<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 33-91494
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
POST EFFECTIVE AMENDMENT NO. 5
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____________________________________
TRANSTEXAS GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0401023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 EAST NORTH BELT, SUITE 310, HOUSTON, TEXAS 77032-2949, (281) 987-8600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
ED DONAHUE, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
1300 EAST NORTH BELT, SUITE 310, HOUSTON, TEXAS 77032-2949, (281) 987-8600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
____________________________________
copy to:
C. ROBERT BUTTERFIELD
GARDERE & WYNNE, L.L.P.
3000 THANKSGIVING TOWER
DALLAS, TEXAS 75201
(214) 999-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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 plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
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* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
******************************************************************************
SUBJECT TO COMPLETION, DATED DECEMBER 20, 1996
PROSPECTUS
59,350,000 SHARES
TRANSTEXAS GAS CORPORATION
COMMON STOCK
____________________________________
This Prospectus relates to the sale from time to time of (i) up to
40,000,000 shares of common stock, $0.01 par value ("Common Stock"), of
TransTexas Gas Corporation ("TransTexas" or the "Company"), by TransAmerican
Energy Corporation ("TEC"), (ii) up to 10,450,000 shares of Common Stock by
TransAmerican Refining Corporation ("TARC"), (iii) up to 5,200,000 shares of
Common Stock by TransAmerican Natural Gas Corporation ("TransAmerican"), and
(iv) up to 3,700,000 shares of Common Stock by TransAmerican Exploration
Corporation ("TEXC" and, together with TEC, TARC and TransAmerican, the
"Selling Security Holders"). The Company will not receive any of the proceeds
from the sale of such shares by the Selling Security Holders. See "Use of
Proceeds" and "Selling Security Holders."
All of the 59,350,000 shares (collectively, the "Shares") of Common
Stock that may be sold pursuant to this Prospectus have been pledged as
security for obligations of the Selling Security Holders. The persons to whom
the Shares have been pledged may sell hereunder the Shares that have been
pledged to them only upon the occurrence of certain events, as set forth in the
various pledge agreements, including the failure to pay principal or interest
when due or other failure to satisfy the obligations for which such Shares have
been pledged as security. Upon the fulfillment of such obligations, or under
certain other circumstances, Shares may be released from such pledges and may
then be sold hereunder by the owner thereof.
The Shares represent 80.2% of the outstanding Common Stock. The
Company is unable to predict the effect, if any, that futures sales of the
shares of Common Stock covered hereby would have on the market price of the
Common Stock prevailing from time to time. However, the sale of a significant
portion of the Shares could have an adverse effect on the market price of the
Common Stock. See "Risk Factors."
It is anticipated that the Selling Security Holders or pledgees may
sell the Shares in underwritten offerings or in open market or block
transactions or otherwise on The Nasdaq Stock Market or a national securities
exchange or automated interdealer quotation system on which shares of Common
Stock are then listed, in the over-the-counter market, or in private
transactions, at prices related to prevailing market prices or at negotiated
prices. Some or all of the Shares may be sold to or through broker-dealers and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions. In effecting sales, participating broker-dealers
or purchasers of the Shares may arrange for other broker-dealers to
participate. Upon any sale of the Common Stock offered hereby, the Selling
Security Holder, any underwriter and any participating broker-dealers or
selling agents may be deemed to be "underwriters" under the Securities Act of
1933, as amended (the "Securities Act"), and any compensation received by a
Selling Security Holder or any such underwriter or broker-dealer in connection
with such sale, such as a discount, concession or commission, may be deemed
underwriting compensation. TARC, TEC, TEXC and TransAmerican have agreed to
pay all costs, fees and expenses incurred in connection with this offering,
other than, in the case of sales by pledgees or other transferees, discounts or
commissions to broker-dealers and fees and expenses of counsel or other
advisors to such pledgees or transferees. See "Plan of Distribution."
The Common Stock is traded on The Nasdaq Stock Market's National
Market ("NNM") under the symbol "TTXG." On December 19, 1996, the closing sale
price of the Common Stock as reported by the NNM was $14.50 per share. See
"Price Range of Common Stock."
SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
_________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE 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 ______________, 1996
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TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SELECTED FINANCIAL AND OPERATING DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PRICE RANGE OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SELLING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
__________________________
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this
Prospectus or any Prospectus Supplement and, if given or made, such
information or representation may not be relied upon as having been
authorized by the Company or any underwriter or agent. This Prospectus and
any Prospectus Supplement do not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction
where, or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus or any Prospectus
Supplement nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that the information herein or therein is
correct as of any time subsequent to their respective dates.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at its
offices at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's Regional Offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, New York, New York 10048. Copies of such materials can also be
obtained by mail from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains an Internet Web site that contains reports,
proxy and information statements and other information regarding the Company
and other registrants that file electronically with the Commission. The
Internet address of the Commission's Web site is http://www.sec.gov. The
Company's Common Stock is listed on The Nasdaq Stock Market's National Market
and reports, proxy and information statements and other information regarding
the Company can be inspected at the offices of the National Association of
Securities Dealers, Inc., 1935 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-3 under the Securities Act with respect to the Common Stock described in
this Prospectus (the "Registration Statement"). This Prospectus does not
contain all the information set forth in the Registration Statement and
exhibits and schedules thereto. For further information with respect to the
Company and such Common Stock, reference is made to the Registration Statement
and the exhibits and schedules filed as part thereof. Statements contained 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. The Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the Commission's
principal offices, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of all or any part thereto may be obtained from such office
upon payment of prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's annual report on Form 10-K for the fiscal year ended
July 31, 1995 and transition report on Form 10-K for the six months ended
January 31, 1996; quarterly reports on Form 10-Q for the fiscal quarters ended
October 31, 1995, April 30, 1996, July 31, 1996 and October 31, 1996; current
reports on Form 8-K dated September 5, 1995, January 12, 1996, and June 17,
1996; and the Company's Registration Statement on Form 8-A, and Amendment No. 1
thereto, each as filed with the Commission, are incorporated by reference
herein. All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of Common Stock
hereunder shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the filing date of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, or in any other
subsequently filed document that is also incorporated or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide a copy of the documents incorporated by
reference herein (other than exhibits to such documents) without charge to each
person to whom this Prospectus is delivered, upon written or oral request by
such person. Requests should be addressed to: TransTexas Gas Corporation, 1300
East North Belt, Suite 310, Houston, Texas 77032-2949, Attention: Investor
Relations (telephone number (281) 987-8600).
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the financial statements (including notes thereto)
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless the context indicates otherwise, references in this Prospectus to the
"Company" or to "TransTexas" are to TransTexas Gas Corporation and its
subsidiary, TransTexas Transmission Corporation, and the business and assets
transferred to TransTexas on August 24, 1993 by TransAmerican.
TransTexas Gas Corporation is engaged in the exploration for, and the
development, production, and transportation of, natural gas, primarily in South
Texas. Since 1973, TransTexas has drilled over 1,400 wells and produced more
than 2.5 Tcfe of natural gas (gross). TransTexas also owns and operates a
system (the "Pipeline System") of approximately 1,100 miles of gas gathering
and transmission pipelines with a current daily capacity of 900 MMcfd.
TransTexas' operating efficiency, reflected in its low finding, development and
operating costs, is attributable substantially to its integrated operating
approach and the economies of scale resulting from the geographic concentration
of its producing areas. TransTexas operates substantially all of its
production and performs most of its own leasehold acquisition, geological and
geophysical analysis, engineering design, well site preparation, drilling,
workover, completion, pipeline construction and production services. As of
October 31, 1996, the Company held oil and gas leases in a total of
approximately 715,000 gross acres (549,000 net acres).
For the nine months ended October 31, 1996, the Company's average net
production, including amounts delivered pursuant to volumetric production
payments, was approximately 410 MMcfd, for total net production of 112.4 Bcf of
natural gas. Average net production for the six months ended January 31, 1996
was approximately 363 MMcfd, for a total net production of 66.9 Bcf of
natural gas. For the nine months ended October 31, 1996, the Company's
average lifting cost, including amounts delivered pursuant to volumetric
production payments, was $.29 per Mcfe. As of February 1, 1996, the
Company's proved reserves, based on the evaluation of the Company's independent
petroleum engineers, were 1,157 Bcfe. As discussed below, the Company has sold
certain of these reserves since the date of such reserve report.
Until recently, the Company's operational focus and the source of
substantially all of its production has been the Lower Wilcox Lobo Trend
located in Webb and Zapata Counties of South Texas (the "Lobo Trend"). Since
commencing operations in the Lobo Trend in 1973, TransTexas has drilled over
1,300 wells, with a cumulative 84% completion rate and produced more than 2.5
Tcfe of natural gas (gross). As of October 31, 1996, TransTexas had developed
approximately 32% of its 212,000 gross acres (195,000 net acres) in the Lobo
Trend and was producing natural gas from 818 wells in the area. For the nine
months ended October 31, 1996, TransTexas produced 69.3 Bcf of natural gas from
the Lobo Trend. As of October 31, 1996, TransTexas was drilling three wells,
and completing another two wells in the area. Net daily natural gas production
from its Lobo Trend properties was 253 MMcfd.
In 1994, TransTexas began a program of evaluating prospects outside
the Lobo Trend. In late 1994, TransTexas made a natural gas discovery in the
Bob West North area of southern Zapata County. TransTexas' recent focus has
been on development activities in Bob West North, including drilling, pipeline
construction and production operations. As of October 31, 1996, TransTexas has
drilled 30 wells and completed 25 wells in the area. TransTexas' mineral
interest in Bob West North consists of a 100% working interest in 11,000 gross
acres (10,700 net acres), and a 90% net profits interest in 660 gross acres.
On October 31, 1996, TransTexas was drilling two wells in Bob West North and
completing five wells. For the nine months ended October 31, 1996, TransTexas
produced 27.2 Bcf of natural gas from Bob West North. Management of the
Company believes that the Bob West North area may, prior to the end of fiscal
1997, surpass the Lobo Trend in net daily natural gas production.
3
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TransTexas also operates or participates in operations in other areas
in South Texas outside the Lobo Trend (including the La Grulla area in Starr
County and the Cuba Libre area in Webb County), and in Mississippi and North
Dakota. TransTexas' La Grulla and Cuba Libre development areas have not met
with the same degree of success as has its Bob West North development area.
However, management continues to believe that further geological and
geophysical analysis will ultimately result in the addition of reserves and
production from these areas. As of October 31, 1996, TransTexas held in excess
of a 79% working interest in approximately 100,000 gross acres (85,000 net
acres) in the La Grulla area. As of October 31, 1996, TransTexas had daily
gross natural gas production of 2 MMcfd from a total of 13 wells drilled in La
Grulla, of which five had been completed. As of October 31, 1996, TransTexas
held a 95% working interest in approximately 40,000 gross acres (33,000 net
acres) in the Cuba Libre area. As of October 31, 1996, TransTexas was drilling
one natural gas well and had daily gross natural gas production of 5 MMcfd from
a total of 19 wells in Cuba Libre, of which nine had been completed by
TransTexas.
TransTexas is also participating in the exploration and development of
the Lodgepole area of Stark and Dunn Counties in North Dakota. As of October
31, 1996, TransTexas held an average working interest of 80% in approximately
199,000 gross acres (98,000 net acres) in the Lodgepole area. TransTexas has
conducted or participated in a series of 3-D seismic surveys covering more than
270 square miles in order to develop drilling locations and evaluate acreage
holdings. As of October 31, 1996, TransTexas had drilled eight wells and
completed two wells. In addition, as of October 31, 1996, TransTexas was
drilling two wells and was completing one well. Gross production from the two
producing wells was approximately 5,700 barrels of oil for the month of October
1996. In December 1996, the Company completed an additional well which flow
tested at a daily rate of 6,836 barrels of oil on an open choke.
TransTexas, as part of its business strategy, continually evaluates
its assets and may, from time to time, decide to sell certain of its assets.
In July 1996, TransTexas consummated the sale, effective May 1, 1996, of
producing properties in Zapata County, Texas for consideration of approximately
$62 million. In June and August 1996, TransTexas consummated sales, effective
February 1, 1996, of certain producing properties in Webb County, Texas for
consideration of approximately $9.95 million and $21.5 million, respectively.
TransTexas has engaged investment banking firms to assist it in the following
potential transactions: (i) the sale of the remaining Lobo Trend producing
properties in Webb and Zapata Counties, Texas, and associated undeveloped
acreage, (ii) the sale or sale-leaseback of all or a portion of TransTexas'
Pipeline System, and (iii) the sale of its interest in the Lodgepole area. If
any of these transactions are consummated, TransTexas intends to use the
proceeds for general corporate purposes, including a possible repurchase of its
11 1/2% Senior Secured Notes due 2002 in the aggregate principal amount of
$800 million (the "Notes").
FORWARD LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, are included throughout this
Prospectus. Words such as "anticipates", "expects," "believes" and "likely"
indicated forward-looking statements. The Company's management believes its
current views and expectations are based on reasonable assumptions; however,
there are significant risks and uncertainties that could significantly affect
expected results. Factors that could cause actual results to differ materially
from those in the forward-looking statements include fluctuations in the
commodity prices for natural gas, crude oil, condensate and natural gas liquids,
the extent of the Company's success in discovering, developing and producing
reserves, conditions in the equity and capital markets, the ultimate resolution
of litigation, and competition.
4
<PAGE> 7
RISK FACTORS
Prospective purchasers of the Shares should consider carefully the
specific risk factors set forth below as well as the other information
contained in this Prospectus.
SIGNIFICANT LEVERAGE
At October 31, 1996, the Company's long-term debt, including the
Notes, the BNY Facility (defined below) and certain equipment financing was
approximately $826 million. Additionally, in December 1996, the Company issued
$189 million in face amount of 13 1/4% Series A Senior Subordinated Notes due
2003. See "The Company - Recent Events." Although earnings for the nine months
ended October 31, 1996 were 1.7 times consolidated fixed charges primarily as a
result of a litigation settlement in the second quarter, earnings for the six
months ended January 31, 1996 and the year ended July 31, 1995 were inadequate
to cover fixed charges by $8.6 million and $15.2 million, respectively. The
Company's high degree of leverage has significant consequences, including (i) a
substantial portion of the Company's net cash provided by operations will be
committed to the payment of the Company's interest expense and principal
repayment obligations, (ii) the Company's cash flow is more sensitive to
fluctuations in natural gas prices than less highly leveraged companies, and
(iii) the Company is more highly leveraged than other large companies in the
gas exploration, production and transmission business, which may place it at a
competitive disadvantage. These consequences could adversely affect the
Company's ability to meet its obligations, including obligations to the holders
of the Notes. Further, the Company's ability to fund its current capital
expenditures and debt service requirements and, ultimately, to pay the
principal amounts of the Notes upon maturity in June 2002 from its cash flows
from operations would require significant increases in production. The Company
may have available to it sources of liquidity other than cash flow from
operations, including asset sales, equity offerings or debt financings, to
retire or otherwise refinance the principal amount of the Notes on or prior to
maturity. However, there can be no assurance that such sources will be
available if and when needed on terms acceptable to the Company, or at all.
SUBSTANTIAL CAPITAL REQUIREMENTS; LIQUIDITY
The Company makes substantial capital expenditures for the
exploration, development and production of its natural gas reserves. The
Company has financed these expenditures primarily with cash from operations,
public offerings of debt and equity securities, the sale of production payments,
asset sales and other financings. Total capital expenditures in fiscal 1995
were $278 million, including $134 million for drilling and development, $125
million for lease acquisitions and $17 million for the Pipeline System and other
equipment. For the six months ended January 31, 1996, total capital
expenditures were approximately $205 million, including approximately $145
million for drilling and development, $31 million for lease acquisitions and $29
million for the Pipeline System and other equipment. For the nine months ended
October 31, 1996, total capital expenditures were $206 million, including $16
million for lease acquisitions, $165 million for drilling and development and
$25 million for the Pipeline System and other equipment. The Company
anticipates total capital expenditures of approximately $275 million and $235
million in fiscal 1997 and fiscal 1998, respectively, subject to requirements of
the indenture governing the Notes (the "Indenture") and available cash flow, of
which approximately $230 million and $195 million, respectively, will be used
for drilling and development, $20 million in each year for lease acquisitions,
and $25 million and $20 million, respectively, for the Pipeline System and other
equipment and seismic acquisitions. The Company anticipates that its cash used
for debt service will be approximately $120 million and $105 million in fiscal
1997 and fiscal 1998, respectively. If revenues decrease, certain contingent
obligations of the Company become fixed, or the level of capital expenditures is
limited by the Indenture, the Company may not have sufficient funds for, or may
be restricted in maintaining the level of, capital expenditures necessary to
replace its reserves or to maintain production at current levels and, as a
result, production may decrease over time. Although cash from operating
activities for the nine months ended October 31, 1996 has increased due to sales
of volumetric production payments and a litigation settlement, net cash provided
by operating activities declined over the three and one-half years ended January
31, 1996. In addition to cash flow from operating activities, the Company has
utilized asset sales and various financings to meet its working capital
requirements. The Company anticipates that it will utilize additional financing
or sales of assets, as allowed by the Indenture, to fund planned levels of
operations and to meet its obligations, including its obligations under the
5
<PAGE> 8
Indenture, through January 1997. However, no assurance can be given that the
Company's cash flow from operating activities will be sufficient to meet
planned capital expenditures, contingent liabilities and debt service in the
future.
The Company has engaged investment banking firms to assist it in the
following potential transactions: (i) the sale of the remaining Lobo Trend
producing properties in Webb and Zapata Counties, Texas, and associated
undeveloped acreage, (ii) the sale or sale-leaseback of all or a portion of the
Company's Pipeline System, and (iii) the sale of its interest in the Lodgepole
prospect in North Dakota. If any of these transactions are consummated, the
Company intends to use the proceeds for general corporate purposes, including a
possible repurchase of the Notes.
The Company currently has a $40 million credit facility with BNY
Financial Corporation (the "BNY Facility"), which provides for borrowings based
on the amount of its accounts receivable. At October 31, 1996, the outstanding
balance under the BNY Facility was $14.8 million. The BNY Facility requires the
Company to maintain certain financial ratios and includes certain covenants.
Under the terms of the BNY Facility, as amended in December 1996, the Company's
net loss (including any extraordinary losses) may not exceed $10 million for
any six month period ending on the last day of any fiscal quarter ending after
January 31, 1996.
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of
Control (as such term is defined in the Indenture), each holder of the Notes
will have the right to require the Company to repurchase such holder's Notes at
101% of the principal amount thereof plus accrued and unpaid interest. A
Change of Control would be deemed to occur under the Indenture in the case of
certain changes or other events in respect of the ownership or control of the
Company, including any circumstance pursuant to which any person or group,
other than John R. Stanley and his wholly owned subsidiaries or the trustee
under the indenture ("TARC Indenture") governing TARC's $440 million aggregate
principal amount of mortgage notes (the "TARC Notes"), is or becomes the
beneficial owner of more than 50% of the total voting power of the Company's
then outstanding voting stock, unless the Notes have an investment grade rating
for the period of 120 days thereafter. The term "person," as used in the
definition of Change of Control, means a natural person, company, government or
political subdivision, agency or instrumentality of a government and also
includes a "group," which is defined as two or more persons acting as a
partnership, limited partnership or other group. In addition, certain changes
or other events in respect of the ownership or control of the Company that do
not constitute a Change of Control under the Indenture may result in a "change
of control" of the Company under the terms of the BNY Facility and certain
equipment financing. Such an occurrence could create an obligation for the
Company to repay such other indebtedness. At October 31, 1996, the Company had
approximately $22.9 million of indebtedness (excluding the Notes) subject to
such right of repayment or repurchase. In the event of a Change of Control
under the Indenture or a "change of control" under the terms of other
outstanding indebtedness, there can be no assurance that the Company will have
sufficient funds to satisfy any such payment obligations.
TARC owns and operates a large petroleum refinery in the Gulf Coast
region along the Mississippi River, approximately 20 miles from New Orleans,
Louisiana. TARC's refinery was shut down in January 1983 and is currently
partially operational. TARC is engaged in a two-phase capital improvement
program ("Capital Improvement Program") designed to reactivate the refinery and
increase its complexity. In February 1995, TARC issued the TARC Notes that
were initially collateralized by, among other things, 55 million shares of
Company Common Stock. In March 1996, TARC sold 4.55 million shares of such
Common Stock to provide additional financing for the Capital Improvement
Program.
TARC has advised the Company as follows: TARC will require substantial
additional financing over the course of the remaining construction period to
complete the Capital Improvement Program. Completion schedules and the amount
of additional expenditures required will depend upon, among other factors, the
structure and timing of additional financing. TARC is currently negotiating
with potential third-party investors to provide for additional funding,
including strategic equity investors, financial investors and foreign producers
of crude oil.
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Primarily because additional financing was not available on a timely
basis, TARC management believes that TARC will not be able to complete Phase I
of the Capital Improvement Program by February 15, 1997. Under the TARC
Indenture, the failure of TARC to complete and test Phase I by February 15,
1997 would constitute an event of default at such date. Any such event of
default could result in the sale, following the occurrence of such event of
default, of some or all of the remaining 50.45 million shares of Common Stock
pledged to collateralize the TARC Notes. A foreclosure on such shares would
constitute a "change of control" of the Company under the BNY Facility and
certain equipment financing, which may create an obligation for the Company to
repay amounts outstanding thereunder, but would not constitute a Change of
Control under the Indenture. A sale of such shares following a foreclosure
could result in a Change of Control under the Indenture. TARC anticipates
that, prior to February 15, 1997, it will solicit the approval of the holders
of the TARC Notes with respect to any elements of a proposed financing that
otherwise would be limited by the terms of the TARC Indenture, as well as to a
revised budget and an extension of the required completion date for Phase I.
There can be no assurance that current negotiations will result in additional
financing for the Capital Improvement Program, that other financing will be
available, or that the requisite approval of the TARC noteholders can be
obtained.
At October 31, 1996, TARC had total assets of $552.3 million,
long-term debt of $352.8 million and stockholder's equity of $99.2 million.
For the nine months ended October 31, 1996, TARC had revenues of $10.9 million,
an operating loss of $36.2 million, and net income of $27.2 million. TARC is
subject to the informational requirements of the Exchange Act and, in
accordance therewith, files reports and other information with the Commission.
Such reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission. Other than the advice
received from TARC set forth above, the foregoing information regarding TARC is
based solely on reports and other documents filed by TARC with the Commission.
The Company makes no representations as to, and disclaims any responsibility
for, the accuracy, adequacy or completeness of the foregoing information or the
information pertaining to TARC contained in the annual report of the Company on
Form 10-K for the year ended July 31, 1995, the transition report of the
Company on Form 10-K for the six months ended January 31, 1996, and the
quarterly reports of the Company on Form 10-Q for the quarters ended October
31, 1995, April 30, 1996, July 31, 1996 and October 31, 1996 incorporated by
reference herein, which should be read in conjunction with other publicly
available information filed by TARC with the Commission.
ABILITY TO REPLACE SHORT-LIVED RESERVES
The Company's Lobo Trend producing properties are characterized by
high initial production, followed by a steep decline in production. The
Company's Bob West North Field production is too recent to establish a reliable
production decline rate. As a result, the Company must find and develop or
acquire new natural gas reserves to replace those being depleted by production.
Without successful drilling or acquisition activities, the Company's reserves
and production will decline rapidly. The Company's business strategy is to add
reserves by pursuing an active drilling program on its existing undeveloped
properties and on properties that it may acquire in the future. There can be
no assurance that production from new wells will be sufficient to replace
production from existing wells during such period.
