiliate of the
Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act shall have the same rights to contribution as the
Sellers.
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<PAGE> 15
(f) The parties hereto agree that it would not be just or equitable
if contribution pursuant to this Paragraph 7 were determined by pro rata
allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in Paragraph 7(e). The
remedies provided for in this Paragraph 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(g) The Company and the Purchasers agree that the only written
information furnished to the Company by or on behalf of any Purchaser
expressly for inclusion in the Offering Memorandum consists of (i) the
last paragraph on the cover page, (ii) the fourth full paragraph on the
page preceding the Offering Memorandum Summary, and (iii) the third,
fourth, fifth, sixth, seventh and tenth paragraphs under the caption "Plan
of Distribution."
(h) The Sellers, jointly and severally, agree to indemnify each
Purchaser Indemnified Party, and each Purchaser, severally and not
jointly, agrees to indemnify each Company Indemnified Party, as a result
of any judgment being rendered in connection with the Indenture, the Notes
or this Agreement or the Offering Memorandum for which indemnification or
contribution is provided pursuant to this Paragraph 7 and such judgment or
order being paid in a currency (the "Judgment Currency") other than United
States dollars, as a result of any variation as between (i) the rate of
exchange at which United States dollars are converted into the Judgment
Currency for the purpose of such judgment or order and (ii) the spot rate
of exchange in New York City at which the indemnified party on the date of
payment of such judgment or order is able to purchase United States
dollars with the amount of the Judgment Currency actually received by the
indemnified party. The foregoing indemnity shall constitute a separate and
independent obligation of the Sellers and the Purchasers and shall
continue in full force and effect notwithstanding any such judgment or
order as aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase of,
or conversion into, United States dollars.
8. Conditions to Obligation of the Purchasers. The obligations of
the several Purchasers to purchase the Notes are subject to the accuracy, when
made and on the Delivery Date, of the representations and warranties of the
Sellers contained herein, to the performance by the Sellers of their respective
obligations hereunder to be performed at or prior to the Delivery Date and to
each of the following additional conditions:
(a) The Purchasers shall not have disclosed to the Company on or
prior to the Delivery Date that the Offering Memorandum contains an untrue
statement of a fact which, in the reasonable opinion of the Purchasers, is
material or omits to state a fact which, in the reasonable opinion of the
Purchasers, is material and is necessary in order to make the statements
therein, in the light of the circumstances under which they were
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<PAGE> 16
made, not misleading; the Company shall not have prepared and distributed
any amendment or supplement to the Offering Memorandum either without
prior review by, or over the reasonable objection of, the Purchasers; and
no change shall have occurred in Rule 144A or Regulation S under the
Securities Act which in the reasonable judgment of the Purchasers makes it
impracticable or inadvisable to proceed with the purchase, sale and
delivery of the Notes on the terms and in the manner contemplated in the
Offering Memorandum.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Registration
Rights Agreement, the Indenture, the Notes, the Offering Memorandum and
all other legal matters relating to this Agreement and the transactions
contemplated hereby and thereby shall be reasonably satisfactory in all
respects to the Purchasers and their counsel, and the Company shall have
furnished to the Purchasers all documents and information that they may
reasonably request to enable them to pass upon such matters.
(c) The Company shall have delivered to the Purchasers a certified
copy of the resolutions of the Board of Directors (or any authorized
committee thereof, together with the resolutions of the Board of Directors
establishing such committee) of the Company and each of the Subsidiary
Guarantors approving the creation and issue of the Notes and the
Guarantees, respectively, on the terms and conditions of the Indenture and
this Agreement and approving the terms hereof and authorizing the
execution and delivery of this Agreement, the Registration Rights
Agreement, the Indenture, the Notes and all other documents relevant to
the issue of the Notes by the Company.