WORKING CAPITAL DEFICIT
For the five years prior to July 31, 1995, the Company had a working
capital deficit. At July 31, 1995, January 31, 1996 and October 31, 1996, the
Company had working capital of $106.8 million, $43.6 million and $69.5 million,
respectively; however, such amounts include $44.7 million, $46.0 million and
$46.0 million, respectively, of cash restricted pursuant to the Indenture.
Should the Company experience a working capital deficit in the future, the
Company could be forced to reduce capital expenditures or sell assets. Under
the Indenture and the BNY Facility, the Company is required to limit its
capital expenditures in a fiscal quarter if its Working Capital (as defined) at
the end of the preceding quarter is less than $20 million. Working Capital
does not include current assets or current liabilities of unrestricted
subsidiaries. TransTexas Exploration Corporation is an unrestricted
subsidiary.
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MATERIAL PROCEEDINGS AND CONTINGENT LIABILITIES
TransAmerican filed for protection from creditors under the federal
bankruptcy laws in 1975 and 1983. In both cases, certain creditor claims were
compromised. In connection with the 1983 bankruptcy, a group of bank creditors
of TransAmerican (the "Bank Group") filed a motion, which was subsequently
withdrawn, to have a trustee in bankruptcy appointed. See "The Company --
Background."
The Company is involved in many legal proceedings. The litigation and
contingent liabilities of the Company, individually and in the aggregate,
amount to significant potential liability and, if adjudicated adversely, could
have a material adverse effect on the Company. The adverse resolution in any
reporting period of one or more of these matters could have a material adverse
impact on the results of operations or cash flow of the Company for that
period. Although the outcome of these lawsuits cannot be predicted with
certainty, the Company does not expect these matters to have a material adverse
effect on its financial position. See "Legal Proceedings."
NATURAL GAS PRICE FLUCTUATIONS AND MARKETS
The Company's results of operations and the value of its gas and oil
properties are highly dependent upon the prices received for the Company's
natural gas, condensate and natural gas liquids ("NGLs"). Substantially all of
the Company's sales of natural gas are made in the spot market, or pursuant to
contracts based on spot market prices, and not pursuant to long-term,
fixed-price contracts. Accordingly, the prices received by the Company for its
natural gas production are dependent upon numerous factors beyond the control
of the Company, including the level of consumer product demand, the North
American supply of natural gas, government regulations and taxes, the price and
availability of alternative fuels, the level of foreign imports of oil and
natural gas, and the overall economic environment. Demand for natural gas is
seasonal, with demand typically higher during the summer and winter, and lower
during the spring and fall, with concomitant changes in price.
Any significant decline in current prices for natural gas and NGLs
could have a material adverse effect on the Company's financial condition,
results of operations and quantities of reserves recoverable on an economic
basis. In order to mitigate its vulnerability to natural gas price volatility,
the Company has entered into commodity price swap agreements to reduce its
exposure to price risk in the spot market for natural gas. See "The Company --
Hedging." However, a significant portion of the Company's current production
remains subject to natural gas price fluctuations. Based on current levels of
production, certain hedge agreements and historical pricing differentials
between delivery points, the Company estimates that a $0.10 per MMBtu change in
average gas prices received would change annual operating income by
approximately $8 million.
SUBSTANTIVE CONSOLIDATION; BANKRUPTCY
An investment in the Shares involves certain insolvency and bankruptcy
considerations including substantive consolidation and fraudulent transfer
issues. A financial failure by Mr. Stanley, TNGC Holdings Corporation (the
parent corporation of TransAmerican) ("TNGC"), TransAmerican, TEXC, TEC or TARC
could have adverse consequences for stockholders of the Company if a bankruptcy
court were to "substantively consolidate" the Company with Mr. Stanley or any
of such entities. If a bankruptcy court substantively consolidated the Company
or TransTexas Transmission Corporation, a wholly owned subsidiary of the
Company ("TTC"), with Mr. Stanley, TNGC, TransAmerican, TEXC, TEC or TARC, the
assets of each such entity would be subject to the claims of creditors of each
other such entity. TransAmerican filed for bankruptcy protection under the
federal bankruptcy laws in 1975 and 1983. As a result of the bankruptcy
proceedings, creditors of TransAmerican received less than the amount to which
they would otherwise have been entitled.
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DECONSOLIDATION FOR FEDERAL INCOME TAX PURPOSES
Under certain circumstances, TransAmerican, TEXC, TEC or TARC may sell
or otherwise dispose of shares of Common Stock. If, as a result of any sale or
other disposition of the Company's Common Stock, the direct and indirect
ownership of the Company by TransAmerican is less than 80% (measured by voting
power and value), the Company will no longer be a member of TransAmerican's
consolidated group for federal tax purposes (the "TransAmerican Consolidated
Group") and, with certain exceptions, will no longer be obligated under the
terms and conditions, or entitled to the benefits, of the Tax Allocation
Agreement between the Company, TransAmerican and certain of TransAmerican's
subsidiaries ("Deconsolidation"). Such sales may be necessary to raise funds
necessary to complete TARC's Capital Improvement Program. Further, if TEC or
TARC sells or otherwise transfers any stock of TARC, or issues any options,
warrants or other similar rights relating to such stock, outside of the
TransAmerican Consolidated Group, then a Deconsolidation of both TARC and the
Company from the TransAmerican Consolidated Group would occur. For the taxable
year during which Deconsolidation of the Company occurs, which would also be
the final year that the Company is a member of the TransAmerican Consolidated
Group, TransAmerican would recognize the remaining portion of a previously
deferred gain of approximately $266.3 million associated with the transfer by
TransAmerican and its subsidiaries of their natural gas exploration, production
and transmission business to the Company (the "Asset Transfer"), and would be
required to pay federal income tax on this gain (the tax is estimated to be
between $29 million and $56 million if Deconsolidation occurs in fiscal 1997
and between $24 million and $45 million if Deconsolidation occurs in fiscal
1998). This liability is based on the Company's position that the gain from the
Asset Transfer, which occurred in 1993, was deferred under the consolidated
return regulations. The deferred gain generally is being included in
TransAmerican's taxable income in a manner that corresponds (as to timing and
amount) with the realization by the Company of (and, thus, will be offset by)
the tax benefits (i.e., additional depreciation, depletion and amortization on,
or reduced gain or increased loss from a sale of, the transferred assets)
arising from the additional basis created by the Asset Transfer. If, under the
terms of the TARC Notes, it was reasonably certain when the TARC Notes were
issued that a sufficient amount of the Company's stock would be disposed in the
future to cause a Deconsolidation of the Company from the TransAmerican
Consolidated Group, it is possible that the Deconsolidation of the Company
would be treated as occurring as of the date the TARC Notes were issued.
However, TARC has advised the Company that it believes that when the TARC Notes
were issued it was not reasonably certain that a Deconsolidation of the Company
would occur in the future. Under the Tax Allocation Agreement, the Company is
required to pay TransAmerican each year an amount equal to the lesser of (i)
the reduction in taxes paid by the Company for such year as a result of any
increase in the tax basis of assets acquired by the Company from TransAmerican
that is attributable to the Asset Transfer and (ii) the increase in taxes paid
by TransAmerican for such year and all prior years attributable to gain
recognized by TransAmerican in connection with the contribution of assets by
TransAmerican to the Company (less certain amounts paid by the Company for all
prior years). The Company estimates that if Deconsolidation occurs in fiscal
1997 or 1998, the amount reimbursed to TransAmerican would be between $15
million and $26 million and between $4 million and $7 million, respectively.
Under the terms of the Tax Allocation Agreement, the remaining amount of the
tax relating to the gain would be paid over the remaining lives of the assets
transferred. In addition, the Company could be liable for additional taxes
pursuant to the Tax Allocation Agreement and the several liability provisions
of federal tax law.
Generally, under the Tax Allocation Agreement, if net operating losses
of the Company are used by other members of the TransAmerican Consolidated
Group, then the Company is entitled to the benefit (through reduced current tax
payable) of such losses in later years to the extent the Company has taxable
income, remains a member of the TransAmerican Consolidated Group, and the other
group members have the ability to pay such taxes. If TransAmerican, TEC, TARC
or TEXC transfers shares of the Company (or transfers options or other rights
to acquire such shares) and, as a result of such transfer, Deconsolidation of
the Company occurs, the Company would not thereafter receive any benefit
pursuant to the Tax Allocation Agreement for net operating losses of the
Company used by other members of the TransAmerican Consolidated Group prior to
the Deconsolidation of the Company.
Each member of a consolidated group filing a consolidated federal
income tax return is severally liable to the Internal Revenue Service (the
"IRS") for the consolidated federal income tax liability of the consolidated
group. There
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can be no assurance that TransAmerican will have the ability to satisfy the
above tax obligation at the time due and, therefore, the Company, TARC or TEC
may be required to pay the tax.
Under the Tax Allocation Agreement, the Company will be required to
pay any Texas franchise tax (which is estimated not to exceed $10.6 million)
which may be attributable to any gain recognized by TransAmerican on the Asset
Transfer and will be entitled to any benefits of the additional basis resulting
from the recognition of such gain.
POSSIBLE FEDERAL TAX LIABILITY
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provisions of the Internal Revenue Code of 1986, as amended ("COD
Exclusion"). Although the Company believes that there is substantial legal
authority to support the position that the COD Exclusion applies to the
cancellation of TransAmerican's indebtedness, due to factual and legal
uncertainties there can be no assurance that the IRS will not challenge this
position, or that the Company's position would be upheld. Under the Tax
Allocation Agreement, the Company has agreed to pay an amount equal to any
federal tax liability (which would be approximately $25.4 million) attributable
to the inapplicability of the COD Exclusion. Pursuant to the Tax Allocation
Agreement, any such tax would be offset in future years by alternative minimum
tax credits and investment tax credit carryforwards to the extent recoverable
from TransAmerican.
CONTROL BY TRANSAMERICAN AND TNGC; POTENTIAL CONFLICTS OF INTEREST
TransAmerican is the indirect controlling stockholder of the Company.
TransAmerican is wholly owned by TNGC. As a member of the board of directors
and chief executive officer of TransAmerican and the Company and sole
stockholder, sole director and chief executive officer of TransAmerican and
TNGC, John R. Stanley will be in a position to control or significantly
influence the management and operations of the Company, including actions with
respect to pending and any future litigation. There can be no assurance that
conflicts will not arise between TNGC, TransAmerican, TNGC's other subsidiaries
and Mr. Stanley, on one hand, and the other stockholders of the Company, on the
other. In addition, Mr. Stanley has guaranteed certain indemnity obligations
of TransAmerican and the Company and certain debt of the Company. The
Company's response to any litigation or any indemnification demand may be
influenced by TransAmerican or Mr. Stanley in a manner that could be adverse to
the other stockholders of the Company. TransAmerican and its existing
subsidiaries, including the Company, are parties to the Tax Allocation
Agreement, the general terms of which provide for TransAmerican and all of its
subsidiaries to file federal income tax returns as members of a consolidated
group. The Tax Allocation Agreement requires the Company, TEC and TARC to make
certain payments to TransAmerican to enable TransAmerican to pay its federal or
alternative minimum tax. In the event of an IRS audit or examination, the Tax
Allocation Agreement generally gives TransAmerican the authority to compromise
or settle disputes and to control litigation, subject to the approval of the
Company, TEC or TARC, as the case may be, where such compromise or settlement
affects the determination of the separate tax liability of that company.
INDENTURE RESTRICTIONS
The Indenture limits the Company's ability to incur additional
indebtedness, transfer or sell assets, transfer assets to subsidiaries or
create new subsidiaries, pay dividends or make other restricted payments,
create liens, enter into certain transactions with affiliates or consummate a
merger, consolidation or sale of all or substantially all of its assets. There
can be no assurance that these limitations will not adversely affect the
Company's results of operations or financial condition.
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COMPETITION
The Company competes in the highly competitive areas of natural gas
exploration, development, production and transportation. Many of the Company's
competitors have substantially larger financial resources, staffs and
facilities than the Company.
DRILLING RISKS
Drilling activities are subject to numerous risks, including
mechanical risk and the risk that no commercially productive reservoirs will be
encountered. There can be no assurance that new wells drilled by the Company
will be productive or that the Company will recover all or any portion of its
investment. The cost of drilling, completing and operating wells is often
uncertain. The Company's drilling operations may be curtailed, delayed or
canceled as a result of numerous factors, many of which are beyond the
Company's control, including title problems, weather conditions, compliance
with governmental requirements and shortages or delays in the delivery of
equipment and services.
OPERATING HAZARDS AND UNINSURED RISKS
The Company's operations are subject to hazards and risks inherent in
drilling for, and the production, processing and transportation of, natural
gas, such as fires, explosions, encountering formations with abnormal
pressures, blowouts, cratering, pipeline ruptures and spills, any of which can
result in loss of hydrocarbons, environmental pollution, personal injury claims
and other damage to properties of the Company and others. The Company's
insurance coverage includes, among other things, operator's extra expense,
physical damage on certain assets, employer's liability, comprehensive general
liability, automobile and workers' compensation insurance. The Company
believes that its insurance is adequate and customary for companies of a
similar size engaged in operations similar to those of the Company, but losses
can occur for uninsurable or uninsured risks or in amounts in excess of
existing insurance coverage.
GOVERNMENT REGULATIONS
The Company's business is subject to certain federal, state and local
laws and regulations relating to the exploration for and the development,
production and transportation of natural gas, as well as environmental and
safety matters. Many of these laws and regulations have become more stringent
in recent years, often imposing greater liability on a larger number of
potentially responsible parties. Because the requirements imposed by such laws
and regulations are frequently changed, the Company is unable to predict the
ultimate cost of compliance with these requirements or their effect on its
operations.
RELIANCE ON ESTIMATES OF PROVED RESERVES
There are numerous uncertainties inherent in estimating quantities of
proved reserves, including many factors beyond the control of the Company. The
reserve data incorporated by reference in this Prospectus represent only
estimates prepared by Netherland, Sewell & Associates, Inc. Gas reserve
assessment is a subjective process of estimating the recovery from underground
accumulations of gas that cannot be measured in an exact way, and estimates of
other persons might differ materially from those of Netherland, Sewell &
Associates, Inc. Certain events, including production, acquisitions and future
drilling and development could result in increases or decreases in estimated
quantities of proved reserves. In addition, estimates of the Company's future
net revenues from proved reserves and the present value thereof are based on
certain assumptions regarding future natural gas prices, production levels,
production and ad valorem taxes and operating and development costs that may
not prove to be correct over time.
FUTURE SALES OF COMMON STOCK
As of the date of this Prospectus, 14,650,000 shares of Common Stock
(representing approximately 19.8% of the outstanding Common Stock) are owned by
the public. The Company is unable to predict the effect, if any, that
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future sales of shares of Common Stock covered hereby would have on the market
price of the Common Stock prevailing from time to time. However, the sale of a
substantial portion of the Shares could have an adverse effect on the market
price of the Common Stock. Although the Company does not currently contemplate
a primary offering of Common Stock, the Company may sell shares of Common
Stock in a public or private offering in the future.
In January 1996, the Company entered into a reimbursement agreement
with an unaffiliated third party pursuant to which the third party caused a $20
million letter of credit to be issued to secure a supersedeas bond on behalf of
the Company in a legal proceeding. If there is a draw under the letter of
credit, the Company is required to reimburse the third party within 60 days.
See " -- Substantial Capital Requirements; Liquidity." The Company has agreed
to issue up to 8.6 million shares of Common Stock to the third party if this
contingent obligation to such third party becomes fixed and remains unpaid for
60 days. See "The Company -- Recent Events." The Company does not believe
that this contingency will occur. If the obligation becomes fixed, and
alternative sources of capital are not available, the Company could elect to
sell shares of Common Stock prior to the maturity of the obligation and use the
proceeds of such sale to repay the third party. If these shares are issued,
their sale could have an adverse effect on the market price of the Common
Stock.
TARC is engaged in a two-phase Capital Improvement Program designed to
reactivate its refinery and increase its complexity. TARC has advised the
Company as follows: TARC will require substantial additional financing over the
course of the remaining construction period to complete the Capital Improvement
Program. Completion schedules and the amount of additional expenditures
required will depend upon, among other factors, the structure and timing of
additional financing. TARC is currently negotiating with potential third-party
investors to provide for additional funding, including strategic equity
investors, financial investors and foreign producers of crude oil. Primarily
because additional financing was not available on a timely basis, TARC
management believes that TARC will not be able to complete Phase I of the
Capital Improvement Program by February 15, 1997. Under the TARC Indenture,
the failure of TARC to complete and test Phase I by February 15, 1997 would
constitute an event of default at such date. Any such event of default could
result in the sale, following the occurrence of such event of default, of some
or all of the remaining 50.45 million shares of Common Stock pledged to
collateralize the TARC Notes. The sale of such shares following a foreclosure
could have a material adverse effect on the market price of the Common Stock.
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THE COMPANY
GENERAL
TransTexas Gas Corporation is engaged in the exploration for and the
development, production, and transportation of natural gas primarily in South
Texas. The address of the Company's principal executive offices is 1300 East
North Belt, Suite 310, Houston, Texas 77032-2949, and its telephone number at
that address is (281) 987-8600.
BACKGROUND
The Company was organized in May 1993 to facilitate the refinancing of
$349.9 million of indebtedness of TransAmerican. The Company is currently an
indirect subsidiary of TransAmerican. The Company's operations consist of the
natural gas exploration, production and transmission businesses of
TransAmerican, which were transferred to the Company in August 1993.
Founded in 1958 by John R. Stanley with a single gas station,
TransAmerican grew rapidly and by the mid-1970s had developed into a chain of
over 200 independent gasoline stations in New England and New York. In the
early 1970s, TransAmerican sought to vertically integrate its gasoline
operations by purchasing a refinery in Louisiana. In a further effort to
vertically integrate, TransAmerican entered the exploration and production
business by acquiring certain oil and gas properties in South Texas. As a
result of its successful gas drilling program in South Texas, in 1974
TransAmerican began constructing gas gathering and transmission facilities.
In 1974, TransAmerican also began construction of a $140 million
ammonia plant which would use natural gas from its South Texas drilling
operations as feedstock. Primarily as a result of a collapse in ammonia
prices, TransAmerican was unable to obtain sufficient financing to complete
construction of the plant. Unable to meet its obligations, TransAmerican and
its affiliates filed a voluntary bankruptcy petition on October 31, 1975.
TransAmerican began operating pursuant to a confirmed plan of reorganization in
May 1980. Under such plan of reorganization, TransAmerican provided full
payment with interest to substantially all creditors with the exception that
claims of creditors of its ammonia plant subsidiary were compromised.
TransAmerican acquired the refining facility in 1971. Between 1979
and 1982, TransAmerican began to modernize and expand its refinery. This
expansion was largely financed through a $750 million credit facility. As a
result of regulatory changes, TransAmerican's natural gas sales to certain
intrastate pipelines became subject to proration, which significantly reduced
sales to several key customers. In 1982, before all the units of the refinery
were completed, oil prices soared, refining margins collapsed, and interest on
TransAmerican's floating-rate debt exceeded 20% per annum. As a result,
TransAmerican was unable to meet all of its financial obligations, and in
January 1983, TransAmerican filed a voluntary bankruptcy petition. In 1985,
following allegations of mismanagement and misrepresentation by TransAmerican's
management made by the Bank Group and others in connection with attempts to
have a trustee in bankruptcy appointed by the court, TransAmerican appointed a
majority of independent directors to alleviate these concerns and to secure the
knowledge and experience of the independent directors to assist TransAmerican
in its reorganization efforts and in future operations. TransAmerican emerged
from bankruptcy in October 1987 under a confirmed plan of reorganization.
Under the plan of reorganization, TransAmerican agreed to pay the secured
creditors substantially all of their allowed pre-petition claims with interest
(subject to the option of certain creditors to discount their claims in return
for earlier payment) and to conduct its business subject to significant
operating restrictions. Despite these operating restrictions, TransAmerican
was able to increase its profitability and its proved reserves in South Texas
and to make significant improvements to the Pipeline System. As a condition of
the bankruptcy plan, TransAmerican formed TARC as a wholly owned subsidiary and
transferred its refinery's net assets to TARC.
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OPERATING ACTIVITY
TransTexas is engaged in the exploration for, and the development,
production, and transportation of, natural gas, primarily in South Texas.
Since 1973, TransTexas has drilled over 1,400 wells and produced more than 2.5
Tcfe of natural gas (gross). TransTexas also owns and operates a Pipeline
System consisting of approximately 1,100 miles of gas gathering and
transmission pipelines with a current daily capacity of 900 MMcfd. TransTexas'
operating efficiency, reflected in its low finding, development and operating
costs, is attributable substantially to its integrated operating approach and
the economies of scale resulting from the geographic concentration of its
producing areas. TransTexas operates substantially all of its production and
performs most of its own leasehold acquisition, geological and geophysical
analysis, engineering design, well site preparation, drilling, workover,
completion, pipeline construction and production services. As of October 31,
1996, the Company held oil and gas leases in a total of approximately 715,000
gross acres (549,000 net acres).
For the nine months ended October 31, 1996, the Company's average net
production, including amounts delivered pursuant to volumetric production
payments, was approximately 410 MMcfd, for total net production of 112.4 Bcf of
natural gas. Average net production for the six months ended January 31, 1996
was approximately 363 MMcfd, for a total net production of 66.9 Bcf of natural
gas. For the nine months ended October 31, 1996, the Company's average lifting
cost, including amounts delivered pursuant to volumetric production payments,
was $.29 per Mcfe. As of February 1, 1996, the Company's proved reserves,based
on the evaluation of the Company's independent petroleum engineers, were
1,157 Bcfe. As discussed below, the Company has sold certain of these reserves
since the date of such reserve report.
Until recently, the Company's operational focus and the source of
substantially all of its production has been the Lobo Trend. Since commencing
operations in the Lobo Trend in 1973, TransTexas has drilled over 1,300 wells,
with a cumulative 84% completion rate and produced more than 2.5 Tcfe of
natural gas (gross). As of October 31, 1996, TransTexas had developed
approximately 32% of its 212,000 gross acres (195,000 net acres) in the Lobo
Trend and was producing natural gas from 818 wells in the area. For the nine
months ended October 31, 1996, TransTexas produced 69.3 Bcf of natural gas from
the Lobo Trend. As of October 31, 1996, TransTexas was drilling three wells,
and completing another two wells in the area. Net daily natural gas production
from its Lobo Trend properties was 253 MMcfd.
In 1994, TransTexas began a program of evaluating prospects outside
the Lobo Trend. In late 1994, TransTexas made a natural gas discovery in the
Bob West North area of southern Zapata County. TransTexas' recent focus has
been on development activities in Bob West North, including drilling, pipeline
construction and production operations. As of October 31, 1996, TransTexas has
drilled 30 wells and completed 25 wells in the area. TransTexas' mineral
interest in Bob West North consists of a 100% working interest in 11,000 gross
acres (10,700 net acres), and a 90% net profits interest in 660 gross acres.
On October 31, 1996, TransTexas was drilling two wells in Bob West North and
completing five wells. For the nine months ended October 31, 1996, TransTexas
produced 27.2 Bcf of natural gas from Bob West North. Management of the
Company believes that the Bob West North area may, prior to the end of fiscal
1997, surpass the Lobo Trend in net daily natural gas production.
TransTexas also operates or participates in operations in other areas
in South Texas outside the Lobo Trend (including the La Grulla area in Starr
County and the Cuba Libre area in Webb County), and in Mississippi and North
Dakota. TransTexas' La Grulla and Cuba Libre development areas have not met
with the same degree of success as has its Bob West North development area.
However, management continues to believe that further geological and
geophysical analysis will ultimately result in the addition of reserves and
production from these areas. As of October 31, 1996, TransTexas held in excess
of a 79% working interest in approximately 100,000 gross acres (85,000 net
acres) in the La Grulla area. As of October 31, 1996, TransTexas had daily
gross natural gas production of 2 MMcfd from a total of 13 wells drilled in La
Grulla, of which five had been completed. As of October 31, 1996, TransTexas
held a 95% working interest in approximately 40,000 gross acres (33,000 net
acres) in the Cuba Libre area. As of October 31, 1996, TransTexas was drilling
one natural gas well and had daily gross natural gas production of 5 MMcfd from
a total of 19 wells in Cuba Libre, of which nine had been completed by
TransTexas.
14
<PAGE> 17
TransTexas is also participating in the exploration and development of
the Lodgepole area of Stark and Dunn Counties in North Dakota. As of October
31, 1996, TransTexas held an average working interest of 80% in approximately
199,000 gross acres (98,000 net acres) in the Lodgepole area. TransTexas has
conducted or participated in a series of 3-D seismic surveys covering more than
270 square miles in order to develop drilling locations and evaluate acreage
holdings. As of October 31, 1996, TransTexas had drilled eight wells and
completed two wells. In addition, as of October 31, 1996, TransTexas was
drilling two wells and was completing one well. Gross production from the two
producing wells was approximately 5,700 barrels of oil for the month of October
1996. In December 1996, the Company completed an additional well which flow
tested at a daily rate of 6,836 barrels of oil on an open choke.
TransTexas, as part of its business strategy, continually evaluates
its assets and may, from time to time, decide to sell certain of its assets.
In July 1996, TransTexas consummated the sale, effective May 1, 1996, of
producing properties in Zapata County, Texas for consideration of approximately
$62 million. In June and August 1996, TransTexas consummated sales, effective
February 1, 1996, of certain producing properties in Webb County, Texas for
consideration of approximately $9.95 million and $21.5 million, respectively.
TransTexas has engaged investment banking firms to assist it in the following
potential transactions: (i) the sale of the remaining Lobo Trend producing
properties in Webb and Zapata Counties, Texas, and associated undeveloped
acreage, (ii) the sale or sale-leaseback of all or a portion of TransTexas'
Pipeline System, and (iii) the sale of its interest in the Lodgepole area. If
any of these transactions are consummated, TransTexas intends to use the
proceeds for general corporate purposes, including a possible repurchase of the
Notes.
HEDGING
Beginning in April 1995, the Company entered into commodity price swap
agreements (the "Hedge Agreements") to reduce its exposure to price risk in the
spot market for natural gas. Pursuant to the Hedge Agreements, either the
Company or the counterparty thereto is required to make a payment to the other
at the end of each month (the "Settlement Date"). The payments equal the
product of a notional quantity ("Base Quantity") of natural gas and the
difference between a specified fixed price ("Fixed Price") and a market price
("Floating Price") for natural gas. The Floating Price is determined by
reference to natural gas futures contracts traded on the New York Mercantile
Exchange ("NYMEX"). The Hedge Agreements provide for the Company to make
payments to the counterparty to the extent that the Floating Price exceeds the
Fixed Price, and for the counterparty to make payments to the Company to the
extent that the Floating Price is less than the Fixed Price. For the three and
nine months ended October 31, 1996, the Company incurred net settlement losses
pursuant to the Hedge Agreements totaling approximately $5.4 million and $23.9
million, respectively. As of October 31, 1996, the Company had Hedge
Agreements with Settlement Dates ranging from November 1996 through April 1997
involving total Base Quantities aggregating approximately 36.4 TBtu of natural
gas. Fixed Prices for these agreements range from $1.70 to $1.72 per MMBtu
($1.76 to $1.78 per Mcf). Floating Prices may not exceed a maximum (the
"Maximum Floating Price") of $2.20 per MMBtu ($2.28 per Mcf). At October 31,
1996, the estimated cost to settle these Hedge Agreements would have been
approximately $15.4 million. These agreements are accounted for as hedges and
accordingly, any gains or losses are deferred and recognized in the month the
physical volumes are delivered. At October 31, 1996, the Company maintained
$7.2 million in margin accounts related to the Hedge Agreements. The Company
may be required to post additional cash margin whenever the daily natural gas
futures prices as reported on the NYMEX, for each of the months in which the
swap agreements are in place, exceed the Fixed Price. The maximum margin call
under each Hedge Agreement will never exceed the product of the Base Quantity
for the remaining months under such Hedge Agreement multiplied by the
difference between the Maximum Floating Price and the Fixed Price.
In June 1996, the Company entered into a Master Swap Agreement (the
"Master Swap Agreement") with one of its swap counterparties, which replaced a
previously existing master agreement governing the swaps between the two
parties. The Company's obligations under the Master Swap Agreement are
collateralized by a mortgage on a substantial portion of the Company's
producing properties. In accordance with the Indenture, the lien created by
the mortgage collateralizes obligations up to a maximum of $80.8 million (10%
of the SEC PV10 of the Company's most recent reserve report as of the creation
of the mortgage). As contemplated by the Indenture, the Trustee under the
Indenture
15
<PAGE> 18
has subordinated the lien collateralizing the Notes outstanding thereunder to
the lien collateralizing the Company's obligations under the Master Swap
Agreement. The maximum amount of obligations of the Company that could be
collateralized by the mortgage, based on the swaps in place under the Master
Swap Agreement as of December 9, 1996, is approximately $9.1 million. Subject
to compliance with certain collateral coverage tests, the Company is not
required to provide additional cash margin for any swaps now or hereafter
subject to the Master Swap Agreement.
RECENT EVENTS
In December 1996, the Company issued $189 million in face amount of 13
1/4% Series A Senior Subordinated Notes due 2003 ("Subordinated Notes") to
unaffiliated third parties. The Subordinated Notes were sold with original
issue discount at a price equal to 52.6166% of the principal amount shown on
the face thereof, for gross proceeds of approximately $99.45 million. The
Subordinated Notes accrete at a rate of 13 1/4% compounded semi-annually. At
such time as the Notes are rated "B1" or better by Moody's Investors Service,
Inc. and "BB" or better by Standard & Poor's Corporation, Inc., or when the
Notes are paid in full, the Subordinated Notes will be exchanged for notes
bearing interest at a rate of 13 1/4% per annum, payable semi-annually on
December 31 and June 30. In addition, the holders of the Subordinated Notes
will have the right to exchange their notes for notes to be registered under
the Securities Act of 1933, as amended. Proceeds from the issuance of the
Subordinated Notes will be used for working capital and general corporate
purposes.
16
<PAGE> 19
SELECTED FINANCIAL AND OPERATING DATA
On January 12, 1996, the Company changed its fiscal year end for
financial reporting purposes from July 31 to January 31. The following table
sets forth selected financial data of the Company for and at the end of each of
the five fiscal years in the period ended July 31, 1995, the six-month
transition period ended January 31, 1996 and the comparable six-month period
ended January 31, 1995 and the nine months ended October 31, 1995 and 1996, and
operating data of the Company for such periods. The financial data for the
fiscal years ended July 31, 1991, 1992, 1993, 1994 and 1995, and the six months
ended January 31, 1996, have been derived from the audited consolidated
financial statements of the Company. The financial data for the six months
ended January 31, 1995 and the nine months ended October 31, 1995 and 1996, are
derived from the unaudited financial statements of the Company. The data for
the six months ended January 31, 1995 and the nine months ended October 31,
1995 and 1996, contain all adjustments (consisting only of normal recurring
accruals) necessary, in the opinion of management of the Company, for a fair
presentation thereof. The results of operations for the nine-month periods
presented are not necessarily indicative of the results to be expected for an
entire year.
<TABLE>
<CAPTION>
Six Months
Year Ended July 31, Ended January 31,
----------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
----------------------------------------------------- ------------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Gas, condensate, and natural gas
liquids . . . . . . . . . . . . . . . . . $193,235 $227,208 $294,753 $302,522 $275,627 $143,304 $124,663
Transportation revenues . . . . . . . . . 31,870 30,749 30,816 33,240 36,787 19,161 15,892
Other revenues . . . . . . . . . . . . . . 704 223 247 157 285 52 601
-------- -------- -------- -------- -------- -------- --------
225,809 258,180 325,816 335,919 312,699 162,517 141,156
Operating costs and expenses . . . . . . . 55,479 75,416 99,982 103,459 99,310 50,893 45,629
Depreciation, depletion,
and amortization . . . . . . . . . . . . 92,427 96,523 95,016 113,858 129,964 70,345 60,894
General and administrative
expenses . . . . . . . . . . . . . . . . 21,632 27,855 23,613 40,311 31,935 12,595 13,685
Litigation settlements . . . . . . . . . . -- -- (5,600) (1,000) -- -- (18,300)
Net interest expense . . . . . . . . . . 354 1,703 2,442 50,155 65,797 29,059 40,436
Income taxes and other . . . . . . . . . . 14,526 4,274 16,746 5,380 (2,415) (131) (416)
Extraordinary loss, net of taxes . . . . . -- -- -- -- 56,637 -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . $ 41,391 $ 52,409 $ 93,617 $ 23,756 $(68,529) $ (244) $ (772)
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share: (1)
Income (loss) before extraordinary item . $ 0.33 $ (0.16) $ -- $ ($.01)
Extraordinary item . . . . . . . . . . . -- (0.77) -- --
-------- -------- -------- --------
Net income (loss) . . . . . . . . . . . . $ 0.33 $ (0.93) $ -- $ (0.01)
======== ======== ======== =======
Dividends declared per common
share (2) . . . . . . . . . . . . . . . . -- -- -- --
Ratio of earnings to
consolidated fixed charges(3) . . . . . . 27.4x 17.8x 34.9x(4) 1.5x --(5) --(5) --(5)
OTHER FINANCIAL DATA:
EBITDA(6) . . . . . . . . . . . . . . . . $150,466 $156,573 $208,635 $195,044 $184,695 $100,224 $103,413
Net cash provided (used) by:
Operating activities(14) . . . . . . . . 139,904 131,869 184,466 136,243 94,312 74,332 52,172
Investing activities . . . . . . . . . . (82,667) (88,515) (142,848) (237,781) (309,415) (105,326) (136,664)
Financing activities . . . . . . . . . . (1,600) (1,652) 507 484,631 284,224 18,249 13,055
OPERATING DATA:
Gas sales volumes (Bcf)(9) . . . . . . . . 120.8 128.4(7) 119.3 130.9 147.9 76.9 66.9
Average gas prices (dry)(per Mcf)(10). . . $1.32 $1.36 $1.98 $1.96 $1.40 $1.41 $1.65
Average finding costs (per Mcfe) . . . . . $.54 $.66(8) $1.01 $1.12 $ .21 $ .32 $1.06
Average lifting costs (per Mcfe) . . . . . $.22 $.19 $.22 $.24 $ .21 $.21 $ .23
Number of gross wells drilled . . . . . . 68 71 103 140 97 60 60
Percentage of wells drilled
completed . . . . . . . . . . . . . . . . 90% 82% 85% 83% 77% 78% 75%
Net proved reserves(11):
Gas (MMcf) . . . . . . . . . . . . . . . 683,492 686,212 695,011 717,367 1,122,645 943,427 1,139,127
Condensate (MBbls) . . . . . . . . . . . 1,741 2,171 1,968 1,935 3,049 2,637 2,903
SEC PV10(12) . . . . . . . . . . . . . . $314,423 $623,173 $701,434 $544,387 $547,646 $533,281 $808,062
BALANCE SHEET DATA:
Working capital (deficit)(13) . . . . . . $(35,073) $(35,295) $(56,949) $(8,865) $106,836 $(56,749) $43,602
Net property and equipment . . . . . . . 300,074 292,587 341,976 462,340 601,460 498,165 715,340
Total assets . . . . . . . . . . . . . . 312,405 306,842 360,241 583,591 826,570 594,738 923,634
Total debt . . . . . . . . . . . . . . . 3,105 3,246 8,270 500,000 800,000 518,701 824,241
Stockholders' equity (deficit) . . . . . 143,034 153,741 204,575 (85,139) (153,668) (85,383) (154,440)
<CAPTION>
Nine Months
Ended October 31,
--------------------
1995 1996
--------------------
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Gas, condensate, and natural gas
liquids . . . . . . . . . . . . . . . . . $190,447 $228,694
Transportation revenues . . . . . . . . . 25,777 25,798
Other revenues . . . . . . . . . . . . . . 294 8,302
-------- --------
216,518 262,794
Operating costs and expenses . . . . . . . 70,123 92,762
Depreciation, depletion,
and amortization . . . . . . . . . . . . 86,277 92,356
General and administrative
expenses . . . . . . . . . . . . . . . . 24,719 35,324
Litigation settlements . . . . . . . . . . (18,300) (96,000)
Net interest expense . . . . . . . . . . 56,102 70,438
Income taxes and other . . . . . . . . . . (2,284) 2,729
Extraordinary loss, net of taxes . . . . . 56,637 --
-------- --------
Net income (loss) . . . . . . . . . . $(56,756) $ 65,185
======== ========
Net income (loss) per share: (1)
Income (loss) before extraordinary item . -- $ 0.88
Extraordinary item . . . . . . . . . . . (0.77) --
-------- --------
Net income (loss) . . . . . . . . . . . . $ (0.77) $ 0.88
======== ========
Dividends declared per common
share (2) . . . . . . . . . . . . . . . . -- --
Ratio of earnings to
consolidated fixed charges(3) . . . . . . --(5) 1.7x(4)
OTHER FINANCIAL DATA:
EBITDA(6) . . . . . . . . . . . . . . . . $144,157 $234,447
Net cash provided (used) by:
Operating activities(14) . . . . . . . . 23,580 162,827
Investing activities . . . . . . . . . . (258,407) (134,821)
Financing activities . . . . . . . . . . 261,329 (19,610)
OPERATING DATA:
Gas sales volumes (Bcf)(9) . . . . . . . . 103.5 112.4
Average gas prices (dry)(per Mcf)(10). . . $ 1.40 $ 1.87
Average finding costs (per Mcfe) . . . . . n/a n/a
Average lifting costs (per Mcfe) . . . . . $ .23 $ .29
Number of gross wells drilled . . . . . . 68 111
Percentage of wells drilled
completed . . . . . . . . . . . . . . . . 60% 73%
Net proved reserves(11):
Gas (MMcf) . . . . . . . . . . . . . . . n/a n/a
Condensate (MBbls) . . . . . . . . . . . n/a n/a
SEC PV10(12) . . . . . . . . . . . . . . n/a n/a
BALANCE SHEET DATA:
Working capital (deficit)(13) . . . . . . $ 65,301 $ 69,524
Net property and equipment . . . . . . . 634,409 753,822
Total assets . . . . . . . . . . . . . . 852,770 943,607
Total debt . . . . . . . . . . . . . . . 801,049 826,360
Stockholders' equity (deficit) . . . . . (160,439) (152,656)
</TABLE>
17
<PAGE> 20
- ------------
(1) Net income per share for the year ended July 31, 1994 gives effect to
69,000,000 shares of Common Stock outstanding after the 69,000-for-1
stock split which was effected in February 1994. Per share data for
prior years is omitted because the Company's predecessor ("TGC") was
not a separate entity with its own capital structure.
(2) The Indenture contains certain restrictions with respect to the
payment of dividends on the Company's Common Stock.
(3) For purposes of determining the ratio of earnings to consolidated
fixed charges, earnings are defined as pre-tax income plus
consolidated fixed charges. Consolidated fixed charges consist of
interest expense on all indebtedness and the portion of operating
lease rental expense that represents the interest factor.
(4) The ratio for the year ended July 31, 1993 would be 33.2x if the gain
on litigation settlement of $5.6 million was excluded from income
before taxes. Earnings for the nine months ended October 31, 1996
would have been inadequate to cover consolidated fixed charges by
$39.4 million if the gain on litigation settlement of $96 million was
excluded from income before taxes.
(5) Earnings for the year ended July 31, 1995, the six months ended
January 31, 1995 and 1996 and the nine months ended October 31, 1995,
were inadequate to cover consolidated fixed charges by $15.2 million,
$0.4 million, $8.6 million and $7.3 million, respectively.
(6) EBITDA consists of earnings before consolidated fixed charges
(excluding capitalized interest), income taxes, depreciation, depletion
and amortization. Consolidated fixed charges consist of interest
expense on all indebtedness and a portion of operating lease rental
expense that represents the interest component. EBITDA includes
litigation accruals of $5.3 million, $3.1 million, $8.1 million, $13.0
million and $7.0 million for the years ended July 31, 1991, 1992, 1993,
1994 and 1995, respectively, and $7.0 million and $12.5 million for the
nine months ended October 31, 1995 and 1996, respectively. EBITDA
includes gains on litigation settlements of $5.6 million and $1.0
million for the years ended July 31, 1993 and 1994, respectively,
$18.3 million for the six months ended January 31, 1996 and the nine
months ended October 31, 1995, respectively, and $96 million for the
nine months ended October 31, 1996. EBITDA is not presented in
accordance with GAAP and should not be used in lieu of GAAP
presentations of results of operations and cash flows.
(7) Includes a 3.5 Bcf adjustment resulting from a favorable litigation
settlement.
(8) Average finding costs for the year ended July 31, 1992 were $0.64 per
Mcfe after giving effect to a favorable litigation settlement.
(9) Sales volumes for the nine months ended October 31, 1996 include 23.5
Bcf delivered pursuant to a volumetric production payment.
(10) Average price for the nine months ended October 31, 1996 includes
amounts delivered under volumetric production payments. The average
gas price for the Company's undedicated production for this period was
$2.05 per Mcf. Gas prices do not include the effect of hedging
agreements.
(11) These reserve data are estimates of the Company's proved reserves as
of August 1, 1991, 1992, 1993, 1994 and 1995 and February 1, 1996, as
evaluated by Netherland, Sewell & Associates, Inc. See "Risk Factors
-- Reliance on Estimates of Proved Reserves."
(12) As of February 1, 1996, the sales price used for purposes of
estimating the Company's proved reserves and the future net cash flow
from those reserves was $1.95 per Mcf of natural gas and $18.34 per
Bbl of condensate.
18
<PAGE> 21
(13) All periods before August 24, 1993 exclude all cash and accounts
receivable of the Company because TransAmerican did not transfer those
assets to the Company. Working capital includes $44.7 million, $46.0
million and $46.0 million at July 31, 1995, January 31, 1996 and
October 31, 1996, respectively, of cash restricted pursuant to the
Indenture.
(14) In the nine month period ended October 31, 1996, operating activities
included $96 million relating to a litigation settlement and $58.6
million relating to a volumetric production payment.
19
<PAGE> 22
LEGAL PROCEEDINGS
The following is a description of certain legal proceedings of
TransTexas and certain legal proceedings of TransAmerican including disputed
claims under its plan of reorganization. As part of the Asset Transfer,
TransTexas assumed liability for litigation up to $15 million plus the
difference, if any, between $10 million and the costs (if less than $10
million) incurred to resolve the disputed claims. Pursuant to the agreement
relating to the Asset Transfer, as amended, TransAmerican has agreed to
indemnify TransTexas against all losses incurred by TransTexas in excess of $25
million in connection with (a) disputed claims in TransAmerican's bankruptcy
and (b) other litigation assumed by TransTexas and other agreements related to
TransAmerican's plan of reorganization (other than settlements and judgments
paid from escrowed cash established in connection with TransAmerican's plan of
reorganization). TransAmerican is required to indemnify TransTexas for all
future losses incurred in connection with litigation or bankruptcy claims
assumed in the Asset Transfer. As of October 31, 1996, TransAmerican owed the
Company approximately $7 million relating to this agreement. There can be no
assurance that TransAmerican will have the financial ability to meet its
indemnification obligations. See "Risk Factors -- Material Proceedings and
Contingent Liabilities."
Finkelstein. On April 15, 1990, H.S. Finkelstein filed suit against
TransAmerican in the 49th Judicial District Court, Zapata County, Texas,
alleging that TransAmerican failed to pay royalties and improperly marketed oil
and gas produced from certain leases. On September 27, 1994, the plaintiff
added TransTexas as an additional defendant. On January 6, 1995, a judgment
against TransAmerican and TransTexas was entered for approximately $18 million
in damages, interest and attorneys' fees. TransTexas and TransAmerican have
appealed the judgement to the Fourth Court of Appeals, San Antonio, Texas. The
Fourth Court of Appeals affirmed the judgment on April 3, 1996. TransTexas and
TransAmerican filed a motion for rehearing. On August 14, 1996, the Fourth
Court of Appeals reversed the trial court judgment and rendered judgment in
favor of TransAmerican and TransTexas. On August 29, 1996, the plaintiff filed
a motion for stay and a motion for rehearing with the court. On October 9,
1996, the court denied Finkelstein's rehearing request, and the case will now
proceed to the Supreme Court of Texas.
On April 22, 1991, the plaintiff filed a separate suit against
TransAmerican and various affiliates in the 49th Judicial District Court,
Zapata County, Texas, alleging an improper calculation of overriding royalties
allegedly owed to the plaintiff and seeking damages in an unspecified amount.
On November 18, 1993, the plaintiff added TransTexas as an additional
defendant. The parties have agreed to binding arbitration in this matter which
is set for January 6, 1997.
Coastal. On October 28, 1991, The Coastal Corporation ("Coastal")
filed an action against TransAmerican that was consolidated in the 49th
Judicial District Court, Webb County, Texas, alleging breach of contract and
tortious interference related to two gas sales contracts and a transportation
agreement, seeking unspecified actual and punitive damages and injunctive
relief. On April 22, 1994, the court entered a judgment adverse to
TransAmerican and TransTexas requiring them to pay $1.3 million plus $0.7
million in attorneys' fees to Coastal. On May 29, 1996, the Court of Appeals
affirmed the judgment. TransAmerican and TransTexas have appealed to the
Supreme Court of Texas. Coastal has abstracted the judgment in Webb and Zapata
Counties. While this matter is being judicially resolved, TransTexas is
continuing to furnish gas to Coastal.
Alameda. On May 22, 1993, Alameda Corporation ("Alameda") sued
TransAmerican and John R. Stanley in the 234th Judicial District Court, Harris
County, Texas, claiming that TransAmerican failed to account to Alameda for a
share of the proceeds TransAmerican received in a 1990 settlement of litigation
with El Paso Natural Gas Company ("El Paso"), and that TransAmerican has been
unjustly enriched by its failure to share such proceeds with Alameda. The
court granted Mr. Stanley's motion for summary judgment. On September 20,
1995, the jury rendered a verdict in favor of TransAmerican. Alameda appealed
to the Fourteenth Court of Appeals, which heard oral arguments on December 18,
1996.
Aspen. TransAmerican brought suit on September 29, 1993, against
Aspen Services, Inc. ("Aspen"), seeking an audit and accounting of drilling
costs that Aspen had charged while providing drilling services to
TransAmerican. This suit is pending in the 215th Judicial District Court,
Harris County, Texas. The parties' drilling agreement provided, among other
things, that Aspen would receive payment for its drilling-related costs from
the production and sale of gas
20
<PAGE> 23
from the wells that were drilled, and that the revenues that TransAmerican
would otherwise receive from the wells would be reduced by the amounts received
by Aspen. On July 19, 1995, Aspen filed a counterclaim and third party claim
against TransAmerican, TransTexas, and affiliated entities, asserting, among
other things, that these entities failed to make certain payments and properly
market the gas from these wells. Aspen is seeking damages in an unspecified
amount, as well as certain equitable claims. TransTexas and its affiliates are
vigorously contesting this claim.