(d) The Company shall have furnished to the Purchasers the opinion
or opinions of Fennemore Craig, P.C., United States counsel to the
Company, addressed to the Purchasers and dated the Delivery Date to the
effect that:
(i) The Indenture has been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors and (assuming
the due authorization, execution and delivery thereof by the
Trustee) constitutes the legal, valid and binding agreement of the
Company and each Subsidiary Guarantor, enforceable against the
Company and each Subsidiary Guarantor in accordance with its terms,
except to the extent that the enforceability thereof may be limited
by (A) bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws relating to creditors' rights
generally, and (B) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(ii) This Agreement has been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors.
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<PAGE> 17
(iii) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the Subsidiary
Guarantors and constitutes the legal, valid and binding agreement of
the Company and each Subsidiary Guarantor, enforceable against the
Company and each Subsidiary Guarantor in accordance with its terms,
except to the extent that the enforceability thereof may be limited
by (A) bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws relating to creditors' rights
generally and, (B) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(iv) The Notes have been duly authorized by all necessary
corporate action on the part of the Company and have been duly
executed by the proper officers of the Company, and, when duly
authenticated by the Trustee and delivered as contemplated hereby
and by the Indenture, will be valid and binding obligations of the
Company enforceable in accordance with their terms and entitled to
the benefits of the Indenture; except, in each case, to the extent
that the enforceability thereof may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
similar laws relating to creditors' rights generally and, (B)
general principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(v) The Guarantees have been duly authorized by all necessary
corporate action on the part of the Subsidiary Guarantors and have
been duly executed by the proper officers of the Subsidiary
Guarantors, and, when delivered as contemplated hereby and by the
Indenture, will be valid and binding obligations of the Subsidiary
Guarantors enforceable in accordance with their terms; except, in
each case, to the extent that the enforceability thereof may be
limited by (A) bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws relating to creditors' rights
generally and, (B) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(vi) The Notes, the Guarantees and the Indenture conform in
all material respects to the respective statements relating thereto
contained in the Offering Memorandum, and the forms of certificates
used to evidence the Notes comply with the requirements of the
Securities Act, the Exchange Act and the Trust Indenture Act.
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<PAGE> 18
(vii) Subject to compliance by the Purchasers with Paragraph
11 hereof, no authorization, consent or approval of, or other order
by, any administrative or governmental, authority or agency or, to
the best of such counsel's knowledge, any court is required by or on
behalf of the Company in connection with the purchase and sale of
the Notes by the Purchasers, except as may have been obtained or may
be required by the securities or Blue Sky laws of any state of the
United States.
(viii) The statements in the Offering Memorandum under the
caption "Certain Federal Income Tax Consequences" are correct in all
material respects.
(ix) No registration of the Notes or the Guarantees under the
Securities Act and no qualification of an indenture under the Trust
Indenture Act is required in connection with the offer and sale of
the Notes in the manner contemplated by the Offering Memorandum,
this Agreement and the other arrangements made to restrict offers
and sales of the Notes.
(x) The Company is not and will not as a result of the offer
and sale of the Notes be (i) an "investment company" or a company
"controlled" by an investment company within the meaning of the
United States Investment Company Act of 1940, as amended, (ii) a
"holding company" or a "subsidiary company" of a holding company or
an "affiliate" thereof within the meaning of the United States
Public Utility Holding Company Act of 1935, as amended, or (iii)
subject to regulation under the United States Federal Power Act or
any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.
In addition, such counsel shall state that such counsel has participated in the
preparation of the Offering Memorandum, including conferences with officers and
other representatives of the Company and its subsidiaries, and representatives
of the independent public accountants of the Company and its subsidiaries, at
which conferences the contents of the Offering Memorandum and related matters
were discussed and, although they are not passing upon the accuracy or
completeness of the statements contained in the Offering Memorandum (except as
specified in 8(d)(vi) and (viii) above), on the basis of the foregoing, nothing
has come to the attention of such counsel which gives them reason to believe
that the Offering Memorandum, as of its date and at the Delivery Date (except as
to the information provided to the Company described in Section 7(g) and the
financial statements, financial data and supporting schedules contained or
incorporated therein, as to which such counsel need express no opinion),
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of circumstances in which made, not
misleading. The aforementioned opinion shall be limited to the Federal laws of
the United States of America, the laws of the State of Arizona and the general
corporate law of the
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<PAGE> 19
State of Delaware. Such counsel may rely on opinions of local counsel
satisfactory to UBS with respect to matters of law of jurisdictions other than
the State of Arizona.