Kathryn M. On June 8, 1995, Kathryn M., Inc., et al., filed suit
against TransAmerican in the 333rd Judicial District Court (subsequently
transferred to the 334th Judicial District Court), Harris County, Texas,
alleging that the plaintiffs, as nonparticipating royalty interest owners in
certain leases, are entitled to receive a portion of the settlement proceeds
received by TransAmerican from El Paso. On April 16, 1996, additional
nonparticipating royalty interest owners intervened, making the same claims as
the plaintiffs. This matter was dismissed without prejudice in December 1996.
McNamara. On June 28, 1996, TransTexas consummated a settlement of
litigation with Tennessee Gas Pipeline Company ("Tennessee") that was filed on
October 14, 1993 in the 244th Judicial District Court of Ector County, Texas
("Tennessee lawsuit") pursuant to which TransTexas and another plaintiff
received approximately $125 million from Tennessee. TransTexas' share of the
settlement proceeds was $96 million. On July 2, 1996, John McNamara, Jr. et
al. ("The Hubberd Trusts") filed a new suit against TransTexas in the 241st
District Court, Webb County, Texas asserting that TransTexas had breached its
duties to The Hubberd Trusts under certain oil and gas leases and that
TransTexas owed The Hubberd Trusts 25% of the gross settlement proceeds, or
approximately $31.25 million. This matter was settled in December 1996.
Briones. In an arbitration proceeding, Jesus Briones, a lessor,
claimed that one of TransTexas' wells on adjacent lands had been draining
natural gas from a portion of his acreage leased to TransTexas on which no well
had been drilled. On October 31, 1995, the Arbitrator decided that drainage
had occurred. On June 3, 1996, the Arbitrator issued a letter indicating that
drainage damages would be awarded to Briones in the amount of approximately
$1.4 million. The Arbitrator entered his award of damages on June 27, 1996.
On July 3, 1996, TransTexas filed a petition in the 49th Judicial District,
Zapata County, Texas, to vacate the Arbitrator's award. Briones also filed its
petition to confirm the Arbitrator's award. On September 30, 1996, the court
consolidated the petitions into one suit. Discovery is proceeding and a
hearing will be held on January 17, 1997 regarding any pending motions for
summary judgment filed by the parties.
Frost. On November 10, 1994, Frost National Bank filed suit against
TransTexas in the 111th Judicial District Court, Webb County, Texas, seeking a
declaratory judgment determination that TransTexas failed to properly and
accurately calculate royalties under a lease. The plaintiff has demanded $10
million plus interest. This litigation is in the discovery stage and trial is
set for May 19, 1997.
Bentsen. On August 13, 1990, Calvin R. Bentsen, et al. filed suit
against TransAmerican and Mr. Stanley in the 139th Judicial District Court,
Hidalgo County, Texas, seeking a portion of the El Paso settlement proceeds,
and an accounting of monies allegedly owed to them, claiming that TransAmerican
produced gas that belonged to them without their knowledge and that
TransAmerican entered into an oral agreement with them which entitled them to
receive a portion of the El Paso settlement proceeds. TransAmerican intends to
vigorously defend this claim. This case has been reset for trial to begin on
January 27, 1997.
Farias. On February 15, 1996, Celita Suzana Farias filed a wrongful
death action in the 93rd District Court, Hidalgo County, Texas, against
TransTexas and one of its contractors for fatal injuries suffered by the
plaintiff's husband at the Yzaguirre Heirs #3 Well on February 13, 1996. The
plaintiff alleges the defendants operated a crane in such a manner that they
were negligent and grossly negligent. The plaintiff seeks unspecified damages.
On March 7, 1996, the mother of the deceased TransTexas employee filed a
petition in intervention also alleging negligence, gross negligence and malice
and seeking unspecified damages. This litigation is in the discovery stage.
General. TransTexas is also named defendant in other ordinary course,
routine litigation incidental to its business. Although the outcome of these
other lawsuits cannot be predicted with certainty, TransTexas does not expect
21
<PAGE> 24
these matters to have a material adverse effect on its financial position. At
October 31, 1996, the possible range of estimated losses related to all of the
aforementioned claims, in addition to the estimates accrued by TransTexas is $0
to $59 million. The resolution in any reporting period of one or more of these
matters in a manner adverse to TransTexas could have a material impact on
TransTexas' results of operations and cash flows for that period. Litigation
expense, including legal fees, totaled approximately $11 million, $20 million
and $11 million for the years ended July 31, 1993, 1994 and 1995, respectively,
approximately $3 million for the six months ended January 31, 1996 and
approximately $15 million for the nine months ended October 31, 1996.
TransTexas has delivered letters of credit and placed into escrow cash, which
letters of credit and cash total approximately $21.1 million, to be applied to
certain of the litigation claims described above.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
offered hereby.
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted through The Nasdaq Stock Market's National
Market under the symbol "TTXG." The following table sets forth, on a per share
basis for the periods indicated and since the Company's initial public
offering, the high and low sale prices for the Common Stock as reported by the
NNM.
<TABLE>
<CAPTION>
High Low
------- --------
<S> <C> <C>
Fiscal year ended July 31, 1994
Third Quarter (from March 10, 1994) . . . . . . . . . $14.250 $12.375
Fourth Quarter . . . . . . . . . . . . . . . . . . . . 12.750 10.625
Fiscal year ended July 31, 1995
First Quarter . . . . . . . . . . . . . . . . . . . . 13.375 11.000
Second Quarter . . . . . . . . . . . . . . . . . . . 13.750 10.500
Third Quarter . . . . . . . . . . . . . . . . . . . 13.500 9.375
Fourth Quarter . . . . . . . . . . . . . . . . . . . 15.750 13.250
Transition Period ended January 31, 1996
First Quarter ended October 31, 1995 . . . . . . . . . 21.000 14.290
Second Quarter ended January 31, 1996 . . . . . . . . 16.000 10.500
Fiscal year ending January 31, 1997
First Quarter ended April 30, 1996 . . . . . . . . . . 13.000 10.750
Second Quarter ended July 31, 1996 . . . . . . . . . . 10.250 7.250
Third Quarter ended October 31, 1996 . . . . . . . . . 14.250 8.500
</TABLE>
On December 19, 1996, the closing sale price of the Common Stock as
reported by the NNM was $14.50, and there were approximately 40 record holders
of Common Stock.
DIVIDEND POLICY
The Company has not paid any cash dividends on its capital stock since
inception, except a dividend to TransAmerican from the proceeds of its initial
public offering. The Company's ability to pay dividends in the future is
restricted by the Indenture and will depend upon the Company's debt levels,
earning levels and book value and discounted value of certain tangible assets.
The Company would not currently be permitted under the Indenture to declare
dividends other than a dividend payable out of the proceeds of a concurrent
public equity offering. In determining whether to declare and pay a dividend,
the Board of Directors will consider various other factors, including the
Company's capital requirements and financial condition.
22
<PAGE> 25
SELLING SECURITY HOLDERS
The Selling Security Holders are TEC, TARC, TransAmerican and TEXC.
TEC and TEXC are subsidiaries of TransAmerican, and TARC is a subsidiary of
TEC. Through its interests in TEC, TARC and TEXC, TransAmerican is the
indirect controlling stockholder of the Company. Prior to the Company's
initial public offering of Common Stock in March 1994, TransAmerican held all
of the outstanding Common Stock of the Company. Mr. John R. Stanley is the
founder, Chairman of the Board, Chief Executive Officer and sole stockholder of
TNGC, which is the sole stockholder of TransAmerican. Mr. Stanley, who has
operated TransAmerican for the past 35 years, is the Chief Executive Officer
and a director of the Company. See "The Company -- Background."
As of the date hereof, TEC owns 40,000,000 shares of Common Stock,
TARC owns 10,450,000 shares of Common Stock, TransAmerican owns 5,200,000
shares of Common Stock and TEXC owns 3,700,000 shares of Common Stock,
representing approximately 54.1%, 14.1%, 7.0% and 5.0%, respectively, of the
total number of shares of Common Stock outstanding. All of the shares of
Common Stock owned by the Selling Security Holders may be offered hereby. All
of the Shares have been pledged as security for obligations of the Selling
Security Holders and may, under certain circumstances, be sold by the pledgees
of such Shares. See "Plan of Distribution."
Because each of the Selling Security Holders may offer some or all of
the Shares, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Shares, no estimate can
be given as to the number of shares of Common Stock that will be held by any of
the Selling Security Holders upon completion of this offering.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Security
Holders or by pledgees, donees, transferees or other successors in interest
(collectively, "Transferees"). Such sales may be made in underwritten
offerings or in open market or block transactions or otherwise on the NNM, or
such other national securities exchange or automated interdealer quotation
system on which shares of Common Stock are then listed, in the over-the-counter
market, or in private transactions, at prices related to prevailing market
prices or at negotiated prices. Some or all of the Shares may be sold to or
through broker-dealers and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Security Holders
or any Transferee or purchasers of shares for whom such broker-dealers may act
as agent or to whom they sell as principal or both. In effecting sales,
participating broker-dealers or purchasers of the Shares may arrange for other
broker-dealers to participate. In addition, any of the Shares covered by this
Prospectus that qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
If underwriters are used in an offering of Shares, the Shares will be
acquired by the underwriters for their own accounts and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or prices, at prices related to the prevailing
market prices at the time of sale or at negotiated prices. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time. Underwriters may sell Shares to or
through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters or
commissions from the purchasers.
Upon any sale of the Common Stock offered hereby, the Selling Security
Holder, any Transferee, any underwriter and any participating broker-dealers or
selling agents may be deemed to be "underwriters" as that term is defined in
the Securities Act, in which event any discount, concession or commissions
received by them, which are not expected to exceed those customary in the types
of transactions involved, or any profit on resales of the Common Stock by them,
may be deemed to be underwriting commissions or discounts under the Securities
Act. The Company will not receive any of the proceeds from the sale by the
Selling Security Holders of the Common Stock offered hereby. See "Use of
Proceeds." The Selling Security Holders have agreed to pay all expenses in
connection with the registration and sale of the Shares other than, in the case
of sales by any Transferee, discounts or commissions to brokers or dealers and
fees and expenses of counsel or other advisors to the Transferee.
Underwriters, broker-dealers and agents may be
23
<PAGE> 26
entitled, under the agreements entered into with the Company or any Selling
Security Holder or Transferee, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act.
At the time a particular offer of Common Stock is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth the
aggregate amount of Common Stock being offered and the terms of the offering,
including shares being offered and the terms of the offering, including the
name or names of any underwriters, broker-dealers or selling agents, any
discounts, commissions and other items constituting compensation from the
Selling Security Holder or Transferee and any discounts, commissions or
concessions allowed or reallowed or paid to underwriters, broker-dealers or
selling agents.
All of the 50,450,000 shares of Common Stock owned by TARC and TEC
have been pledged to the trustee under the indenture governing the TARC Notes.
A portion of the TARC Notes (the "TARC Discount Notes") with an original face
amount of $340 million bears interest at a rate of 18.5% per annum payable
semi-annually, commencing August 15, 1998 (subject to a decrease to 18% per
annum upon payment in full of the interest payment due on August 15, 1998).
The remaining portion of the TARC Notes is in the aggregate principal amount of
$100 million and bears interest at a rate of 16.5% per annum payable
semi-annually (subject to a decrease to 16% per annum upon payment in full of
the August 15, 1998 interest payment on the TARC Discount Notes).
TransAmerican has pledged 5,000,000 of the Shares to support contingent
obligations of TARC under certain tax benefit transfer agreements, which
obligations will arise only if the other parties to such agreements do not
receive the tax benefits anticipated thereunder. The remaining 200,000 shares
of Common Stock owned by TransAmerican are pledged to a bonding company in
support of a performance bond. The 3,700,000 shares of Common Stock owned by
TEXC have been pledged as collateral for a $30 million loan which matures on
September 19, 1998. The persons to whom the Shares have been pledged may sell
hereunder the Shares that have been pledged to them only upon the occurrence of
certain events, as set forth in the various pledge agreements, including the
failure to pay principal or interest when due or other failure to satisfy the
obligations for which such Shares have been pledged as security. Upon the
fulfillment of such obligations, or under certain other circumstances, Shares
may be released from such pledges and may then be sold hereunder by the owner
hereof.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon
for the Company by Gardere & Wynne, L.L.P., 3000 Thanksgiving Tower, Dallas,
Texas 75201.
INDEPENDENT ACCOUNTANTS
The consolidated balance sheets as of July 31, 1994 and 1995 and
January 31, 1996, and the related consolidated statements of operations and
cash flows for each of the three years in the period ended July 31, 1995 and
the six months ended January 31, 1996, and the related statement of
stockholders' deficit for each of the two years ended July 31, 1995 and the
six-month period ended January 31, 1996, and related schedules, incorporated by
reference in this prospectus, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in auditing and accounting. With respect to
the unaudited interim financial information for the periods ended October 31,
1995, April 30, 1996, July 31, 1996 and October 31, 1996 incorporated by
reference in this prospectus, the independent accountants have reported that
they have applied limited procedures in accordance with professional standards
for a review of such information. However, their separate reports included in
the Company's quarterly reports on Form 10-Q for the quarters ended October 31,
1995, April 30, 1996, July 31, 1996 and October 31, 1996, and incorporated by
reference herein, state that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the Securities Act for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
24
<PAGE> 27
EXPERTS
The reserve estimates of the Company included in the Company's Form
10-K for the transition period ended January 31, 1996 have been incorporated by
reference in this Prospectus and the Registration Statement in reliance upon
reserve reports and summary letters prepared by Netherland, Sewell &
Associates, Inc., upon the authority of such firm as experts in estimating
proved oil and gas reserves.
25
<PAGE> 28
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
TransAmerican Energy Corporation, TransAmerican Refining Corporation,
TransAmerican Natural Gas Corporation and TransAmerican Exploration Corporation
have agreed to pay all expenses, other than underwriting discounts, concessions
and commissions, in connection with the issuance and distribution of the
securities being registered pursuant to this Registration Statement, on a pro
rata basis, based on the number of shares registered for the account of each.
The following table sets forth an estimate of such expenses:
<TABLE>
<CAPTION>
ITEM AMOUNT*
---- -------
<S> <C>
Securities and Exchange Commission fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . $247,209
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,500
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500
Fees and expenses for qualification under state securities laws . . . . . . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,791
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $425,000
========
</TABLE>
______________________
* All expenses are estimated, except the Securities and Exchange Commission
fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. Section 145 of the Delaware
General Corporation Law (the "DGCL") provides that any person may be
indemnified by a Delaware corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or completed action,
suit or proceeding in which such person is made a party by reason of his being
or having been a director, officer, employee or agent of the Company. The
statute provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise.
Section nine of the Company's Certificate of Incorporation provides
that directors of the Company shall not, to the fullest extent permitted by the
DGCL, as amended from time to time, be liable to the Company or its
stockholders for monetary damages for breach of their fiduciary duty to the
Company or the Company's stockholders.
The Company has entered into indemnification agreements with its
executive officers and directors that will contractually provide for
indemnification and expense advancement and include related provisions meant to
facilitate the indemnitees' receipt of such benefits. In addition, the Company
has purchased customary directors' and officers' liability insurance policies
for its directors and officers. The Bylaws of the Company and agreements with
directors and officers also provide for indemnification for amounts (i) in
respect of the deductibles for such insurance policies and (ii) that exceed the
liability limits of such insurance policies. Such indemnification may be made
even though directors and officers would not otherwise be entitled to
indemnification under other provisions of the Bylaws or such agreements.
II-1
<PAGE> 29
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
*4.1 -- Pledge Agreement dated as of February 23, 1995, between
TransAmerican Energy Corporation and First Fidelity Bank, National
Association, as Trustee
*4.2 -- Pledge Agreement dated as of February 23, 1995, between
TransAmerican Refining Corporation and First Fidelity Bank,
National Association, as Trustee
*4.3 -- Registration Rights Agreement dated as of February 23, 1995, among
TransTexas Gas Corporation, TransAmerican Refining Corporation and
TransAmerican Energy Corporation
*4.4 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and Halliburton Company
*4.5 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and RECO Industries, Inc.
*4.6 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and Frito-Lay, Inc.
*4.7 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and EM Sector Holdings, Inc.
*4.8 -- Stock Pledge Agreement dated January 27, 1995, between
TransAmerican Natural Gas Corporation and ITT Commercial Finance
Corp.
*4.9 -- Registration Rights Agreement dated January 27, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and ITT Commercial Finance Corp.
*4.10(1) -- Pledge and Security Agreement dated as of September 19, 1996,
between TransAmerican Exploration Corporation and Fleet National
Bank.
*4.11(1) -- Registration Rights Agreement dated as of September 19, 1996,
by and among TransTexas Gas Corporation, TransAmerican Natural
Gas Corporation, TransAmerican Exploration Corporation and
Fleet National Bank.
**4.12 -- Note Purchase Agreement dated December 13, 1996 between TransTexas
Gas Corporation and the Purchasers of 13 1/4% Series A Senior
Subordinated Notes due 2003.
**4.13 -- Indenture dated December 13, 1996 between TransTexas Gas
Corporation and BankOne, Columbus, NA, as Trustee.
**4.14 -- Registration Rights Agreement dated December 13, 1996 between
TransTexas Gas Corporation and each of the Purchasers of the
Subordinated Notes.
*5.1 -- Legal Opinion of Gardere & Wynne, L.L.P.
*12.1 -- Statement regarding computation of ratio of earnings to fixed
charges.
II-2
<PAGE> 30
**15.1 -- Awareness Letter of Coopers & Lybrand, L.L.P.
**23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Gardere & Wynne, L.L.P. (set forth in Exhibit 5.1)
*23.3(2) -- Consent of Netherland, Sewell & Associates, Inc.
*24.1 -- Power of Attorney (set forth on page II-4 of the Registration
Statement filed on April 24, 1995)
*99.1 -- Legal Opinion of Gardere & Wynne, L.L.P. regarding substantive
consolidation
______________________
* previously filed
** filed herewith
(1) Filed as an exhibit to the Company's report on Form 10-Q for the
quarter ended October 31, 1996, and incorporated herein by reference
thereto.
(2) Filed as an exhibit to the Company's report on Form 10-K for the
transition period ended January 31, 1996, and incorporated herein by
reference thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) 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, as amended ("Act");
(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 (i) and (ii) above do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by
the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act")
that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability
under the Act, 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.
II-3
<PAGE> 31
(3) 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.
(4) That, for purposes of determining any liability under
the Act, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) 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.
(5) That, insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(6) That, for purposes of determining any liability under
the Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
(7) That, for the purpose of determining any liability
under the Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this Post
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on the 20th day of December, 1996.
TRANSTEXAS GAS CORPORATION
By: /s/ Ed Donahue
----------------------------------
Ed Donahue, Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Post
Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities indicated on December 20, 1996.
<TABLE>
<CAPTION>
Name Title
<S> <C>
* Director and Chief Executive Officer
- ------------------------------------------- (Principal Executive Officer)
John R. Stanley
* Director
- -------------------------------------------
Thomas B. McDade
/s/ Ed Donahue Vice President and Chief Financial Officer (Principal
- ------------------------------------------- Financial Officer and Principal Accounting Officer)
Ed Donahue
* Director
- -------------------------------------------
James R. Lesch
* Director
- -------------------------------------------
Robert L. May
* Director
- -------------------------------------------
Donald D. Sykora
*By: /s/ Ed Donahue
---------------------------------------
Ed Donahue, Attorney-in-Fact
</TABLE>
II-5
<PAGE> 33
INDEX TO EXHIBITS
*4.1 -- Pledge Agreement dated as of February 23, 1995, between
TransAmerican Energy Corporation and First Fidelity Bank, National
Association, as Trustee
*4.2 -- Pledge Agreement dated as of February 23, 1995, between
TransAmerican Refining Corporation and First Fidelity Bank,
National Association, as Trustee
*4.3 -- Registration Rights Agreement dated as of February 23, 1995, among
TransTexas Gas Corporation, TransAmerican Refining Corporation and
TransAmerican Energy Corporation
*4.4 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and Halliburton Company
*4.5 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and RECO Industries, Inc.
*4.6 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and Frito-Lay, Inc.
*4.7 -- Pledge Agreement dated as of February 23, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and EM Sector Holdings, Inc.
*4.8 -- Stock Pledge Agreement dated January 27, 1995, between
TransAmerican Natural Gas Corporation and ITT Commercial Finance
Corp.
*4.9 -- Registration Rights Agreement dated January 27, 1995, among
TransAmerican Natural Gas Corporation, TransTexas Gas Corporation
and ITT Commercial Finance Corp.
*4.10(1) -- Pledge and Security Agreement dated as of September 19, 1996,
between TransAmerican Exploration Corporation and Fleet National
Bank.
*4.11(1) -- Registration Rights Agreement dated as of September 19, 1996, by
and among TransTexas Gas Corporation, TransAmerican Natural Gas
Corporation, TransAmerican Exploration Corporation and Fleet
National Bank.
**4.12 -- Note Purchase Agreement dated December 13, 1996 between TransTexas
Gas Corporation and the Purchasers of 13 1/4% Series A Senior
Subordinated Notes due 2003.
**4.13 -- Indenture dated December 13, 1996 between TransTexas Gas
Corporation and BankOne, Columbus, NA, as Trustee.
**4.14 -- Registration Rights Agreement dated December 13, 1996 between
TransTexas Gas Corporation and each of the Purchasers of the
Subordinated Notes.
*5.1 -- Legal Opinion of Gardere & Wynne, L.L.P.
*12.1 -- Statement regarding computation of ratio of earnings to fixed
charges.
**15.1 -- Awareness Letter of Coopers & Lybrand, L.L.P.
**23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Gardere & Wynne, L.L.P. (set forth in Exhibit 5.1)
*23.3(2) -- Consent of Netherland, Sewell & Associates, Inc.
<PAGE> 34
*24.1 -- Power of Attorney (set forth on page II-4 of the Registration
Statement filed on April 24, 1995)
*99.1 -- Legal Opinion of Gardere & Wynne, L.L.P. regarding substantive
consolidation
______________________
* previously filed
** filed herewith
(1) Filed as an exhibit to the Company's report on Form 10-Q for the
quarter ended October 31, 1996, and incorporated herein by reference
thereto.
(2) Filed as an exhibit to the Company's report on Form 10-K for the
transition period ended January 31, 1996, and incorporated herein by
reference thereto.
<PAGE> 1
EXHIBIT 4.12
EXECUTION COPY
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
$189,000,000
13 1/4% Series A Senior Subordinated Notes due 2003
of
TRANSTEXAS GAS CORPORATION
- --------------------------------------------------------------------------------
December 13, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Issuance of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.1 Issuance of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Sale and Purchase of the Notes; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2.1 Sale and Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Each Purchaser's Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.1 Authorization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.2 Investment Intent; Transfer of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.3 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3.4 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3.5 Securities Not Registered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3.6 Purchasers' Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Failure to Deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.1 No Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.2 Failure to Notify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5.1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6.1 Scope of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6.2 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7.1 Indemnification Provisions Unenforceable . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7.2 No Pro Rata Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 Survival of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Conditions to the Purchasers' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.1 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.2 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.3 Issue of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.4 Representations and Warranties True; No Event of Default . . . . . . . . . . . . . . . . . . 13
3.1.5 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.6 Purchase Permitted by Applicable Laws; Legal Investment . . . . . . . . . . . . . . . . . . . 13
3.1.7 The Indenture and the Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . 13
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3.1.8 Consents and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1.9 Proceedings Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1.10 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1.11 No Material Judgment or Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1.12 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Conditions to the Obligations of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2.1 Sale of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2.2 No Material Judgment or Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2.3 The Sale by the Company Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . 15
3.2.4 Consents and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4. CERTAIN PURCHASERS' SPECIAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1 Delivery Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Issue Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Direct Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4.1 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4.2 Disclosure; Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4.3 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 No Bond Necessary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Organization, Standing and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1.1 Organization; Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Authorization of Agreement and Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4.1 Existing Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4.2 Execution of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.6 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.7 [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8.1 Fair Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8.2 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.8.3 No Change in Accounting Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.8.4 Transfer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.8.5 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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5.10.1 No Material Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10.2 No Material Judgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.11 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.15 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.16 No Violation of Regulations of Board of Governors of Federal Reserve
System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.18 Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.18.1 Sale Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.18.2 No General Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.19 Governmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.20 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.21 Patents, Trademarks, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.22 Title to and Condition of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.23 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.24 Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.25 Survival of Indemnification and Contribution and Representations and Warranties . . . . . . . . . . 28
SECTION 6. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Exhibit A Form of Indenture
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Opinion of Gardere & Wynne L.L.P.
Exhibit D Form of 10-Q Report
Schedule 2.3.3 Employee Benefit Plans
Schedule 5.2 Capitalization
Schedule 5.8.5 Liabilities
Schedule 5.17 Environmental Matters
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TRANSTEXAS GAS CORPORATION
1300 East North Belt, Suite 310
Houston, Texas 77032
As of December 13, 1996
To Each of the Purchasers
Who Are Signatories Hereto
Ladies and Gentlemen:
TransTexas Gas Corporation, a Delaware corporation (the "Company"),
hereby agrees with each of you as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any officer,
director or controlling shareholder of such other Person. For the purposes of
this definition, "control", when used with respect to any Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Person authorized to act and who acts on behalf of
any Purchaser with respect to the transactions contemplated by this Agreement
and the other Documents. "Agent" shall also include the Placement Agent and
its agents.
"Agreement" means this Purchase Agreement, as the same may be amended,
supplemented or modified from time to time in accordance with the terms hereof.
"Applicable Law" means any Federal, state, local or foreign statute,
law, ordinance, governmental rule or regulation or any judgment, decree, rule
or order of any court or governmental agency or authority applicable to the
Company or any of its Subsidiaries or any of their respective properties,
assets or operations.
"Business Day" means a day that is not a Saturday, a Sunday or a day
on which banking institutions in The Commonwealth of Massachusetts, the State
of New York or the State of Texas are not required to be open.
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"Capital Lease" means any lease that is required to be capitalized for
financial reporting purposes in accordance with generally accepted accounting
principles as in effect on the date hereof.
"Capital Stock" means any capital stock of any Person and shares,
interests, participations or other ownership interests (however designated), of
any Person and any rights (other than debt securities convertible into capital
stock), warrants or options to purchase any thereof.
"CERCLA" shall have the meaning specified in Section 5.16 hereof.
"Charter Documents" means the Articles or Certificate of Incorporation
and By-Laws or similar organizational documents of the applicable Person.
"Closing" shall have the meaning specified in Section 2.2.2 hereof.
"Closing Date" shall have the meaning specified in Section 2.2.2
hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" shall mean the Common Stock, $0.01 par value per share,
of the Company.
"Company" shall mean TransTexas Gas Corporation, a Delaware
corporation, and any successor thereto.
"Default" means any event, act or condition that is, or after notice
or passage of time or both would, constitute an Event of Default.
"Documents" means all documents delivered in connection with the
transactions contemplated by this Agreement, including without limitation the
Notes, the Indenture and the Registration Rights Agreement collectively, or
each of such documents singularly, and any documents or instruments
contemplated by or executed in connection with any of them or any of the
transactions contemplated hereby or thereby.
"Draft 10-Q" shall have the meaning provided in Section 5.8.1 hereof.
"employee benefit plan" shall have the meaning specified in Section
2.3.3 hereof.
"Environmental Laws" shall have the meaning specified in Section 5.16
hereof.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall have the meaning specified in Section 4.6
hereof.
"Event of Default" shall mean any event defined as an Event of Default
in the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Commission thereunder.
"Exchange Event" shall have the meaning specified in the Indenture.
"Indemnified Parties" shall have the meaning specified in Section
2.6.1 hereof.
"Indenture" means the Indenture, dated as of the date hereof, by and
among the Company and the Trustee (initially in the form attached hereto as
Exhibit A), as the same may be amended, modified or supplemented from time to
time in accordance with its terms.
"Intellectual Property" shall have the meaning specified in Section
5.21 hereof.
"Lien" shall have the meaning specified in the Indenture.
"Losses" shall have the meaning specified in Section 2.6.1 hereof.
"Material Adverse Effect" shall mean a material adverse effect on the
properties, business, operations, prospects, earnings, assets, liabilities or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole, or on the ability of the Company and its Subsidiaries taken as a whole
to perform their respective obligations under this Agreement, the Securities or
any of the other Documents.
"Notes" shall have the meaning specified in the Indenture.
"Pension Plan" shall have the meaning specified in Section 5.13 hereof.
"Person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Placement Agent" shall mean Jefferies & Company Inc.
"Privately Outstanding Securities" shall mean the Notes upon the
original issuance thereof and at all times subsequent thereto until, in the
case of any Note, (i) the registered exchange offer provided for in Section 2
of the Registration Rights Agreement shall have been
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<PAGE> 8
consummated and such Note or the Series B Note received in exchange therefor
shall have been resold by the Purchaser thereof, (ii) the sale or other public
distribution of such Note shall have been registered pursuant to the Securities
Act and such Note shall have been disposed of by the Purchaser thereof in
accordance with such registration, or (iii) such Note shall have been resold by
the Purchaser pursuant to Rule 144, Rule 144A or other resale exemption from
the registration requirements of the Securities Act.
"Proceeding" shall mean an action, claim, suit or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or, to the knowledge of the Company or its
Subsidiaries, threatened.
"Purchasers" shall mean those Persons who have executed a counterpart
of this Agreement on any one of the signature pages hereto who are to be
purchasers of the Notes.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement of even date herewith by and among the Company and each of the
Purchasers, relating to the registration, exchange or resale of the Notes in
accordance with the Securities Act (initially in the form attached hereto as
Exhibit B), as the same may be amended from time to time in accordance with its
terms.
"reportable event" shall have the meaning specified in Section 4.6
hereof.
"Rule 144" means Rule 144 as promulgated by the Commission pursuant to
the Securities Act, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the Commission pursuant
to the Securities Act, and any successor rule or regulation thereto.
"Scheduled Closing Date" shall have the meaning specified in Section
2.4.2.
"Securities" means the Notes.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the Commission pursuant thereto.
"Series B Note" shall have the meaning specified in the Indenture.
"Subsidiary" means with respect to any Person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person, or by such Person
and one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
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"Trustee" shall have the meaning specified in Section 3.1.7 hereof.
SECTION 2. PURCHASE AND SALE OF NOTES
2.1 Issuance of Notes.
2.1.1 Issuance of Notes. The Company has taken all necessary
corporate action to authorize the issuance and sale of up to $189,000,000 in
aggregate principal amount shown on the face thereof, of its 13 1/4% Series A
Senior Subordinated Notes due 2003 to be issued pursuant to the Indenture. The
Series A Notes will be issued in denominations of $1,000 and any integral
multiple of $1,000 thereof and will otherwise be substantially in the form of
Note attached as Exhibit A to the Indenture. Each Purchaser shall have the
registration rights set forth in the Registration Rights Agreement with respect
to the Notes to be purchased by it.
2.2 Sale and Purchase of the Notes; Closing.
2.2.1 Sale and Purchase of Notes.
Subject to the terms and conditions set forth herein, the Company
hereby agrees to sell at a discount to each Purchaser Series A Notes in the
principal amount shown on the face thereof to be equal to the the "aggregate
original principal amount of Notes to be purchased" set forth opposite the name
of such Purchaser on the execution pages hereof. Each of the Series A Notes
shall be sold at a price equal to 52.6166% of the principal amount shown on the
face of such Series A Notes.
In reliance upon the representations and warranties of the Company
contained herein and in the other Documents, and subject to the terms and
conditions set forth herein and therein, each of the Purchasers hereby agrees,
severally and not jointly, to purchase the Series A Notes to be purchased by
such Purchaser at the purchase price set forth above. Each Purchaser shall,
severally and not jointly, be liable for only the purchase of that original
principal amount of the Series A Notes indicated on the page executed by such
Purchaser.
2.2.2 Closing.
The sale and purchase of the Notes shall take place at a closing (the
"Closing") at the offices of Ropes & Gray, One International Place, Boston,
Massachusetts, commencing at 10:00 A.M., Boston time, on December 13, 1996 or
such other place, Business Day and time as may be agreed upon by all of the
Purchasers and the Company (such time and date being referred to as the
"Closing Date"). At the Closing, the Company will deliver to each Purchaser
one or more Notes in the aggregate principal amount shown on the face of the
Notes to be purchased by each such Purchaser (in such permitted denomination or
denominations as set forth on the signature page of such Purchaser), registered
in each such Purchaser's name or in the name(s) of such nominee(s) or
designee(s) as each such Purchaser may request, against payment of the purchase
price therefor by Federal funds bank wire transfer in same day
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available funds to such bank account as the Company shall designate at least
one Business Day prior to the Closing Date.
2.3 Each Purchaser's Representations.
2.3.1 Authorization and Authority.
Each Purchaser represents to the Company that it is authorized to
enter into this Agreement, to perform its several obligations hereunder and to
consummate the transactions contemplated hereby. Each Purchaser further
represents that, when executed, this Agreement and the Registration Rights
Agreement will be a legal, valid and binding obligation of such Purchaser,
enforceable against it in accordance with the respective terms thereof, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether such enforcement is sought in a proceeding in equity or at law).
2.3.2 Investment Intent; Transfer of Securities.
Each Purchaser further represents to the Company that it is purchasing
the Securities to be purchased by it hereunder for its own account, and with no
intention of distributing or reselling said Securities or any part thereof in
any transaction that would be in violation of the securities laws of the United
States of America or any state thereof, without prejudice, however, to its
right at all times to sell or otherwise dispose of all or any part of said
Securities pursuant to an effective registration statement under the Securities
Act and in compliance with applicable state securities laws, or under an
exemption from such registration available under the Securities Act and other
applicable state securities laws and subject, nevertheless, to the disposition
of its property being at all times within its control.
If any Purchaser desires to offer, sell or otherwise transfer, pledge
or hypothecate all or any part of the Securities (other than pursuant to an
effective registration statement under the Securities Act or pursuant to Rule
144 or Rule 144A), such Purchaser shall, if so requested by the Company,
deliver to the Company a written opinion of counsel reasonably satisfactory to
the Company, which written opinion shall be reasonably satisfactory in form and
substance to the Company, that there is available therefor an exemption from
the registration requirements of the Securities Act. Upon original issuance
thereof, and until such time as no longer required by law, each Note (and all
securities issued in exchange therefor or substitution thereof) shall bear a
legend in substantially the form set forth in the Indenture.
At such time that such legend is no longer required by law to be borne
by such Note, the Company shall, at the request of the holder of any Note,
cause such legend to be removed or replace such certificate with an unlegended
Note. The Company may require, as a condition to its obligation to remove such
legend a written opinion of counsel reasonably
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<PAGE> 11
satisfactory to the Company, which written opinion shall be reasonably
satisfactory in form and substance to the Company to the effect that such
legend is no longer required.
2.3.3 ERISA.
Each Purchaser further represents that either (i) no part of the funds
to be used to purchase the Notes to be purchased by it constitutes assets
allocated to any qualified trust that contains the assets of any employee
benefit plan with respect to which the Company or any ERISA Affiliates (as
defined in Section 4.6 below) is a party in interest or disqualified person or
(ii) the use of such assets would not constitute a non-exempt prohibited
transaction. The representations made by each Purchaser in the preceding
clauses are made solely in reliance upon such Purchaser's review of the list (a
copy of which is set forth as Schedule 2.3.3 hereto), previously furnished to
it by the Company, which sets forth the employee benefit plans with respect to
which the Company or any ERISA Affiliates is a party in interest or a
disqualified person. The terms "employee benefit plan" and "party in interest"
shall have the meanings assigned to such terms in Section 3 of ERISA, the term
"disqualified person" shall have the meaning assigned to such term in section
4975 of the Code, and the term "qualified trust" shall mean any trust qualified
under section 401(a) of the Code in which is held the assets of any employee
benefit plan.
2.3.4 Accredited Investor.
Each Purchaser further represents that it is, and each of its managed
accounts, if applicable, is, an "accredited investor" within the meaning of
Rule 501 under the Securities Act.
2.3.5 Securities Not Registered.
Each Purchaser further represents that it understands that (i) the
Securities have not been registered under the Securities Act and are being
offered and sold under an exemption from registration thereunder, (ii) it must
bear the economic risk of its investment in the Securities for an indefinite
period of time because it is not anticipated that there will be any market for
the Securities and because the Securities cannot be resold unless subsequently
registered under the Securities Act or unless an exemption from such
registration is available, and (iii) no federal or state agency has passed on
or made any recommendations or endorsements of the Securities.
2.3.6 Purchasers' Representations and Warranties.
Each Purchaser's payment of the purchase price for the Notes purchased
by it at the Closing shall constitute a certification by that Purchaser that
all of its representations and warranties made herein and in the other
Documents shall be true and correct in all material respects at and as of the
Closing Date, after giving effect to the transactions contemplated by this
Agreement and the other Documents, as if made at and as of such date.
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2.4 Failure to Deliver.
2.4.1 No Closing.
Notwithstanding anything to the contrary contained in this Agreement,
this Agreement may be terminated and the transactions contemplated hereby may
be abandoned at any time prior to the Closing:
(i) by the mutual consent of all of the parties; or
(ii) if the Closing shall not have occurred on or before
December 18, 1996.
2.4.2 Failure to Notify.
If the Closing shall not actually occur on any date on which the
Closing is scheduled to occur (the "Scheduled Closing Date"), and the Company
shall have failed to notify Ropes & Gray prior to 11:00 a.m., Houston time, on
such Scheduled Closing Date that such Closing has been postponed, the Company
shall pay to each Purchaser by Federal funds bank wire transfer in same day
available funds to the bank account designated by such Purchaser (as
compensation for its loss of funds and administrative costs) an amount equal to
interest on the aggregate original purchase price for the Notes to have been
purchased by such Purchaser on such Scheduled Closing Date, at the effective
rate of interest equal to [insert interest rate of 13 1/4% per annum, for each
day from and including such Scheduled Closing Date to, but not including, the
earlier of the date on which such Closing actually occurs or the date on which
the amount to be paid by such Purchaser as the purchase price of such Notes is
available to such Purchaser for reinvestment, provided, that the Company shall
pay to such Purchaser in any case not less than one day's interest at such
specified rate.
2.5 Fees and Expenses.
2.5.1 Fee.
If the Notes are sold, the Company shall pay to each Purchaser (i) a
funding fee equal to 1/4% and (ii) a structuring fee equal to 1/4%, in each
case of the purchase price of the Notes purchased by such Purchaser.
2.5.2 Expenses.
Whether or not the Notes are sold, the Company shall pay all
reasonable expenses relating to this Agreement and the other Documents,
including, but not limited to:
(a) the cost of printing, reproducing and filing this Agreement,
the other Documents and any other documents contemplated hereby or thereby;
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(b) the reasonable fees and expenses of the Placement Agent;
(c) the reasonable fees, disbursements and related charges of
Ropes & Gray, the special counsel of certain of the Purchasers;
(d) the cost of delivering to each Purchaser's custodian or home
office the Notes purchased by the Purchaser at the Closing upon the issuance
thereof;
(e) all reasonable out-of-pocket expenses relating to any
amendment to, or modification of, or any waiver, or consent or preservation of
rights under, this Agreement or any of the other Documents; and
(f) all reasonable other expenses, including reasonable attorneys'
fees, incurred by the Company in connection with the transactions contemplated
by this Agreement and the other Documents.
2.6 Indemnification.
2.6.1 Scope of Indemnification.
In addition to all other sums due hereunder or provided for in this
Agreement or any of the other Documents and any and all obligations of the
Company to indemnify any Purchaser hereunder or under any of the other
Documents, the Company shall, without limitation as to time, indemnify and hold
harmless each Purchaser, its Affiliates, and the employees, officers,
directors, and Agents of each Purchaser and its Affiliates, including attorneys
and consultants (individually, an "Indemnified Party" and collectively, the
"Indemnified Parties"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, costs (including, without limitation,
reasonable costs of preparation and reasonable attorneys' fees) and expenses,
including expenses of investigation (collectively, "Losses"), incurred by any
Indemnified Party, as a consequence of any claim by or obligation to a third
party which arises out of or in connection with this Agreement or the other
Documents or the transactions contemplated hereby or thereby (or any other
document or instrument executed herewith or pursuant hereto or thereto),
whether or not the transactions contemplated by this Agreement are consummated
and whether or not any Indemnified Party is a formal party to any Proceeding;
provided, however, that the Company shall not be liable to any Indemnified
Party for any Losses (i) resulting from a violation by such Indemnified Party
of a legal restriction on its investment powers or (ii) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or review) that such Losses arose from
the negligence or willful misconduct of such Indemnified Party. Subject to the
provisions of the last sentence of Section 2.6.2, the Company agrees promptly
to reimburse any Indemnified Party for all such Losses as they are incurred and
disclosed to the Company in writing by such Indemnified Party. The obligations
of the Company to each Indemnified Party hereunder shall be separate
obligations, and the liability of the Company to
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<PAGE> 14
any Indemnified Party hereunder shall not be extinguished solely because any
other Indemnified Party is not entitled to indemnity hereunder.
2.6.2 Indemnification Procedures.
If any proceeding shall be brought or asserted against any Indemnified
Party in respect of which indemnity may be sought from the Company hereunder,
such Indemnified Party promptly shall notify the Company in writing, and the
Company shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
reasonable fees and expenses incurred in connection with the defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Company of its obligations pursuant to this Agreement, except
to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or review) that such
failure shall have materially prejudiced the Company.
Any such Indemnified Party shall have the right to employ separate
counsel in any such action, claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the Company shall have
agreed to pay such fees and expenses; or (2) the Company shall have failed
promptly to assume the defense of such action, claim or proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any such
action, claim or proceeding; or (3) the named parties to any such action, claim
or proceeding (including any impleaded parties) include both such Indemnified
Party and the Company, and such Indemnified Party shall have been advised by
counsel that a conflict of interest may exist if such counsel represents such
Indemnified Party and the Indemnifying Party (and in the case of any of (1),
(2) or (3), if such Indemnified Party notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense thereof and the reasonable fees
and expenses of such counsel shall be at the expense of the Company), it being
understood, however, that, the Company shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for all such Indemnified Parties, which firm shall be designated in writing by
such Indemnified Parties. The Company shall have the right to employ separate
counsel in, and to participate in the defense of, any action or proceeding with
respect to which it has no right to assume the defense, but the fees and
expenses of such counsel shall be at the expense of the Company. No
Indemnified Party will be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). The
Company shall not consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release, in form and
substance satisfactory to the Indemnified Party, from all liability in respect
of such action, claim or proceeding for which such Indemnified Party would be
entitled to indemnification hereunder (whether or not any Indemnified Party is
a party thereto). All fees and expenses of the
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<PAGE> 15
Indemnified Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such action or
proceeding in a manner not inconsistent with this Section 2.6) shall be paid to
the Indemnified Party, as incurred, upon written notice thereof to the Company;
provided, that the Company may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined by a court of competent jurisdiction (which determination is not
subject to appeal or review) that such Indemnified Party is not entitled to
indemnification hereunder.
2.7 Contribution.
2.7.1 Indemnification Provisions Unenforceable.
If an Indemnified Party has incurred Losses for which the Company is
required to indemnify such Indemnified Party pursuant to Section 2.6, and if
the indemnification provided for in Section 2.6 is unavailable to any such
Indemnified Party or is insufficient to hold such Indemnified Party harmless in
respect of any such Losses, then the Company, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Company, on the one hand, and
such Indemnified Party, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of the Company, on the
one hand, and any Indemnified Party, on the other hand, shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been taken by, or relates to information
supplied by, the Company on the one hand or such Indemnified Party on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed to
include any legal or other fees or expenses incurred by such party in
connection with any proceeding.
2.7.2 No Pro Rata Allocation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.7 were determined by pro rata
allocation or by any other method of allocation that does not account for the
equitable considerations referred to in Section 2.7.1 hereof. Notwithstanding
the provisions of this Section 2.7, no Indemnified Party shall be required to
contribute any amount in excess of the amount by which the price at which the
Securities sold by such Indemnified Party and distributed to the public exceeds
the amount of any damages that such Indemnified Party has otherwise been
required to pay by reason of such statement or 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 is not
guilty of such fraudulent misrepresentation.
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<PAGE> 16
2.8 Survival of Obligations.
The obligations of the Company under Section 2.6 and Section 2.7 shall
survive the payment or prepayment of the Notes, at maturity, upon redemption or
otherwise, any transfer of the Notes by any Purchaser, and any termination of
this Agreement or the other Documents.
2.9 Further Actions.
During the period from the date hereof to the Closing Date, the
Company shall take all actions reasonably necessary or appropriate to cause
their representations and warranties contained in Section 5 hereof to be true
and correct in all material respects as of the Closing Date, after giving
effect to the transactions contemplated by this Agreement, as if made on and as
of such date.
SECTION 3. CLOSING CONDITIONS
3.1 Conditions to the Purchasers' Obligations.
Each Purchaser's obligation to purchase and pay for the Notes to be
delivered to it at the Closing shall be subject to the satisfaction of the
following conditions as of the Closing Date.
3.1.1 Opinions of Counsel.
Each Purchaser shall have received the following opinions:
(a) a favorable opinion, dated the Closing Date and addressed to such
Purchaser, from Gardere & Wynne L.L.P., counsel to the Company, substantially
in the form set forth in Exhibit C hereto; and
(b) such other opinions of counsel addressing such other matters
incidental to the transactions contemplated by this Agreement and the other
Documents as such Purchaser may reasonably request.
3.1.2 Officers' Certificate.
Each Purchaser shall have received a certificate or certificates,
dated the Closing Date and signed by the President or a Vice President of the
Company, certifying that the conditions set forth in Sections 3.1.3 through
3.1.5 and 3.1.7 through 3.1.12 hereof have been satisfied on and as of such
date.
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3.1.3 Issue of Notes.
Simultaneously with the sale to each Purchaser of the Notes to be
purchased by it at the Closing, the Company shall have issued and sold Notes
with a minimum aggregate purchase price of $70,000,000.
3.1.4 Representations and Warranties True; No Event of Default.
The representations and warranties of the Company contained herein and
in each of the other Documents shall be true and correct in all material
respects at and as of the Closing Date, after giving effect to the transactions
contemplated by this Agreement and the other Documents, as if made on and as of
such date. There shall exist at and as of the Closing Date (after giving
effect to the transactions contemplated by this Agreement and the other
Documents) no Default or Event of Default.
3.1.5 Compliance with Agreements.
The Company shall have performed and complied in all material respects
with all agreements, covenants and conditions contained herein and in the other
Documents that are required to be performed or complied with by the Company on
or before the Closing Date.