(e) The Company shall have furnished to the Purchasers the opinion
or opinions of Morgan Gust, Esq., Vice President, General Counsel and
Secretary to the Company, addressed to the Purchasers and dated the
Delivery Date to the effect that:
(i) The Company has been duty incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware; has the corporate power and authority to own,
lease and operate its properties and to conduct its business as
presently conducted and as described in the Offering Memorandum; and
is duly qualified as a foreign corporation to transact business and
is in good standing in each jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so
qualify would not have a Material Adverse Effect.
(ii) Each Subsidiary Guarantor has been duly incorporated and
is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation; has the corporate power
and authority to own, lease and operate its properties and to
conduct its business as presently conducted and as described in the
Offering Memorandum; and is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure to so qualify would not have a Material Adverse
Effect. All the issued and outstanding capital stock of each
Subsidiary Guarantor is owned, directly or indirectly, by the
Company, and, to the knowledge of such counsel, free and clear of
any Lien.
(iii) The descriptions in the Offering Memorandum of statutes,
legal and governmental proceedings, contracts and other documents
are accurate and fairly present the information which, to such
counsel's knowledge, is required to be shown; and such counsel does
not know of any statutes or legal or governmental proceedings
required to be described in the Offering Memorandum that are not
described as required, or of any contracts or documents of a
character required to be described in the Offering Memorandum that
are not described as required.
(iv) To the best of such counsel's knowledge, neither the
Company nor any Subsidiary Guarantor is in violation of its charter
or bylaws, and to the best of such counsel's knowledge neither the
Company nor any Subsidiary Guarantor is in default in the
performance or observance of any obligation, agreement,
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<PAGE> 20
covenant or condition contained in any material Contract or any
applicable law, administrative regulation or administrative or court
order or decree known to such counsel, which violation or default
would have a Material Adverse Effect.
(v) To the best of such counsel's knowledge, the issuance and
delivery of the Notes and the Guarantees, the execution and delivery
of this Agreement, the Registration Rights Agreement and the
Indenture and the consummation of the transactions contemplated
herein and therein, will not conflict with or constitute a breach
of, or default under, or result in the creation or imposition of any
Lien upon any material property or assets of the Company or any
Subsidiary Guarantor pursuant to any material Contract.
(vi) The issuance and delivery of the Notes and the
Guarantees, the execution and delivery of this Agreement, the
Registration Rights Agreement and the Indenture and the consummation
of the transactions contemplated herein and therein, will not result
in any violation of the provisions of the charter or bylaws of the
Company or any Subsidiary Guarantor or, to the best of such
counsel's knowledge, any material applicable law, administrative
regulation, administrative or court order or decree known to such
counsel.
In addition, such counsel shall state that such counsel has reviewed
the sections of the Offering Memorandum under the captions "Business - Legal
Matters" and "Business - Other Matters - Regulatory, Environmental and Other
Matters Affecting Refining and Marketing," and, on the basis of such review, to
the best of such counsel's knowledge, such sections of the Offering Memorandum,
as of the date of the Offering Memorandum and at the Delivery Date, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances in which made, not misleading. The aforementioned
opinion shall be limited to the Federal law of the United States of America, the
laws of the State of Arizona and the corporate law of the State of Delaware.
Such counsel may rely on opinions of local counsel satisfactory to UBS with
respect to matters at law of jurisdictions other than the State of Arizona. Such
counsel may rely on certificates of good standing and foreign qualification from
appropriate state officials with respect to opinions regarding good standing and
foreign qualification.
(f) The Company shall have furnished to the Purchasers on the
Delivery Date a certificate, dated the Delivery Date, of the President or
a Vice President and the principal financial or accounting officer of the
Company stating that to the best of their knowledge based on reasonable
investigation, the representations and warranties of the Sellers in
Paragraph 1 are true and correct as of the Delivery Date; and the Sellers
have complied with all the agreements and satisfied all the conditions on
their part to be performed or satisfied at or prior to the Delivery Date.
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<PAGE> 21
(g) The Company shall have furnished to the Purchasers on the
Delivery Date an agreed upon procedures letter (the "procedures letter")
of Deloitte & Touche LLP, addressed to the Purchasers and dated the
Delivery Date, (i) confirming that they are independent public accountants
within the meaning of, and are in compliance with the applicable
requirements relating to the qualification of accountants under, Rule 101
of the Rules of Conduct of the American Institute of Certified Public
Accountants and (ii) stating, as of the date of the procedures letter (or,
with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in
the Offering Memorandum, as of a date not more than five days prior to the
date of the procedures letter), the findings of such firm with respect to
the financial information included or incorporated by reference in the
Offering Memorandum and such other matters as the Purchasers may
reasonably request.
(h) The Purchasers shall have received the opinion of Andrews &
Kurth L.L.P., its U.S. counsel, with respect to the Securities, the
Offering Memorandum and other related matters the Purchasers may
reasonably request.
(i) The Notes shall have been accepted for (i) settlement through
the facilities of DTC, and (ii) if applicable, settlement through the
facilities of Cedel and Euroclear.
(j) The Sellers shall have furnished to the Purchasers such further
certificates and documents, including certificates of officers of the
Subsidiary Guarantors, as the Purchasers shall have reasonably requested.
(k) The Sellers shall have executed and delivered the
Registration Rights Agreement.
All opinions, letters, evidences and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to Andrews & Kurth L.L.P., U.S. counsel to the Purchasers.
9. Stabilization. The Purchasers may, at their discretion, to the
extent permitted by applicable law, make purchases and sales of the Notes for
their own accounts in the open market or otherwise for long or short account, on
such terms as they deem advisable in connection with the distribution of the
Notes, with a view to stabilizing or maintaining the market price of the Notes
at a level other than that which might otherwise prevail on the open market.
Such transactions, if commenced, may be discontinued at any time. In such
circumstances, as between the Company, on the one hand, and the Purchasers, on
the other hand, the Purchasers shall act as principal, and any loss resulting
from stabilization shall be borne, and
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<PAGE> 22
any profit arising therefrom and any sum received by it shall be beneficially
retained, by the Purchasers for their own account.
10. Termination. The Purchasers, in their absolute discretion, may
terminate this Agreement by notice given to and received by the Company at any
time before payment is made to the Company on the Delivery Date (i) if there has
been, since the respective dates as of which information is given in the
Offering Memorandum, any Material Adverse Change, which is in the reasonable
judgment of the Purchasers, so material and adverse as to make it impracticable
or inadvisable to proceed with the purchase, sale and delivery of the Notes on
the terms and in the manner contemplated by the Offering Memorandum or (ii) if
trading in any securities of the Company has been suspended by the Commission or
a national securities exchange or the NASD, or if trading generally has been
suspended or materially limited on or by the American Stock Exchange, the New
York Stock Exchange or the NASD or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required, by
either of said exchanges or by order of the Commission or of the NASD or any
other governmental authority, or (iii) if a banking moratorium has been declared
by either Federal, New York or California authorities in the United States or
authorities in London. In addition, notwithstanding anything contained in this
Agreement the Purchasers may by notice to the Company terminate this Agreement
at any time before the time on the Delivery Date when payment would otherwise be
due under this Agreement to the Company in respect of the Notes if, in the
opinion of the Purchasers, there shall have been such a change in national or
international financial, political or economic conditions or currency exchange
rates or exchange controls or any calamity or crisis as would in their
reasonable judgment be likely to prejudice the success of the offering and
distribution of the Notes as contemplated by the Offering Memorandum or dealings
in the Notes in the secondary market. Upon any termination notice being given
under this Paragraph 10, the parties to this Agreement shall (except for the
respective liabilities of the Company and the Purchasers in relation to expenses
and indemnification and contribution as provided in Paragraph 6 and Paragraph 7,
respectively, and except for any liability arising before or in relation to such
termination) be released and discharged from their respective obligations under
this Agreement.