3.1.6 Purchase Permitted by Applicable Laws; Legal Investment.
Each Purchaser's purchase of and payment for the Notes to be purchased
by it (a) shall not be prohibited by any applicable law or governmental
regulation, release, interpretation or opinion (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System), (b) shall not subject such Purchaser to any penalty or other onerous
condition under or pursuant to any applicable law or governmental regulation,
and (c) shall be permitted by the laws and regulations of the jurisdictions to
which such Purchaser is subject. The Company shall have delivered to such
Purchaser factual certificates or other evidence it shall reasonably request,
in form and substance reasonably satisfactory to it, to enable it to establish
compliance with this condition. The Placement Agent shall have delivered to
each Purchaser a copy of a letter or letters, addressed to the Company, in form
and substance reasonably satisfactory to each Purchaser, confirming certain
matters set forth in Section 5.18.2.
3.1.7 The Indenture and the Registration Rights Agreement.
(a) The Company and Bank One, Columbus, NA, as trustee (the
"Trustee"), shall have duly entered into the Indenture, and each Purchaser
shall have received counterparts, conformed as executed, of the Indenture.
(b) The Company shall have duly executed and delivered to each
Purchaser the Registration Rights Agreement.
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<PAGE> 18
3.1.8 Consents and Permits.
The Company shall have received all consents, permits and other
authorizations, and made all such filings and declarations, as may be required
pursuant to any law, statute, regulation or rule (Federal, state, local and
foreign), contemplated by this Agreement and the other Documents, including the
issuance and sale of the Notes to the Purchasers, and pursuant to all other
agreements, orders and decrees to which any of them is a party or to which any
of them is subject, in connection with the transactions to be consummated on or
prior to the Closing Date contemplated by this Agreement and the other
Documents.
3.1.9 Proceedings Satisfactory.
All corporate proceedings taken in connection with the sale of the
Notes and all documents relating thereto, shall be reasonably satisfactory in
form and substance to each Purchaser. Each Purchaser and the Purchasers'
special counsel shall have received copies of such documents as any Purchaser
may reasonably request in connection with the Closing, or as a basis for the
Closing opinions, all in form and substance reasonably satisfactory to each
Purchaser. Each Document shall be reasonably satisfactory in form and
substance to each Purchaser.
3.1.10 No Material Adverse Change.
There shall not have occurred any material adverse change in the
operations, business, properties, prospects, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, taken as a whole,
subsequent to the date hereof.
3.1.11 No Material Judgment or Order.
There shall not be on the Closing Date any judgment or order of a
court of competent jurisdiction or any ruling of any agency of the Federal,
state or local government that, in the reasonable judgment of any Purchaser or
the Purchasers' special counsel, would prohibit the sale or issuance of the
Notes hereunder or subject the Company to any material penalty if the Notes
were to be issued and sold hereunder.
3.1.12 Fees and Expenses.
The Company shall have paid to the Purchasers the fees and, to the
extent invoices therefor shall have been delivered to the Company prior to
Closing, expenses set forth in Section 2.5 hereof.
3.2 Conditions to the Obligations of the Company.
The obligations of the Company to sell the Notes to be delivered to
the Purchasers at the Closing shall be subject to the satisfaction of the
following conditions:
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3.2.1 Sale of Notes.
The Purchasers shall have purchased Notes with a minimum aggregate
purchase price of $70,000,000.
3.2.2 No Material Judgment or Order.
There shall not be on the Closing Date any judgment or order of a
court of competent jurisdiction or any ruling of any agency of the Federal,
state or local government that, in the reasonable judgment of the Company,
would prohibit the sale or issuance of the Notes hereunder or subject the
Company to any material penalty if the Notes were to be issued and sold
hereunder.
3.2.3 The Sale by the Company Permitted by Applicable Laws.
The sale by the Company and each Purchaser's payment for the Notes to
be purchased by it (a) shall not be prohibited by any applicable law or
governmental regulation, release, interpretation or opinion (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System), (b) shall not subject the Company to any material penalty
under or pursuant to any Applicable Law and (c) shall be permitted by
Applicable Law.
3.2.4 Consents and Permits.
Each Purchaser shall have received all consents, permits and other
authorizations, and made all such filings and declarations, as may be required
pursuant to any law, statute, regulation or rule (Federal, state, local or
foreign), contemplated by this Agreement and the other Documents, including the
purchase of the Notes by such Purchaser, and pursuant to all other agreements,
orders and decrees to which such Purchaser is a party or to which such
Purchaser is subject, in connection with the transactions to be consummated on
or prior to the Closing Date contemplated by this Agreement.
SECTION 4. CERTAIN PURCHASERS' SPECIAL RIGHTS
Notwithstanding anything to the contrary in this Agreement or the
other Documents, the provisions of this Section 4 shall apply only to those
Privately Outstanding Securities held by any of the Purchasers; provided, that
all of the obligations of the Company set forth in this Section 4 that are
outstanding with respect to any Security at the time such Security ceases to be
a Privately Outstanding Security shall survive until such time as such
obligations with respect to such Security shall be satisfied in full.
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4.1 Delivery Expenses.
If a holder of a Privately Outstanding Security surrenders such
Security to the Company or the Trustee for substitution, replacement or
exchange, the Company will pay the cost of delivering to and from such holder's
home office (or to and from the office of such holder's designee(s)) and the
office of the Company or the Trustee, as the case may be, insured to such
holder's satisfaction, the surrendered Security and each Security issued in
substitution, replacement or exchange therefor.
4.2 Issue Taxes.
The Company shall pay all stamp, transfer and other similar taxes and
governmental fees in connection with (a) the issuance, sale, delivery or
transfer by the Company to the Purchasers of the Privately Outstanding
Securities, (b) the execution and delivery of the Documents, (c) any
modification of the Documents and (d) the consummation of an exchange of any
Note for a Series B Note as contemplated by the Registration Rights Agreement.
The Company will hold each holder of Privately Outstanding Securities harmless,
without limitation as to time, against any and all liabilities with respect to
all such taxes and fees. The obligations of the Company under this Section 4.2
shall survive the payment or prepayment of the Securities, at maturity, upon
redemption or otherwise, any transfer of the Securities by the holder thereof,
and the termination of this Agreement.
4.3 Direct Payment.
The Company shall instruct the Trustee to pay or cause to be paid any
and all interest payments with respect to any Privately Outstanding Security
held by each of the Purchasers (if the registered holder) or the registered
nominee(s) thereof (without any presentment of such Privately Outstanding
Security and without any notation of such payment being made thereon) by
crediting such amount, before Noon, New York time, on the date such amount is
payable, by Federal funds bank wire transfer in same day available funds, to
the registered holder's account in any bank in the United States of America as
may be designated by such holder or such nominee(s), as the case may be, not
less than two Business Days prior to such payment. The initial bank account
for this purpose of each of the Purchasers is set forth on the signature pages
hereof. Each registered holder of the Securities is solely responsible for
advising the Company of any changes in its designated bank account and the
Company shall not have any responsibility for delays in transfers because of
any registered holder's failure to advise the Company of any such change.
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4.4 Financial Statements.
4.4.1 Delivery.
The Company will deliver or cause the Trustee to deliver to each
holder of record of Privately Outstanding Securities the financial statements
and other information described by Section 4.8 of the Indenture in the time
periods and manner prescribed therein.
4.4.2 Disclosure; Officer's Certificate.
Each financial statement of the Company delivered pursuant to this
Section shall be accompanied by a certificate of an officer of the Company
stating that (x) such officer does not have knowledge of the existence during
or at the end of such period of any condition or event that constitutes an
Event of Default or Default, or (y) if such condition or event existed or then
currently exists, specifying the nature and period of existence thereof and
what action the Company has taken, is taking, or proposes to take in connection
therewith.
4.4.3 Additional Information.
The Company shall, from time to time, deliver such additional
information regarding the financial position or business of the Company as the
holders of a majority of the outstanding principal amount of Notes that are
Privately Outstanding Securities may reasonably request, subject in each case
to the confidentiality provisions set forth in Section 4.4 hereof.
4.5 ERISA Compliance.
Promptly upon becoming aware of any (i) "reportable event" (as defined
in section 4043(b) of ERISA), (ii) "complete withdrawal" or "partial
withdrawal" (within the meaning of sections 4203 and 4205 of ERISA) from a
"Multiemployer Plan" (as defined in section 3(37) of ERISA), (iii) "prohibited
transaction" (as defined in section 406 of ERISA or section 4975 of the Code),
(iv) "accumulated funding deficiency" (as defined in section 412 of the Code),
(v) "lien" (within the meaning of section 412(n) of the Code or section 302(f)
of ERISA), or (vi) requirement to provide security under section 401(a)(29) of
the Code or section 307 of ERISA in connection with any "employee benefit plan"
maintained or contributed to by the Company or any of its "affiliates" (as
defined in section 407(d)(7) of ERISA, and hereinafter referred to as "ERISA
Affiliates") or any trust created thereunder, that may reasonably be expected
to, singly or in the aggregate, result in a liability that could have a
Material Adverse Effect, the Company shall furnish to each holder of Privately
Outstanding Securities a written notice specifying the nature thereof and what
action the Company, the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or any other relevant party is taking or proposes to take with
respect thereto.
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4.6 No Bond Necessary.
The Company shall not require, and shall make a request to the Trustee
that it not require, that any holder of Privately Outstanding Securities shall
be required to post any bond in accordance with Section 2.7 of the Indenture
(but such holder may be required to enter into an indemnity agreement, at the
Company's request, reasonably satisfactory to the Company and the Trustee) if
such holder certifies that a Privately Outstanding Security has been lost,
destroyed or wrongfully taken and demands that the Company issue and the
Trustee authenticates a replacement Note or Notes.
SECTION 5. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each of the Purchasers as
follows:
5.1 Organization, Standing and Qualification.
5.1.1 Organization; Standing.
Each of the Company and its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation; has all requisite corporate power and
authority to own or lease, and operate its respective properties and assets,
and to carry on its respective businesses as now conducted and as proposed to
be conducted; and is duly qualified or licensed to do business and is in good
standing as a foreign corporation in all jurisdictions in which it owns or
leases property or in which the conduct of its respective businesses requires
it so to qualify or be licensed, except where the failure so to qualify would
not, singly or in the aggregate, have a Material Adverse Effect.
5.1.2 Authority.
The Company has all requisite corporate power and authority to enter
into and perform all of its respective obligations under this Agreement and the
other Documents to which it is a party, to issue, sell and deliver the Notes to
be issued by it, and to carry out the transactions contemplated by this
Agreement or any other Document.
5.1.3 Subsidiaries.
As of the Closing, the only direct or indirect subsidiaries of the
Company are TransTexas Transmission Corporation and TransTexas Exploration
Company. Neither the Company nor any of its Subsidiaries own, directly or
indirectly, any of the Capital Stock or other equity interest in any other
Person.
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5.2 Capitalization.
The total authorized Capital Stock of the Company consists of
100,000,000 shares of Common Stock, 74,000,000 shares of which are issued and
outstanding. Each share of Capital Stock of the Company and each of its
Subsidiaries that is issued and outstanding has been duly authorized and
validly issued, and is fully paid and nonassessable. Except as provided in
Schedule 5.2(a), all of the issued and outstanding shares of Capital Stock of
each of the Company's Subsidiaries is owned by the Company free and clear of
any Liens. Except as provided in Schedule 5.2(b), there are no outstanding (i)
securities convertible into or exchangeable for any Capital Stock of the
Company or any of its Subsidiaries, (ii) options, warrants or other rights to
purchase or subscribe to Capital Stock of the Company or any of its
Subsidiaries, or securities convertible into or exchangeable for Capital Stock
of the Company or any of its Subsidiaries, (iii) contracts, commitments,
agreements, understandings, arrangements, calls or claims of any kind relating
to the issuance or sale of any Capital Stock of the Company or any of its
Subsidiaries, any such convertible or exchangeable securities or any such
options, warrants or rights or (iv) any voting trust, agreement, contract,
commitment, understanding or arrangement with respect to the voting of any
Capital Stock of the Company or any of its Subsidiaries.
5.3 Authorization of Agreement and Other Documents.
The Company has taken all corporate actions necessary to authorize it
to enter into and perform its obligations under this Agreement and each of the
other Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby (including, without limitation, the issuance
and sale of the Notes). This Agreement is, and, as of the Closing Date
(assuming payment of the purchase price for the Notes by the Purchasers), each
of the other Documents to which the Company is a party will be, a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws now or
hereafter affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law).
5.4 No Violation.
5.4.1 Existing Violations.
Neither the Company nor any of its Subsidiaries is (i) in default in
the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
indenture, mortgage, deed of trust or any other agreement or instrument to
which any of them is a party other than such defaults that could not, singly or
in the aggregate, reasonably be expected to result in a Material Adverse Effect
or (ii) in violation of its respective Charter Documents. There exists no
condition that, with the passage of time or otherwise, would constitute a
default under any such document or instrument or
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result in the imposition of any penalty or the acceleration of any indebtedness
or other obligation other than such defaults that would not, singly or in the
aggregate, result in a Material Adverse Effect or a violation of such Charter
Documents.
5.4.2 Execution of Agreement.
Neither the execution or delivery by the Company of this Agreement or
the other Documents to which it is a party, the issuance, sale or delivery of
the Notes, the performance by the Company of any of its obligations pursuant to
this Agreement or the other Documents, nor the consummation of the transactions
contemplated hereby or thereby will conflict with, violate, constitute a breach
of or a default (with the passage of time or otherwise) under, require the
consent of any Person (other than consents already obtained) under, result in
the imposition of any penalty, or result in the imposition of a Lien (other
than Liens permitted under the Indenture) on any properties of the Company or
of its Subsidiaries or an acceleration of indebtedness or other obligation
pursuant to, (i) the Charter Documents of the Company or any of its
Subsidiaries, (ii) any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or any other agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which any of them is bound or to which any of the property or assets of the
Company or its Subsidiaries is subject, or (iii) any Applicable Law except, in
the case of clauses (ii) and (iii), for such conflicts, violations, breaches,
defaults, penalties or Liens which would, singly or in the aggregate, have a
Material Adverse Effect.
5.5 Use of Proceeds.
The proceeds from the sale of the Notes shall be used by the Company
for its general corporate purposes.
5.6 No Default.
Were the Indenture in effect and the Notes outstanding as of the date
hereof, no Default or Event of Default would have occurred and be continuing.
5.7 [Intentionally Omitted.]
5.8 Financial Statements.
5.8.1 Fair Presentation.
The unaudited consolidated financial statements of the Company and its
Subsidiaries for the fiscal periods ended October 31, 1996 (the "Financial
Statements") set forth in the draft of the Company's report on Form 10-Q
attached hereto as Exhibit D (the "Draft 10-Q") fairly present the financial
condition and results of operations of the Company and its Subsidiaries for the
period specified therein.
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5.8.2 No Material Adverse Change.
Except as disclosed in the Draft 10-Q, since January 31, 1996, there
has been no material adverse change in the properties, business, prospects,
operations, earnings, assets, liabilities, or condition (financial or
otherwise) of the Company or its Subsidiaries from that set forth in the
audited financial statements dated January 31, 1996.
5.8.3 No Change in Accounting Practices. The amendment and
restatement of the definition of "GAAP" in the indenture under which the
Company's 11 1/2% Senior Secured Notes due 2002 were issued (the "Senior Notes
Indenture") to read in its entirety as the definition of "GAAP" in the
Indenture would have no effect on the determination of the Company's compliance
with the covenants in the Senior Notes Indenture.
5.8.4 Transfer Agreement. The Transfer Agreement dated as of August
24, 1993 among TransAmerican Natural Gas Corporation, the Company, TransTexas
Transmission Company and Mr. John R. Stanley has not been amended, restated,
supplemented or otherwise modified since June 15, 1995.
5.8.5 Liabilities.
On a consolidated basis, the Company has no liability or obligation
(absolute, accrued, contingent or otherwise), except (i) liabilities reflected
in the Financial Statements, (ii) other liabilities incurred in the ordinary
course of business, consistent with past practices, since the date of said
Financial Statements and (iii) as set forth in Schedule 5.8.5 hereto as
previously delivered. On a consolidated basis, the Company and its
Subsidiaries have no material forward or material, long-term commitments or
material unrealized losses or anticipated losses from any unfavorable
commitments, except as reflected in the Financial Statements.
5.9 Full Disclosure.
The Draft 10-Q in conjunction with the Company's transitional report
on Form 10-K for the period ending January 31, 1996, does not contain any
untrue statement of a material fact or as of such date omitted, or now omits,
to state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
5.10 Litigation.
5.10.1 No Material Proceedings
Except as disclosed in the Draft 10-Q, there is no Proceeding against
or affecting the Company or any of its Subsidiaries or any of their respective
properties or assets except for such Proceedings that, if finally determined
adversely to the Company or its Subsidiaries, would not, singly or in the
aggregate, have a Material Adverse Effect.
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5.10.2 No Material Judgements.
Except as disclosed in the Draft 10-Q, neither the Company nor any of
its Subsidiaries is subject to any judgment, order, decree, rule or regulation
of any court, governmental authority or arbitration board or tribunal that
would, singly or in the aggregate, have a Material Adverse Effect.
5.11 Labor Relations.
Neither the Company nor any of its Subsidiaries is engaged in any
unfair labor practice that could, singly or in the aggregate, have a Material
Adverse Effect. There is (a) no unfair labor practice complaint or other
proceeding pending or to the best of their knowledge threatened against the
Company or any of its Subsidiaries before the National Labor Relations Board or
any industrial tribunal and no grievance or arbitration proceeding arising out
of or under collective bargaining agreements is so pending or, to the best of
their knowledge threatened against the Company or any of its Subsidiaries
before the National Labor Relations Board or any industrial tribunal and no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements is so pending or, to the best of their knowledge,
threatened against the Company or any of its Subsidiaries, and (c) no union
representation questions existing with respect to the employees of the Company
or any of its Subsidiaries and no union organizing activities are taking place.
Neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement.
5.12 Taxes.
All tax returns required to be filed by the Company or any of its
Subsidiaries in any jurisdiction (including foreign jurisdictions) have been
timely so filed, and all material taxes, assessments, fees and other charges
(including, without limitation, withholding taxes, penalties, and interest) due
or claimed to be due from the Company or its Subsidiaries that are due and
payable have been paid, other than those (i) being contested in good faith and
for which an adequate reserve or accrual has been established on the Financial
Statements or (ii) those currently payable without penalty or interest and for
which an adequate reserve or accrual has been established on the Financial
Statements or extensions duly filed. Neither the Company nor any of its
Subsidiaries knows of any actual or proposed additional tax assessments for any
fiscal period against the Company or any of its Subsidiaries that would, singly
or in the aggregate, have a Material Adverse Effect. Neither the Company's nor
any of its Subsidiaries' income or franchise tax returns are under audit and no
waivers of the statute of limitations or extensions of time with respect to any
tax returns have been granted by the Company or any of its Subsidiaries.
5.13 ERISA.
The execution and delivery of this Agreement, the other Documents and
the sale of the Notes to be purchased by any Purchaser will not, to the
Company's and its Subsidiaries'
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knowledge, involve any "prohibited transaction." To the Company's and its
Subsidiaries' knowledge, none of the Company, any Subsidiary or any of their
ERISA Affiliates is a "party in interest" or a "disqualified person" except as
to those employee benefit plans set forth on Schedule 2.3.3. To the Company's
and its Subsidiaries' knowledge no condition exists or event or transaction has
occurred in connection with any "employee benefit plan" maintained or
contributed to by the Company or any of its Subsidiaries or any ERISA Affiliate
of the Company or any of its Subsidiaries (any plan being herein referred to as
the "Pension Plan") that could result in the Company or any of its Subsidiaries
or any such ERISA Affiliate incurring any liability, fine or penalty which
would, singly or in the aggregate, have a Material Adverse Effect. With
respect to any Pension Plan that is subject to Title IV of ERISA, (a) the fair
market value of the assets of such Pension Plan equals or exceeds (and will
equal or exceed immediately subsequent to the consummation of the transactions
contemplated hereby) the present value of the liabilities of such Pension Plan
(as determined in accordance with the actuarial methods and assumptions set
forth in the latest actuarial report for such Pension Plan), except where the
failure so to equal or exceed would not, singly or in the aggregate, have a
Material Adverse Effect and (b) there exists (and will exist immediately
subsequent to the consummation of the transactions contemplated hereby) no
accumulated funding deficiency.
5.14 Compliance with Laws.
Neither the Company nor any of its Subsidiaries is in violation of any
Applicable Law, except such violations as may not, singly or in the aggregate,
have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership or operation of its
respective properties or the conduct of its respective business as currently
conducted, except such failures as could not, singly or in the aggregate, have
a Material Adverse Effect.
5.15 Governmental Consents.
No consent, approval or authorization of, or filing, registration or
qualification with, any governmental or regulatory authority or body is
required in connection with or as a condition to the execution and delivery of
this Agreement or any of the other Documents or the consummation of
transactions contemplated hereby or thereby (including, without limitation, the
offer, issuance, sale or delivery of the Notes at the Closing), except for such
consents, approvals, authorizations, filings, registrations or qualifications
as have been made or obtained on or before the Closing Date (and copies of
which will be delivered to each Purchaser) or are not required to be made or
obtained prior to the Closing Date and except to the extent that the failure to
obtain any such consents, approvals, authorizations or qualifications or to
make any such filings or registrations could not, singly or in the aggregate,
have a Material Adverse Effect.
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5.16 No Violation of Regulations of Board of Governors of Federal Reserve
System.
None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the Notes) shall
violate or result in a violation by the Company or any of its Subsidiaries of
Section 7 of the Exchange Act including, without limitation, Regulations G, T,
U and X of the Board of Governors of the Federal Reserve System. No part of
the proceeds of the sale of the Notes will be used directly or indirectly for
the purpose of purchasing or carrying any margin securities within the meaning
of Regulation G.
5.17 Environmental Matters.
(a) Except as disclosed in Schedule 5.17:
(i) each of the Company and its Subsidiaries has obtained
all permits, licenses, approvals and other authorizations that are required
with respect to the operation of its business, property and assets under the
Environmental Laws and is in compliance with all terms and conditions of such
required permits, licenses, approvals and authorizations, except where the
failure to so obtain or be in compliance could not, singly or in the aggregate,
have a Material Adverse Effect;
(ii) each of the Company and its Subsidiaries is in
compliance with the Environmental Laws (including, without limitation,
compliance with standards, schedules and timetables therein), except where the
failure to so comply, could not, singly or in the aggregate, have a Material
Adverse Effect;
(iii) no real property or facility owned, used, operated,
leased, managed or controlled by the company or, to their knowledge, any
predecessor in interest, is listed or proposed for listing on the National
Priorities List or the Comprehensive Environmental Response, Compensation, and
Liability Information System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any comparable state or local list established pursuant to
any Environmental Law, and neither the Company nor any of its Subsidiaries has
received any notification of potential or actual liability or request for
information under CERCLA or any comparable state or local law;
(iv) except as could not, singly or in the aggregate, have
a Material Adverse Effect, no underground storage tank or other underground
storage receptacle, or related piping, is located on a facility or property
currently owned, operated, leased, managed or controlled by the Company or any
of its Subsidiaries (except with respect to common areas designed under
leases);
(v) there have been no releases (i.e., any past or
present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching,
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disposing or dumping, on-site or off-site) of Hazardous Materials by the
Company or any of its Subsidiaries or, to their knowledge after due inquiry,
any predecessor in interest at, on, under, from or into any facility or real
property owned, operated, leased, managed or controlled by each such Person,
except such as could not, singly or in the aggregate, have a Material Adverse
Effect;
(vi) except as could not, singly or in the aggregate, have
a Material Adverse Effect, neither the Company nor any of its Subsidiaries has
any liability, absolute or contingent, under any Environmental Law and there is
no civil, criminal or administrative action, suite, demand, hearing, notice of
violation or deficiency, investigation, proceeding, notice or demand letter
pending or, to the best of their knowledge, threatened against the Company or
such Subsidiary under any Environmental Law; and
(vii) there are no events, conditions, circumstances,
activities, practices, incidents, actions or plans that may interfere with or
prevent compliance by the Company or any of its Subsidiaries with any
Environmental Law or that may give rise to any liability under the
Environmental Laws, except such as could not, singly or in the aggregate, have
a Material Adverse Effect.