11. Representations, Warranties and Agreements of the
Purchasers. Each Purchaser severally represents, warrants and agrees that:
(a) The Purchasers understand that the Notes have not been and will
not be registered under the Securities Act; the Notes have not been and
will not be offered or sold by a Purchaser or its affiliates or persons
acting on its behalf except in accordance with Regulation S under the
Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. The Purchasers have offered and sold
the Notes and will offer and sell the Notes, (i) as part of their
distribution at any time and (ii) otherwise until 40 days after the later
of the commencement of the offering of the Notes and the Delivery Date
(the "restricted period"), only in accordance with the provisions of
Regulation S, Rule 144A under the Securities Act or to institutional
"accredited
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<PAGE> 23
investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act. Accordingly, no Purchaser, nor their affiliates nor any
persons acting on their behalf has engaged or will engage in any directed
selling efforts with respect to the Notes, and they have complied and will
comply with any applicable offering restrictions requirement of Regulation
S with respect to the Notes. Each Purchaser will have sent, at or prior to
confirmation of sale of Notes pursuant to Regulation S, to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration in respect of the Notes from it during the restricted period
a confirmation or notice to substantially the following effect:
"The Notes covered hereby have not been registered under the United
States Securities Act of 1933, as amended (the "Securities Act"), and may
not be offered or sold within the United States or to, or for the account
or benefit of, United States persons (i) as part of their distribution at
any time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, except in either case
in accordance with Regulation S or Rule 144A under the Securities Act.
Terms used in this paragraph have the meanings given to them by Regulation
S."
Terms used in this paragraph (a) have the meanings given to them by Regulation
S.
(b) No action has been taken or will be taken in any country or
jurisdiction by a Purchaser (either on its own account or as agent for the
Company) either in connection with an offering of the Notes or in
connection with the possession or distribution of the Offering Memorandum
or any other offering material relating to the Notes which requires any
action to be taken or filing or registration to be made for that purpose
in any country or jurisdiction, or which would result in the material
breach of any applicable rules or regulations or the like (whether by a
Purchaser or the Company) in any such country or jurisdiction. Each
Purchaser will comply in all material respects with all applicable laws
and regulations in each jurisdiction in which it purchases, offers, sells
or delivers Notes or has in its possession or distributes or causes or
permits to be distributed the Offering Memorandum or any other offering
material.
(c) No Purchaser will offer or sell the Notes in the United States
by means of any form of general solicitation or general advertising within
the meaning of Section 502(c) under the Securities Act; provided, however,
that such limitation shall not preclude the placing of any customary
tombstone advertisement with respect to the resale of the Notes following
the expiration of the restricted period. With respect to resales made in
reliance on Rule 144A of any of the Notes, each Purchaser will deliver
either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Notes has been made in reliance upon the exemption from the registration
requirements of the Securities Act provided by Rule 144A.
-23-
<PAGE> 24
(d) (i) No Purchaser has offered or sold nor will any Purchaser
offer or sell in the United Kingdom any Notes other than to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses (except in circumstances that do not constitute an offer to the
public within the meaning of the Public Offers of Securities Regulations
1995), (ii) each Purchaser has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes in, from or otherwise
involving the United Kingdom, and (iii) each Purchaser has only issued or
passed on and will only issue or pass on to any person in the United
Kingdom, any document received by it in connection with the issuance of
the Notes if that person is of a kind described in Article 11(3) of The
Financial Services Act 1986 (Investment Advertisements) (Exemption) Order
1995 or is a person to whom the document may otherwise be lawfully issued
or passed on.
The Company acknowledges and agrees that the Purchasers may, subject
to the provisions of this Paragraph 11, offer Notes to other brokers and dealers
for resale by such brokers and dealers.
12. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements and other statements of any person
set forth in or made pursuant to this Agreement shall survive the delivery of
and payment for the Notes and shall remain in full force and effect as made on
the Delivery Date regardless of any investigation made by or on behalf of any
person referred to in Paragraph 7. The provisions of Paragraphs 6 and 7 shall
survive the termination or cancellation of this Agreement.
13. Notices. Any notice or notification in any form to be given
hereunder shall be in writing and shall be delivered in person or sent by
telephone or facsimile transmission (but in the case of a notification by
telephone, with subsequent confirmation by letter or facsimile transmission).
Any notice or notification to the Company or any Subsidiary Guarantor shall be
addressed to or in care of the Company at:
Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Attention: General Counsel
Telecopy No: (602) 585-8985
Any notice or notification to the Initial Purchaser or to the Purchasers shall
be addressed to it or them at:
c/o UBS Securities LLC
299 Park Avenue
-24-
<PAGE> 25
New York, NY 10171-0026
Telecopy No: (212) 821-3285
Any notice or notification shall take effect at the time of receipt.
14. Benefit. This Agreement shall be binding upon the Purchasers,
the Sellers and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(a) the representations, warranties, indemnities and agreements of the Sellers
contained in this Agreement shall also be deemed to be for the benefit of each
Purchaser Indemnified Party and (b) the representations, warranties, indemnities
and agreements of the Purchasers contained in Paragraph 7 hereof shall be deemed
to be for the benefit of each Company Indemnified Party. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Paragraph 14, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision contained
herein. This Agreement shall not be assigned by any party hereto without the
prior written consent of the other parties hereto.
15. Miscellaneous. This Agreement shall be governed by and construed
in accordance with the internal (and not the conflict) laws of the State of New
York. This Agreement may be executed in one or more counterparts, and if
executed in more than one counterpart, the executed counterparts shall together
constitute a single instrument. The descriptive headings in this Agreement are
for convenience of reference only and shall not define or limit the provisions
hereof Time shall be of the essence of this Agreement.
-25-
<PAGE> 26
If the foregoing is in accordance with the Purchasers' understanding
of our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Sellers and the
Purchasers in accordance with its terms.
Very truly yours,
THE COMPANY:
GIANT INDUSTRIES, INC.,
a Delaware corporation
By: /s/ A. Wayne Davenport
------------------------
Name: A. Wayne Davenport
Title:Vice President
THE SUBSIDIARY GUARANTORS:
GIANT INDUSTRIES ARIZONA, INC.,
an Arizona corporation
By: /s/ A. Wayne Davenport
------------------------
Name: A. Wayne Davenport
Title:Vice President
GIANT EXPLORATION
& PRODUCTION COMPANY,
a Texas corporation
By: /s/ A. Wayne Davenport
------------------------
Name: A. Wayne Davenport
Title:Vice President
CINIZA PRODUCTION COMPANY,
-26-
<PAGE> 27
a New Mexico corporation
By: /s/ A. Wayne Davenport
------------------------
Name: A. Wayne Davenport
Title:Vice President
GIANT STOP-N-GO OF NEW MEXICO, INC.,
a New Mexico corporation
By: /s/ A. Wayne Thompson
------------------------
Name: A. Wayne Davenport
Title:Vice President
GIANT FOUR CORNERS, INC.
an Arizona corporation
By: /s/ A. Wayne Thompson
------------------------
Name: A. Wayne Davenport
Title:Vice President
PHOENIX FUEL CO., INC.
an Arizona corporation
By: /s/ A. Wayne Davenport
------------------------
Name: A. Wayne Davenport
Title:Vice President
-27-
<PAGE> 28
SAN JUAN REFINING COMPANY,
a New Mexico corporation
By: /s/ A. Wayne Davenport
------------------------v
Name: A. Wayne Davenport
Title:Vice President
GIANT MID-CONTINENT, INC.,
an Arizona corporation
By: /s/ A. Wayne Davenport
------------------------
Name: A. Wayne Davenport
Title:Vice President
-28-
<PAGE> 29
THE PURCHASERS:
The foregoing Purchase Agreement is hereby confirmed and accepted as of the date
first above written.
UBS SECURITIES LLC
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA SECURITIES, INC.
JEFFERIES & COMPANY, INC.
By: UBS Securities LLC
By: /s/ Susan Ward
----------------------------
Name: Susan Ward
Title: Managing Director
-29-
<PAGE> 30
SCHEDULE I
<TABLE>
<CAPTION>
INITIAL PURCHASERS PRINCIPAL
AMOUNT OF NOTES
--------------
<S> <C>
UBS Securities LLC........................................... $75,000,000
Donaldson, Lufkin & Jenrette Securities Corporation.......... 45,000,000
BancAmerica Securities, Inc.................................. 15,000,000
Jefferies & Company, Inc..................................... 15,000,000
--------------
$150,000,000
==============
</TABLE>
-30-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF
GIANT INDUSTRIES, INC.
(A DELAWARE CORPORATION)
JURISDICTION OF NAMES UNDER WHICH
SUBSIDIARY INCORPORATION COMPANY DOES BUSINESS
Giant Industries Arizona, Arizona Giant Refining Company
Inc. Ciniza Pipe Line Company
Ciniza Production Company* New Mexico
Giant Stop-N-Go of New New Mexico
Mexico, Inc.*
San Juan Refining Company* New Mexico
Giant Four Corners, Inc.* Arizona
Giant Mid-Continent, Inc.* Arizona
Giant Exploration & Texas
Production Company
Phoenix Fuel Co., Inc.* Arizona
* wholly-owned subsidiary of Giant Industries Arizona, Inc.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Giant Industries,
Inc. on Form S-4 of our report dated March 3, 1997 on the financial statement
schedule listed in Item 14 included in the Annual Report on Form 10-K of Giant
Industries, Inc. for the year ended December 31, 1996, and to the use of our
report dated March 3, 1997, except for Note 17 as to which the date is June 3,
1997, appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Summary Historical
and Pro Forma Financial Data", "Selected Financial Data" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
October 6, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated October 13, 1995
with respect to the financial statements of Bloomfield Refining Company included
in Giant Industries, Inc.'s current report on Form 8-K, dated October 19, 1995,
and to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Denver, Colorado
October 6, 1997
<PAGE> 1
EXHIBIT 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-5160382
(STATE OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
48 WALL STREET, NEW YORK, N.Y. 10286
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GIANT INDUSTRIES, INC.
GIANT INDUSTRIES ARIZONA,INC.
GIANT EXPLORATION & PRODUCTION COMPANY
GIANT STOP-N-GO OF NEW MEXICO, INC.
SAN JUAN REFINING COMPANY
CINIZA PRODUCTION COMPANY
GIANT FOUR CORNERS, INC.
GIANT MID-CONTINENT, INC.
PHOENIX FUEL CO., INC
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 86-0642718
ARIZONA 86-0218157
TEXAS 74-1501967
NEW MEXICO 85-0389396
NEW MEXICO 74-2759385
NEW MEXICO 74-2468207
ARIZONA 86-0739055
ARIZONA 86-0784398
ARIZONA 86-0109486
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
23733 NORTH SCOTTSDALE ROAD
SCOTTSDALE, ARIZONA 85255
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
----------------------
9% SENIOR SUBORDINATED NOTES DUE 2007
(TITLE OF THE INDENTURE SECURITIES)
================================================================================
<PAGE> 2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
NAME ADDRESS
- --------------------------------------------------------------------------------