(b) For the purposes of this Agreement, "Environmental Laws" means
the common law and all Federal, state, local and foreign laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder, now or hereafter in effect, relating to pollution or
protection of human health or the environment, including, without limitation,
laws relating to (i) emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
constituents, substances or wastes, including, without limitation, petroleum,
including crude oil or any fraction thereof, or any petroleum product or other
wastes, chemicals or substances regulated by any Environmental Law
(collectively referred to as "Hazardous Materials"), into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), (ii) the manufacture, processing, distribution,
use, generation, treatment, storage, disposal, transport or handling of
Hazardous Materials, and (iii) underground storage tanks, and related piping,
and emissions, discharges, releases or threatened release of Hazardous
Materials therefrom.
5.18 Private Offering.
5.18.1 Sale Exempt.
Based in part on representations made by the Purchasers, and assuming
the correctness of such representations, the sale of the Securities hereunder
is exempt from the registration and prospectus delivery requirements of the
Securities Act and it is not necessary in connection with the sale of the
Securities to the Purchasers in accordance herewith to qualify the Indenture
under the Trust Indenture Act of 1939, as amended.
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5.18.2 No General Solicitation.
In the case of each offer or sale of the Securities, no form of
general solicitation or general advertising was used by the Company, any of its
Subsidiaries or any of their respective officers, directors or employees
including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
had been invited by any general solicitation or general advertising. No offers
were made by the Company, any of its Subsidiaries or any of their respective
officers, directors or employees other than to persons whom the offeror
reasonably believed to be accredited investors or sophisticated purchasers as
those terms have been construed under Section 4(2) of the Securities Act. The
Purchasers are the sole purchasers of the Securities. The Company agrees that
neither it nor anyone acting on any of its behalf, will, with the Company's or
its Subsidiaries' knowledge, offer any Securities so as to bring the issuance
and sale of any of the Securities within the provisions of Section 5 of the
Securities Act nor offer any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, or otherwise approach or
negotiate with respect thereto with anyone if the sale of any of the Securities
and any such securities could be integrated as a single offering for purposes
of the Securities Act so as to bring the issuance and sale of any of the
Securities within the provisions of Section 5 of the Securities Act.
5.19 Governmental Regulations.
Neither the Company nor any of its Subsidiaries is subject to
regulation, or will become subject to regulation upon the consummation of the
transactions contemplated by this Agreement or any of the other Documents,
under the Investment Company Act of 1940, as amended, or any Federal or state
statute or regulation limiting its ability to incur or assume indebtedness for
borrowed money or consummate the transactions contemplated hereby.
5.20 Brokers.
The Company has not dealt with any broker, finder, commission agent or
other Person in connection with the sale of the Notes and the transactions
contemplated by this Agreement and the other Documents other than the Placement
Agent. The Company is under no obligation to pay any broker's fee or
commission in connection with such transactions, other than a fee payable to
the Placement Agent for investment banking services rendered in connection with
such transactions.
5.21 Patents, Trademarks, etc.
Each of the Company and its Subsidiaries owns, or is licensed under,
and has the right to use, all material patents, trademarks, trade names,
copyrights, technology, know-how and processes (collectively, "Intellectual
Property") necessary for the conduct of its business. The consummation of the
transactions contemplated by this Agreement and the other Documents
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<PAGE> 31
will not alter or impair any such rights. No claims have been asserted by any
person to the use of any Intellectual Property or challenging or questioning
the validity or effectiveness of any license or agreement related thereto and
the use of such Intellectual Property by the Company and its Subsidiaries does
not infringe on the rights of any person, except to the extent that any such
claims or infringements would not, singly or in the aggregate, have a Material
Adverse Effect.
5.22 Title to and Condition of Properties.
Each of the Company and its Subsidiaries (a) has good and indefeasible
title to all the real or personal properties and other assets (tangible,
intangible or mixed) it purports to own, free and clear of all Liens, except
for Liens permitted under the Indenture and (b) enjoys peaceful and undisturbed
possession under all leases to which it is a party as lessee except to the
extent any failure to have such title or enjoy such possession would, singly or
in the aggregate, have a Material Adverse Effect. To the Company's and its
Subsidiaries' knowledge, all leases and other agreements to which the Company
or any Subsidiary is a party are valid and binding and in full force and effect
except to the extent that the failure of such leases and other agreements to be
valid and binding and in full force and effect would not, singly or in the
aggregate, have a Material Adverse Effect. No default has occurred or is
continuing under such leases and other agreements, and no consent need be
obtained, from any Person in respect of any such lease or agreement in
connection with the transactions contemplated by this Agreement and the other
Documents, except to the extent that any such defaults, or the failure to
obtain any such consents, could not, singly or in the aggregate, have a
Material Adverse Effect. The properties used or useful to the conduct of the
business of the Company and its Subsidiaries are in good repair and working
order, ordinary wear and tear excepted. The Company and its Subsidiaries
maintain with reputable insurers such insurance as may be required by law and
such other insurance, to such extent and against such hazards and liabilities,
as is customarily maintained by companies similarly situated (which may include
self-insurance in the same form as is customarily maintained by companies
similarly situated).
5.23 Customers and Suppliers.
In each case, except as would not, singly or in the aggregate, have a
Material Adverse Effect, since the January 31, 1996, (i) no significant
customer (or group of customers which in the aggregate is significant) or any
distributor of the Company or its Subsidiaries has given any such company
notice or, to the knowledge of any such company, has taken any other action
which has given any such company any reason to believe that such customer (or
group of customers) or distributor will cease to purchase products or reduce
significantly the amount of products purchased from such company and (ii) no
significant supplier or vendor (or group of suppliers or vendors which in the
aggregate is significant) of the Company and its Subsidiaries has given any
such company notice or, to the knowledge of any such company, has taken any
other action which has given any such company any reason to believe that such
supplier or vendor (or group of suppliers or vendors) will cease to supply or
restrict the
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<PAGE> 32
amount supplied or adversely change its price or terms to such company of any
products or services.
5.24 Burdensome Agreements.
To the knowledge of the Company and its Subsidiaries, no agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them may be bound or to which any of their properties may be
subject contains any unusual or burdensome provisions that would have a
Material Adverse Effect on the Company or any of its Subsidiaries.
5.25 Survival of Indemnification and Contribution and Representations and
Warranties.
All of the representations and warranties of the Company and the
Purchasers in this Agreement and the other Documents and in any other document,
financial statement or other instrument or certificate delivered to any party
hereto by or on behalf of the Company or any of its Subsidiaries, on the one
hand, or the Purchasers, on the other hand, in connection with this Agreement
and the other Documents and the transactions contemplated hereby and thereby
shall be deemed to constitute representations and warranties hereunder and
shall be true in all material respects at and as of the Closing Date, after
giving effect to the transactions contemplated hereby.
All of the obligations to indemnify each Purchaser and each other
Indemnified Party and contribute to the Purchasers' and each other Indemnified
Party's losses contained in this Agreement and the other Documents and in any
other document, financial statement or other instrument or certificate
delivered to you by or on behalf of the Company or any of its Subsidiaries in
connection with this Agreement and the Documents and the transactions
contemplated hereby and thereby and all of the representations and warranties
of the Company shall survive the execution and delivery of this Agreement and
the other Documents, any investigation by any Purchaser or any Indemnified
Party and the issuance of the Notes.
SECTION 6. MISCELLANEOUS
6.1 Notices.
Prior to the Closing, and thereafter with respect to matters
pertaining to this Agreement only, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
next-day air courier, certified first-class mail, return receipt requested, or
facsimile:
(a) if to any Purchaser, at such Purchaser's address set forth below
on the signature page hereto, with a copy to Ropes & Gray, One International
Place, Boston, Massachusetts 02110, Attention: Robert L. Nutt, Esq; and
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(b) if to the Company or its Subsidiaries, at its address set forth on
the first page of this Agreement, with a copy to Gardere & Wynne L.L.P., 3000
Thanksgiving Tower, 1601 Elm Street, Suite 3000, Dallas, Texas 75201,
Attention: C. Robert Butterfield, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being timely delivered to a next-day air courier; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back if
telexed; and when receipt is acknowledged by the recipient's telecopier
machine, if telecopied.
From and after the Closing, the foregoing notice provisions shall be
superseded by the notice provisions of the Document under which notice is
given.
6.2 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, and to the extent set forth in
Sections 2.6 and 2.7 hereof, the Indemnified Parties and their respective
heirs, personal representatives, successors and assigns and no other persons
shall acquire or have any right under or by virtue of this Agreement.
6.3 Amendment and Waiver.
Prior to the Closing Date, this Agreement and the other Documents may
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may be given, provided that the same are in writing
and signed by each Purchaser and the Company. Thereafter, this Agreement may
only be amended, and such waivers be given, with the consent of the holders of
a majority of the then outstanding aggregate principal amount of the Notes
(other than Notes owned or acquired by the Company or its Affiliates).
6.4 Counterparts.
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
6.5 Headings.
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
6.6 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK AS APPLIED
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TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE SUPREME COURT OF NEW YORK, NEW YORK COUNTY OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE COMPANY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PURCHASER TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
6.7 Entire Agreement.
This Agreement, together with the other Documents, are intended by the
parties as a final expression of their agreement and are intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, together
with the other Documents, supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
6.8 Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their best efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.
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If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart of this Agreement and
return such counterpart to the Company whereupon this Agreement will become
binding between us in accordance with its terms.
Very truly yours,
TRANSTEXAS GAS CORPORATION
By:_______________________
Name:
Title:
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PURCHASE AGREEMENT SIGNATURE
EACH PURCHASER EXECUTING THIS SIGNATURE PAGE ON BEHALF OF ONE OR MORE MANAGED
ACCOUNTS SHOULD PROVIDE THE NAME OF, AND THE REQUESTED INFORMATION WITH RESPECT
TO, EACH MANAGED ACCOUNT.
Accepted and Agreed as of
the date first above written
_________________________
Name of Purchaser Aggregate original principal
amount of Notes to be purchased
by the Purchaser: $___________
Purchase Price: $___________
By:______________________
Name:
Title:
Address:_________________
_________________________
_________________________
Telephone:_______________
Telecopy:________________
Nominee (name in which the Notes
are to be registered, if different
than name of the Purchaser):
Note Purchase Agreement
-32-
<PAGE> 1
EXHIBIT 4.13
EXECUTION COPY
================================================================================
$189,000,000
13 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2003
AND
13 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2003
INDENTURE
BETWEEN
TRANSTEXAS GAS CORPORATION,
AS ISSUER
AND
BANK ONE, COLUMBUS, NA,
AS TRUSTEE
DATED AS OF DECEMBER 13, 1996
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
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) . . . . . . . . . . . . . . . . . . . . . . 14.03
(c) . . . . . . . . . . . . . . . . . . . . . . 14.03
313(a) . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . 7.06; 14.02
(d) . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . 4.08; 14.02
(b) . . . . . . . . . . . . . . . . . . . . . . 12.03(b)
(c)(1) . . . . . . . . . . . . . . . . . . . . . . 2.02; 7.02; 14.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . 7.02; 14.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . 12.03(b); 12.04(b)
(e) . . . . . . . . . . . . . . . . . . . . . . 14.05
(f) . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . 7.05; 14.02
(c) . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . 6.11; 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . 6.13
316(a)(last sentence) . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . 6.11
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . 6.12
(a)(2) . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . 6.12; 6.08
(c) . . . . . . . . . . . . . . . . . . . . . . 10.05
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . 6.03
(a)(2) . . . . . . . . . . . . . . . . . . . . . . 6.04
(b) . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . 14.01
- --------------
</TABLE>
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to
be part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . 1
Section 1.2 Incorporation by Reference of TIA . . . . . . . 18
Section 1.3 Rules of Construction . . . . . . . . . . . . . 19
ARTICLE II
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.1 Form and Dating . . . . . . . . . . . . . . . . 19
Section 2.2 Execution and Authentication . . . . . . . . . . 20
Section 2.3 Registrar and Paying Agent . . . . . . . . . . . 20
Section 2.4 Paying Agent to Hold Assets in Trust . . . . . . 21
Section 2.5 Securityholder Lists . . . . . . . . . . . . . . 21
Section 2.6 Transfer and Exchange . . . . . . . . . . . . . 21
Section 2.7 Replacement Securities . . . . . . . . . . . . . 22
Section 2.8 Outstanding Securities . . . . . . . . . . . . . 22
Section 2.9 Treasury Securities . . . . . . . . . . . . . . 22
Section 2.10 Temporary Securities . . . . . . . . . . . . . . 23
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . 23
Section 2.12 Interest . . . . . . . . . . . . . . . . . . . . 23
Section 2.13 Computation of Interest . . . . . . . . . . . . 24
ARTICLE III
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.1 Right of Redemption . . . . . . . . . . . . . . 24
Section 3.2 Notices to Trustee . . . . . . . . . . . . . . . 24
Section 3.3 Selection of Securities to Be Redeemed . . . . . 25
Section 3.4 Notice of Redemption . . . . . . . . . . . . . . 25
Section 3.5 Effect of Notice of Redemption . . . . . . . . . 26
Section 3.6 Deposit of Redemption Price . . . . . . . . . . 26
Section 3.7 Securities Redeemed in Part . . . . . . . . . . 26
ARTICLE IV
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.1 Payment of Securities . . . . . . . . . . . . . 26
Section 4.2 Maintenance of Office or Agency . . . . . . . . 27
Section 4.3 Limitation on Restricted Payments . . . . . . . 27
Section 4.4 Corporate Existence . . . . . . . . . . . . . . 28
Section 4.5 Payment of Taxes and Other Claims . . . . . . . 28
Section 4.6 Maintenance of Properties and Insurance . . . . 28
Section 4.7 Compliance Certificate; Notice of Default . . . 29
Section 4.8 SEC Reports . . . . . . . . . . . . . . . . . . 29
Section 4.9 Limitation on Status as Investment
Company or Public Utility Company . . . . . . . 29
Section 4.10 Limitation on Transactions with
Related Persons . . . . . . . . . . . . . . . . 29
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
Section 4.11 Limitation on Incurrences of
Additional Debt and Issuances of
Disqualified Capital Stock . . . . . . . . . . . 30
Section 4.12 Limitations on Restricting Subsidiary
Dividends . . . . . . . . . . . . . . . . . . . 32
Section 4.13 Limitation on Liens . . . . . . . . . . . . . . 32
Section 4.14 Limitation on Asset Sales . . . . . . . . . . . 32
Section 4.15 Waiver of Stay, Extension or Usury Laws . . . . 35
Section 4.16 Limitation on Ranking of Future Debt. . . . . . 35
Section 4.17 Restriction on Sale and Issuance of
Subsidiary Stock . . . . . . . . . . . . . . . . 36
Section 4.18 Limitations on Line of Business . . . . . . . . 36
Section 4.19 Separate Existence and Formalities . . . . . . . 36
Section 4.20 Limitation on Capital Expenditures . . . . . . . 37
Section 4.21 Limitation on Assets Held by Nominees . . . . . 37
ARTICLE V
SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.1 When the Company May Merge, Etc . . . . . . . . 37
Section 5.2 Successor Corporation Substituted . . . . . . . 38
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . 38
Section 6.1 Events of Default . . . . . . . . . . . . . . . 38
Section 6.2 Acceleration of Maturity Date;
Rescission and Annulment . . . . . . . . . . . . 40
Section 6.3 Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . . . . . . . 41
Section 6.4 Trustee May File Proofs of Claim . . . . . . . . 41
Section 6.5 Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . . . . 42
Section 6.6 Priorities . . . . . . . . . . . . . . . . . . . 42
Section 6.7 Limitation on Suits . . . . . . . . . . . . . . 42
Section 6.8 Unconditional Right of Holders to
Receive Principal, Premium and
Interest . . . . . . . . . . . . . . . . . . . . 43
Section 6.9 Rights and Remedies Cumulative . . . . . . . . . 43
Section 6.10 Delay or Omission Not a Waiver . . . . . . . . . 43
Section 6.11 Control by Holders . . . . . . . . . . . . . . . 43
Section 6.12 Waiver of Past Default . . . . . . . . . . . . . 43
Section 6.13 Undertaking for Costs . . . . . . . . . . . . . 44
Section 6.14 Restoration of Rights and Remedies . . . . . . . 44
ARTICLE VII
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.1 Duties of Trustee . . . . . . . . . . . . . . . 44
Section 7.2 Rights of Trustee . . . . . . . . . . . . . . . 45
Section 7.3 Individual Rights of Trustee . . . . . . . . . . 46
Section 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . 46
Section 7.5 Notice of Default . . . . . . . . . . . . . . . 46
Section 7.6 Reports by Trustee to Holders . . . . . . . . . 46
Section 7.7 Compensation and Indemnity . . . . . . . . . . . 46
Section 7.8 Replacement of Trustee . . . . . . . . . . . . . 47
Section 7.9 Successor Trustee by Merger, Etc . . . . . . . . 47
Section 7.10 Eligibility; Disqualification . . . . . . . . . 48
Section 7.11 Preferential Collection of Claims
against Company . . . . . . . . . . . . . . . . 48
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
Section 7.12 No Bond . . . . . . . . . . . . . . . . . . . . 48
Section 7.13 Condition to Action . . . . . . . . . . . . . . 48
Section 7.14 Investment . . . . . . . . . . . . . . . . . . . 48
ARTICLE VIII
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . 48
Section 8.1 Satisfaction, Discharge of the
Indenture and Defeasance of the
Securities . . . . . . . . . . . . . . . . . . . 48
Section 8.2 Termination of Obligations Upon
Cancellation of the Securities . . . . . . . . . 49
Section 8.3 Survival of Certain Obligations . . . . . . . . 49
Section 8.4 Acknowledgment of Discharge by Trustee . . . . . 50
Section 8.5 Application of Trust Assets . . . . . . . . . . 50
Section 8.6 Repayment to the Company . . . . . . . . . . . . 50
Section 8.7 Reinstatement . . . . . . . . . . . . . . . . . 50
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . 50
Section 9.1 Supplemental Indentures Without
Consent of Holders . . . . . . . . . . . . . . . 50
Section 9.2 Amendments, Supplemental Indentures
and Waivers with Consent of Holders . . . . . . 51
Section 9.3 Compliance with TIA . . . . . . . . . . . . . . 52
Section 9.4 Revocation and Effect of Consents . . . . . . . 52
Section 9.5 Notation on or Exchange of Securities . . . . . 53
Section 9.6 Trustee to Sign Amendments, Etc . . . . . . . . 53
ARTICLE X
MEETINGS OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . 53
Section 10.1 Purposes for Which Meetings May Be Called . . . 53
Section 10.2 Manner of Calling Meetings . . . . . . . . . . . 53
Section 10.3 Call of Meetings by Company or Holders . . . . . 54
Section 10.4 Who May Attend and Vote at Meetings . . . . . . 54
Section 10.5 Regulations May Be Made by Trustee;
Conduct of the Meeting; Voting
Rights; Adjournment . . . . . . . . . . . . . . 54
Section 10.6 Voting at the Meeting and Record to Be Kept . . 55
Section 10.7 Exercise of Rights of Trustee or
Securityholders May Not Be Hindered
or Delayed by Call of Meeting . . . . . . . . . 55
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE . . . . . . . . . . . . . . . . . . . . . 55
Section 11.1 Repurchase of Securities at Option of
the Holder Upon Change of Control . . . . . . . 55
Section 11.2 Exchange of Securities at Option of
the Holder Upon Upgrade . . . . . . . . . . . . 56
ARTICLE XII
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.1 Securities Subordinate to Senior Debt. . . . . . 58
Section 12.2 Payment Over of Proceeds Upon
Dissolution, Etc . . . . . . . . . . . . . . . . 58
Section 12.3 No Payment When Senior Debt in Default. . . . . 59
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C>
Section 12.4 Payment Permitted If No Default . . . . . . . . 60
Section 12.5 Subrogation to Rights of Holders of
Senior Debt . . . . . . . . . . . . . . . . . . 60
Section 12.6 Provisions Solely to Define Relative Rights. . . 60
Section 12.7 Trustee to Effectuate Subordination . . . . . . 60
Section 12.8 No Waiver of Subordination Provisions . . . . . 61
Section 12.9 Notice to Trustee. . . . . . . . . . . . . . . . 61
Section 12.10 Reliance on Judicial Order or
Certificate of Liquidating Agent . . . . . . . . 61
Section 12.11 Trustee Not Fiduciary for Holders of
Senior Debt. . . . . . . . . . . . . . . . . . 62
Section 12.12 Rights of Trustee as Holder of Senior
Debt; Preservation of Trustee's
Rights. . . . . . . . . . . . . . . . . . . . . 62
Section 12.13 Article Applicable to Paying Agents. . . . . . . 62
Section 12.14 Defeasance of this Article XII. . . . . . . . . 62
ARTICLE XIII
[INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE XIV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 14.1 TIA Controls . . . . . . . . . . . . . . . . . . 62
Section 14.2 Notices . . . . . . . . . . . . . . . . . . . . 63
Section 14.3 Communications by Holders with Other
Holders . . . . . . . . . . . . . . . . . . . . 63
Section 14.4 Certificate and Opinion as to
Conditions Precedent . . . . . . . . . . . . . . 63
Section 14.5 Statements Required in Certificate or
Opinion . . . . . . . . . . . . . . . . . . . . 63
Section 14.6 Rules by Trustee, Paying Agent, Registrar . . . 64
Section 14.7 Legal Holidays . . . . . . . . . . . . . . . . . 64
Section 14.8 GOVERNING LAW . . . . . . . . . . . . . . . . . 64
Section 14.9 No Adverse Interpretation of Other
Agreements . . . . . . . . . . . . . . . . . . . 64
Section 14.10 No Recourse against Others . . . . . . . . . . . 64
Section 14.11 Successors . . . . . . . . . . . . . . . . . . . 65
Section 14.12 Duplicate Originals . . . . . . . . . . . . . . 65
Section 14.13 Severability . . . . . . . . . . . . . . . . . . 65
Section 14.14 Table of Contents, Headings, Etc . . . . . . . . 65
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
EXHIBITS
Exhibit A - Form of Note
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
iv
<PAGE> 7
INDENTURE, dated as of December 13, 1996, among TRANSTEXAS GAS
CORPORATION, a Delaware corporation (the "Company"), and BANK ONE, COLUMBUS,
NA, a national banking association, as Trustee.
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 13 1/4%
Series A Senior Subordinated Notes due 2003 and the Company's 13 1/4% Series B
Senior Subordinated Notes due 2003:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Accreted Value" means, with respect to each $1,000 principal amount of
Securities, (i) with respect to any date on or prior to the Final Accretion
Date, $526.166 plus 13 1/4% per annum, compounded semi-annually from and after
December 13, 1996, subject to increase as provided in Section 4 of the
Registration Rights Agreement and (ii) with respect to any date after the Final
Accretion Date, $1,000.00.