SUPERINTENDENT OF BANKS OF THE STATE OF 2 RECTOR STREET, NEW YORK,
NEW YORK N.Y. 10006, AND ALBANY, N.Y. 12203
FEDERAL RESERVE BANK OF NEW YORK 33 LIBERTY PLAZA, NEW YORK,
N.Y. 10045
FEDERAL DEPOSIT INSURANCE CORPORATION WASHINGTON, D.C. 20429
NEW YORK CLEARING HOUSE ASSOCIATION NEW YORK, NEW YORK 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
YES.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
NONE.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A COPY OF THE ORGANIZATION CERTIFICATE OF THE BANK OF NEW YORK
(FORMERLY IRVING TRUST COMPANY) AS NOW IN EFFECT, WHICH CONTAINS THE
AUTHORITY TO COMMENCE BUSINESS AND A GRANT OF POWERS TO EXERCISE
CORPORATE TRUST POWERS. (EXHIBIT 1 TO AMENDMENT NO. 1 TO FORM T-1
FILED WITH REGISTRATION STATEMENT NO. 33-6215, EXHIBITS 1a AND 1b TO
FORM T-1 FILED WITH REGISTRATION STATEMENT NO. 33-21672 AND EXHIBIT
1 TO FORM T-1 FILED WITH REGISTRATION STATEMENT NO. 33-29637.)
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE. (EXHIBIT 4 TO FORM
T-1 FILED WITH REGISTRATION STATEMENT NO. 33-31019.)
6. THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT.
(EXHIBIT 6 TO FORM T-1 FILED WITH REGISTRATION STATEMENT NO.
33-44051.)
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR TO THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
<PAGE> 3
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE ACT, THE TRUSTEE, THE BANK OF NEW
YORK, A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF NEW
YORK, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF NEW YORK, AND
STATE OF NEW YORK, ON THE 30TH DAY OF SEPTEMBER, 1997.
THE BANK OF NEW YORK
BY: /S/ VIVIAN GEORGES
-------------------------------
NAME: VIVIAN GEORGES
TITLE: ASSISTANT VICE PRESIDENT
<PAGE> 4
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ..................................... $ 7,769,502
Interest-bearing balances ............................. 1,472,524
Securities:
Held-to-maturity securities ........................... 1,080,234
Available-for-sale securities ......................... 3,046,199
Federal funds sold and Securities pur-
chased under agreements to resell ..................... 3,193,800
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .............................................. 35,352,045
LESS: Allowance for loan and
lease losses ........................................ 625,042
LESS: Allocated transfer risk
reserve ............................................. 429
Loans and leases, net of unearned
income, allowance, and reserve ...................... 34,726,574
Assets held in trading accounts ......................... 1,611,096
Premises and fixed assets (including
capitalized leases) ................................... 676,729
Other real estate owned ................................. 22,460
Investments in unconsolidated
subsidiaries and associated
companies ............................................. 209,959
Customers' liability to this bank on
acceptances outstanding ............................... 1,357,731
Intangible assets ....................................... 720,883
Other assets ............................................ 1,627,267
------------
Total assets ............................................ $ 57,514,958
============
LIABILITIES
Deposits:
In domestic offices ................................... $ 26,875,596
Noninterest-bearing ................................... 11,213,657
Interest-bearing ...................................... 15,661,939
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ...................... 16,334,270
Noninterest-bearing ................................... 596,369
Interest-bearing ...................................... 15,737,901
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Federal funds purchased and Securities
sold under agreements to repurchase ................... 1,583,157
Demand notes issued to the U.S. .........................
Treasury .............................................. 303,000
Trading liabilities ..................................... 1,308,173
Other borrowed money:
With remaining maturity of one year
or less ............................................. 2,383,570
With remaining maturity of more than
one year through three years ............................ 0
With remaining maturity of more than
three years ......................................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding ................................. 1,377,244
Subordinated notes and debentures ....................... 1,018,940
Other liabilities ....................................... 1,732,792
------------
Total liabilities ....................................... 52,937,421
------------
EQUITY CAPITAL
Common stock ............................................ 1,135,284
Surplus ................................................. 731,319
Undivided profits and capital
reserves .............................................. 2,721,258
Net unrealized holding gains
(losses) on available-for-sale
securities ............................................ 1,948
Cumulative foreign currency transla-
tion adjustments ...................................... (12,272)
------------
Total equity capital .................................... 4,577,537
------------
Total liabilities and equity
capital ............................................... $ 57,514,958
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
-