"Accumulated Amount" shall have the meaning specified in Section 4.14.
"Adjusted Consolidated Tangible Assets" means (without duplication), as
of the date of determination, (A) the sum of (i) discounted future net cash
flows from proved oil and gas reserves of the Company and its Consolidated
Subsidiaries, calculated in accordance with SEC guidelines (before any state or
federal income tax), as estimated by nationally recognized independent
petroleum engineers as of a date no earlier than the date of the Company's
latest annual consolidated financial statements (or, if the date of
determination is after the end of the first fiscal quarter of the fiscal year
of the Company, as estimated by Company engineers on the same basis as of a
date no earlier than the end of the most recent fiscal quarter, which estimates
shall be confirmed in writing by a report by nationally recognized independent
petroleum engineers in accordance with SEC guidelines in the event of a
Material Change if the amount of Adjusted Consolidated Tangible Assets is
required to be computed under the Indenture), (ii) the Net Working Capital on a
date no earlier than the date of the Company's latest consolidated annual or
quarterly financial statements and (iii) with respect to all other tangible
assets of the Company or its Consolidated Subsidiaries, the lesser of (x)
$125,000,000 plus capital expenditures made after the Issue Date, on such other
tangible assets and (y) the greater of (a) the net book value of such other
tangible assets on a date no earlier than the date of the Company's latest
consolidated annual or quarterly financial statements, and (b) the appraised
value, as estimated by a qualified independent appraiser, of such other
tangible assets, as of a date no earlier than the date that is three years
prior to the date of determination (or such later date on which the Company
shall have a reasonable basis to believe that there has occurred a material
decrease in value since the determination of such appraised value); provided,
however, that with respect to the acreage not considered in the valuation of
the proved oil and gas reserves in clause (i) above, the values shall be the
lesser of (a) and (b), minus (B) minority interests and, to the extent not
otherwise taken into account in determining Adjusted Consolidated Tangible
Assets, any gas balancing liabilities of the Company and its Consolidated
Subsidiaries. In addition to, but without duplication of the foregoing, for
purposes of this definition, "Adjusted Consolidated Tangible Assets" shall be
calculated after giving effect, on a pro forma basis, to (1) any Permitted
Investment, to and including the date of the transaction giving rise to the
need to calculate Adjusted Consolidated Tangible Assets (the "Assets
Transaction Date"), in any other Person that, as a result of such Investment,
becomes a Subsidiary of the Company, (2) the acquisition, to and including the
Assets Transaction Date (by merger, consolidation or purchase of stock or
assets), of any business or assets, including, without limitation, Permitted
Investments, and (3) any sales or other dispositions of assets (other than
sales of Hydrocarbons or other mineral products in the ordinary course of
business) occurring on or prior to the Assets Transaction Date. For purposes
of calculating the ratio of the Company's Adjusted Consolidated Tangible Assets
to total consolidated principal amount of Debt of the Company and its
Subsidiaries, Debt of a Subsidiary that is not a Wholly Owned Subsidiary of the
<PAGE> 8
Company (which Debt is non-recourse to the Company or any other Subsidiary of
the Company or any of their assets) shall be included only to the extent of the
Company's pro rata ownership interest in such Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director or controlling shareholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 5% or more of the
voting power of the voting common equity of such Person (on a fully diluted
basis) or of warrants or other rights to acquire such equity (regardless of
whether presently exercisable).
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means any direct or indirect conveyance, sale, transfer or
other disposition (including through damage or destruction for which insurance
proceeds are paid or by condemnation), in one or a series of related
transactions, of any of the properties, businesses or assets of the Company or
any Subsidiary of the Company, whether owned on the Issue Date or thereafter
acquired; provided, however, that "Asset Sale" shall not include (i) any
Section 29 Transaction, (ii) any disposition of Receivables, Inventory or
Equipment, or (iii) any pledge or disposition of assets (if such pledge or
disposition would otherwise constitute an Asset Sale) to the extent and only to
the extent that it results in the creation of a Permitted Lien, other than a
disposition of a production payment or royalty in connection with a Permitted
Production Payment Asset Sale.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
"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 authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means a day that is not a Legal Holiday.
"Capital Assets" means (i) assets with respect to which an expenditure
would be considered a Capital Expenditure or (ii) Permitted Capital Stock.
"Capital Expenditures" of a Person means expenditures (whether paid in
cash or accrued as a liability) by such Person or any of its Subsidiaries that,
in conformity with GAAP, are or would be included in "capital expenditures,"
"additions to property, plant or equipment" or comparable items in the
consolidated financial statements of such Person consistent with prior
accounting practices.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations or other ownership interests
(however designated) of such Person and any rights (other than debt securities
convertible into corporate stock), warrants or options to purchase any of the
foregoing, including without limitation each class of common stock and
preferred stock of such Person if such Person is a corporation and each general
and limited partnership interest or other equity interest of such Person if
such Person is a partnership.
"Capitalized Lease Obligation" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Debt represented by such obligations shall be the
capitalized amount of such obligations, as determined in accordance with GAAP.
2
<PAGE> 9
"Cash" means U.S. Legal Tender.
"Cash Equivalents" means (a) United States dollars, (b) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (c) certificates of deposit
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months, and overnight bank
deposits, in each case, with any Eligible Institution, (d) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (b) and (c) entered into with any Eligible
Institution, (e) commercial paper rated "P-1," "A-1" or the equivalent thereof
by Moody's Investors Service, Inc. or Standard & Poor's Corporation, Inc.,
respectively, and in each case maturing within six months after the date of
acquisition and (f) shares of money market funds, including those of the
Trustee, that invest solely in United States dollars and securities of the
types described in clauses (a) through (e).
"Change of Control" means (i) any sale, transfer, or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company, on a consolidated basis, to any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), other than to or among the Company's Wholly Owned Subsidiaries
or the trustee under the TARC Indenture, whether in a single transaction or a
series of related transactions, unless, immediately after such transaction,
John R. Stanley has, directly or indirectly, in the aggregate, sole beneficial
ownership of more than 50%, on a fully diluted basis, of the total voting power
entitled to vote in the election of directors, managers, or trustees of the
transferee, (ii) the liquidation or dissolution of the Company, or (iii) any
transaction, event or circumstance pursuant to which any "person" or "group"
(as such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable), other than John R. Stanley and his
Wholly Owned Subsidiaries or the trustee under the TARC Indenture, is or
becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5
under the Exchange Act, whether or not applicable, except that a person shall
be deemed to be the "beneficial owner" of all shares that any such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total voting power of the Company's then outstanding Voting Stock, unless, at
the time of the occurrence of an event specified in clauses (i), (ii) or (iii),
the Notes have an Investment Grade Rating; provided, however, that if, at any
time within 120 days after such occurrence, the Notes cease having an
Investment Grade Rating, such event shall be a "Change of Control".
"Change of Control Offer" shall have the meaning specified in Section
11.1.
"Change of Control Payment Date" shall have the meaning specified in
Section 11.1.
"Change of Control Purchase Price" shall have the meaning specified in
Section 11.1.
"Closing Price" means, as of any date and with respect to any Capital
Stock, (i) the closing sales price regular way per share of such Capital Stock
on such date on the NYSE, or (ii) if such Capital Stock is not listed on the
NYSE, the last reported sales price regular way, or in case no such reported
sale takes place on such date, the average of the reported closing bid and ask
prices regular way, on the principal national securities exchange on which such
Capital Stock is admitted for trading, or (iii) if such Capital Stock is not
listed or admitted for trading on any national securities exchange, the last
reported sales price regular way per share of such Capital Stock on such date,
or, in case no such reported sale takes place on such date, the average of the
reported closing bid and ask prices regular way, in either case, on the NNM.
"Common Stock" means the common stock, $0.01 par value per share, of the
Company, now or hereafter issued, or any reclassification thereof.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
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<PAGE> 10
"Consolidated EBITDA" of any Person for any period, unless otherwise
defined herein, means (a) the Consolidated Net Income of such Person for such
period, plus (b) the sum, without duplication (and only to the extent such
amounts are deducted from net revenues in determining such Consolidated Net
Income), of (i) the provision for income taxes for such period for such Person
and its Consolidated Subsidiaries, (ii) depreciation, depletion, and
amortization of such Person and its Consolidated Subsidiaries during such
period, and (iii) Consolidated Fixed Charges of such Person for such period,
determined, in each case, on a consolidated basis for such Person and its
Consolidated Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" on any date (the "Transaction
Date") means, with respect to any Person, the ratio, on a pro forma basis, of
(i) the aggregate amount of Consolidated EBITDA of such Person (attributable to
continuing operations and businesses and exclusive of amounts attributable to
operations and businesses discontinued or disposed of, on a pro forma basis)
for the Reference Period to (ii) the aggregate Consolidated Fixed Charges of
such Person (exclusive of amounts attributable to discontinued operations and
businesses, but only to the extent that the obligations giving rise to such
Consolidated Fixed Charges would no longer be obligations contributing to such
Person's Consolidated Fixed Charges subsequent to the Transaction Date) during
the Reference Period; provided, that for purposes of such computation, in
calculating Consolidated EBITDA and Consolidated Fixed Charges, (a) the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period, (b) the incurrence of any Debt or issuance of Disqualified
Capital Stock during the Reference Period or subsequent thereto and on or prior
to the Transaction Date (and the application of the proceeds therefrom) shall
be assumed to have occurred on the first day of such Reference Period, and (c)
Consolidated Interest Expense attributable to any Debt (whether existing or
being incurred) bearing a floating interest rate shall be computed as if the
rate in effect on the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to an
Interest Swap Obligation (that remains in effect for the 12-month period after
the Transaction Date) that has the effect of fixing the interest rate on the
date of computation, in which case such rate (whether higher or lower) shall be
used.
"Consolidated Fixed Charges" of any Person for any period means (without
duplication) the sum of (i) Consolidated Interest Expense of such Person for
such period, (ii) dividend requirements of such Person and its Subsidiaries
(whether in cash or otherwise (except dividends payable solely in shares of
Qualified Capital Stock)) with respect to Disqualified Capital Stock paid,
accrued or scheduled to be paid or accrued during such period, in each case to
the extent attributable to such period and excluding items eliminated in
consolidation, and (iii) fees paid, accrued or scheduled to be paid or accrued
during such period by such Person and its Subsidiaries in respect of
performance bonds or other guarantees of payment. For purposes of clause (ii)
above, dividend requirements shall be increased to an amount representing the
pre-tax earnings that would be required to cover such dividend requirements;
accordingly, the increased amount shall be equal to a fraction, the numerator
of which is such dividend requirements and the denominator of which is 1 minus
the applicable actual combined effective Federal, state, local, and foreign
income tax rate of such Person and its subsidiaries (expressed as a decimal),
on a consolidated basis, for the fiscal year immediately preceding the date of
the transaction giving rise to the need to calculate Consolidated Fixed
Charges.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate interest (without duplication), whether expensed or capitalized,
paid, accrued or scheduled to be paid or accrued during such period in respect
of all Debt of such Person and its Consolidated Subsidiaries (including (i)
amortization of deferred financing costs and original issue discount and non-
cash interest payments or accruals, (ii) the interest portion of all deferred
payment obligations, calculated in accordance with the effective interest
method and (iii) all commissions, discounts, other fees and charges owed with
respect to letters of credit and banker's acceptance financing and costs
associated with Interest Swap Obligations, in each case to the extent
attributable to such period) determined on a consolidated basis in accordance
with GAAP. For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at the interest rate reasonably
determined by the Board of Directors of such Person (as evidenced by a Board
Resolution) to be the rate of interest implicit in such Capitalized Lease
Obligation in accordance with GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board) and (y)
Consolidated Interest Expense attributable to any Debt represented by the
guarantee by such Person or a
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<PAGE> 11
Subsidiary of such Person other than with respect to Debt of such Person or a
Subsidiary of such Person shall be deemed to be the interest expense
attributable to the item guaranteed.
"Consolidated Net Income" of any Person for any period means the net
income (loss) of such Person and its Consolidated Subsidiaries for such period,
determined in accordance with GAAP, excluding (without duplication) (i) all
extraordinary, unusual and nonrecurring gains, (ii) the net income, if
positive, of any other Person, other than a Consolidated Subsidiary, in which
such Person or any of its Consolidated Subsidiaries has an interest, except to
the extent of the amount of any dividends or distributions actually paid in
cash to such Person or a Consolidated Subsidiary of such Person during such
period, but not in excess of such Person's pro rata share of such other
Person's aggregate net income earned during such period or earned during the
immediately preceding period and not distributed during such period, (iii) the
net income, if positive, of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (iv) the
net income, if positive, of any Subsidiary of such Person to the extent that
the declaration or payment of dividends or similar distributions is not at the
time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated for financial
statement reporting purposes with the financial statements of such Person in
accordance with GAAP.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt" means, with respect to any Person, (i) all liabilities,
contingent or otherwise, of such Person (a) for borrowed money (regardless of
whether 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 or letters of credit or representing the balance deferred
and unpaid of the purchase price of any property acquired by such Person or
services received by such Person, (c) evidenced by bankers' acceptances or
similar instruments issued or accepted by banks or Interest Swap Obligations,
(d) for the payment of money relating to a Capitalized Lease Obligation or (e)
with respect to production and royalty payments created after the Issue Date,
burdening oil and gas properties of such Person, other than any Permitted
Production and Royalty Payment Obligation, Permitted Production Payment Asset
Sale or Drilling Program (to the extent such Person's obligations thereunder
are limited in recourse to the properties subject to such Drilling Program);
(ii) reimbursement obligations of such Person with respect to letters of
credit; (iii) all liabilities of others of the kind described in the preceding
clause (i) or (ii) that such Person has guaranteed or that is otherwise its
legal liability (to the extent of such guaranty or other legal liability); (iv)
all obligations secured by a Lien (other than Permitted Liens, except to the
extent the obligations secured by such Permitted Liens are otherwise included
in clause (i), (ii) or (iii) of this definition) to which the property or
assets (including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such Person are subject, regardless
of whether the obligations secured thereby shall have been assumed by or shall
otherwise be such Person's legal liability (but, if such obligations are not
assumed by such Person or are not otherwise such Person's legal liability, the
amount of such Debt shall be deemed to be limited to the fair market value of
such property or assets determined as of the end of the preceding fiscal
quarter); and (v) 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) through (iv) regardless of whether between or among the same
parties.
"Default" means an event or condition, the occurrence of which is, or
with the lapse of time or giving of notice or both would be, an Event of
Default.
"Default Amount" means, with respect to the Securities, the Accreted
Value of the Securities as of the date on which the Securities are accelerated
and become immediately due and payable (the "date of acceleration"), plus
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<PAGE> 12
accrued interest from the most recent date to which payment in kind interest
has been paid (or, if no interest has been paid, from November 30, 1999) to the
date of acceleration.
"Deferred Installment" shall have the meaning specified in Section 2.12.
"Disqualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person or its Subsidiaries that, by its terms or by the
terms of any security into which it is convertible or exchangeable, is, or upon
the happening of an event or the passage of time would be, required to be
redeemed or repurchased by such Person or its subsidiaries, including at the
option of the holder, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due, on or
prior to the Stated Maturity.
"Drilling Program" means any arrangement between the Company or any
Subsidiary of the Company and another Person pursuant to which (i) such Person
agrees to drill, complete or perform operations to enhance recovery from, a
well or wells on mineral interests owned by the Company or such Subsidiary (or
to pay all or a portion of the costs of drilling, completing or performing such
other operations) and (ii) the Company or such Subsidiary agrees to convey or
assign to such person an interest in such well or wells in accordance with
clause (l) of the definition of "Permitted Liens".
"Eligible Institution" means a domestic commercial banking institution
that has combined capital and surplus of not less than $500,000,000, whose debt
is rated "A" (or higher) according to Moody's Investors Service, Inc. or
Standard & Poor's Corporation, Inc. at the time as of which any investment or
rollover therein is made.
"Equipment" means and includes, as to any Person, all of such Person's
now owned or hereafter acquired Vehicles, drilling rigs, workover rigs,
fracture stimulation equipment, wellsite compressors, rolling stock and related
equipment and other assets accounted for as equipment by such Person on its
financial statements, all proceeds thereof, and all documents of title, books,
records, ledger cards, files, correspondence, and computer files, tapes, disks
and related data processing software that at any time evidence or contain
information relating to the foregoing; provided, however, that "Equipment"
shall not include any assets constituting part of a natural gas pipeline or the
compression or dehydration equipment used in the operation of any such
pipeline.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Event of Default" shall have the meaning specified in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Assets" means any properties acquired by the Company or any
Subsidiary of the Company in exchange for assets of the Company or such
Subsidiary in connection with an Asset Sale, which properties include proved
reserves with a value which, together with the value of any cash or Permitted
Capital Stock received by the Company or such Subsidiary, is equal to or
greater than the value of the proved reserves included in the properties
disposed of by the Company in connection with such Asset Sale.
"Exchange Date" shall have the meaning specified in Section 11.2.
"Exchange Event" shall have the meaning specified in Section 11.2.
"Exchange Offer" shall have the meaning specified in Section 11.2.
"Final Accretion Date" means the date on which the Accreted Value under
clause (i) of the definition of Accreted Value equals $1,000.00.
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<PAGE> 13
"Final Change of Control Put Date" shall have the meaning specified in
Section 11.1.
"Final Exchange Date" shall have the meaning specified in Section 11.2.
"Final Put Date" shall have the meaning specified in Section 4.14.
"Fractional Sale" means a sale of an undivided percentage interest in
the assets sold pursuant to such sale.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the Issue Date applied on a basis consistent with that
used in the preparation of the audited financial statements of the Company
included in the Company's transition report on Form 10-K for the six month
period ended January 31, 1996.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"Hydrocarbons" means oil, gas, condensate and natural gas liquids.
"Incur" shall have the meaning specified in Section 4.11.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Independent Director" means (i) each of Messrs. James R. Lesch, Robert
L. May and Donald D. Sykora, or (ii) if any of such persons set forth in clause
(i) is unwilling or unable to serve as a director of the Company or the size of
the Board of Directors is increased in accordance with the next sentence, an
individual that is not and has not been affiliated (other than as a director of
the Company) with, and is not and has not been a Related Person with respect
to, Mr. John R. Stanley, TransAmerican or the Company and either (x) whose
nomination or election to the Board of Directors is not reasonably objected to
by a majority of the Independent Directors then in office, if any, or (y) who
becomes a director as a result of a merger, consolidation or sale of all or
substantially all of the assets of the Company permitted by this Indenture that
is approved by a majority of Independent Directors. The size of the Board of
Directors may be increased with the approval of the majority of the Independent
Directors. In the event that the size of the Board of Directors is so
increased, the number of Independent Directors shall also increase such that
the Independent Directors on the Board of Directors as so increased shall
constitute at least a majority of the Board of Directors.
"Interest Payment Date" means the stated due date of an installment of
interest on the Notes.
"Interest Reserve Account" shall have the meaning provided in Section
4.20.
"Interest Swap Obligation" means any obligation of any Person pursuant
to any arrangement with any other Person whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional
amount in exchange for periodic payments made by such Person calculated by
applying a fixed or floating rate of interest on the same notional amount;
provided, that the term "Interest Swap Obligation" shall also include interest
rate exchange, collar, cap, swap option or similar agreements providing
protection from interest rate volatility.
"Inventory" means and includes, as to any Person, all of such Person's
now owned or hereafter acquired line pipe, casing, drill pipe and other
supplies accounted for as inventory by such Person on its financial statements
(excluding any Hydrocarbons), all proceeds thereof, and all documents of title,
books, records, ledger cards, files, correspondence, and computer files, tapes,
disks and related data processing software that at any time evidence or contain
information relating to the foregoing.
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<PAGE> 14
"Investment" by any Person in any other Person means (a) the acquisition
(whether for cash, property, services, securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of such other Person or any agreement to make any such
acquisition; (b) the making by such Person of any deposit with, or advance,
loan, contribution or other extension of credit to, such other Person
(including the purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such property to
such other Person) and (without duplication) any amount committed to be
advanced, lent or extended to such other Person; (c) the entering into of any
guarantee of, or other contingent obligation with respect to, Debt or other
liability of such other Person; or (d) the entering into of any Interest Swap
Obligation with such other Person.
"Investment Grade Rating" means, with respect to any Person or an issue
of debt securities or preferred stock, a rating in one of the four highest
letter rating categories (without regard to "+" or "-" or other modifiers) by
any rating agency or if any such rating agency has ceased using such letter
rating categories or the four highest of such letter rating categories are not
considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Issue Date" means the date of first issuance of the Securities under
this Indenture.
"Junior Debt" means Debt of the Company that (i) requires no payment of
principal prior to or on the date on which all principal of and interest on the
Notes is paid in full or (ii) is subordinate or junior in right of payment to
the Notes in the event of a liquidation, dissolution or other winding up of the
Company or any insolvency or bankruptcy of the Company.
"Junior Subordinated Payment" shall have the meaning specified in
Section 12.2.
"Legal Holiday" shall have the meaning provided in Section 14.7.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, regardless of whether filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"Loss Carry Forward" means the amount, if any, by which the Property
Expenses for a month exceed the Production Revenues for such month.
"Major Asset Sale" means an Asset Sale or series of related Asset Sales
involving assets with a fair market value in excess of $1,000,000,000.
"Material Change" means an increase or decrease of more than 10% during
a fiscal quarter in the discounted future net cash flows (excluding changes
that result from changes in prices) from proved oil and gas reserves of the
Company and its Consolidated Subsidiaries (before any state or federal income
tax); provided, however, that the following will be excluded from the Material
Change calculation: (i) any acquisitions during the quarter of oil and gas
reserves that have been estimated by independent petroleum engineers and on
which a report or reports exist, (ii) any reserves added during the quarter
attributable to the drilling or recompletion of wells not included in previous
reserve estimates, but which will be included in future quarters for purposes
of subsequent calculations of "Material Change", and (iii) any disposition of
properties existing at the beginning of such quarter that have been disposed of
as provided in Section 4.14.
"Maturity Date," when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity, Change of Control Payment
Date, Purchase Date or by declaration of acceleration, call for redemption or
otherwise.
"Net Cash Proceeds" shall have the meaning specified in Section 4.14.
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<PAGE> 15
"Net Proceeds" means in the case of any sale by the Company of Qualified
Capital Stock, the aggregate net cash proceeds received by the Company from the
sale of Qualified Capital Stock (other than to a Subsidiary) after payment of
reasonable out-of-pocket expenses, commissions and discounts incurred in
connection therewith.
"Net Working Capital" means (i) all current assets of the Company and
its Consolidated Subsidiaries, minus (ii) all current liabilities of the
Company and its Consolidated Subsidiaries, except current liabilities that are
Debt, all in accordance with GAAP.
"New Notes" shall have the meaning set forth in Section 11.2 hereof.
"NNM" means the Nasdaq National Market.
"Nominee" means any Person who has or holds any right, title or interest
in any property, lease, interest or other asset as a nominee for the Company or
any of its Subsidiaries.
"Nominee Property" means any property, lease, interest or other asset
with respect to which any Person has or holds any right, title or interest as a
nominee for the Company or any of its Subsidiaries.
"Notes" means the 13 1/4% Series A Senior Subordinated Notes due 2003
and the 13 1/4% Series B Senior Subordinated Notes due 2003, in each case as
supplemented from time to time in accordance with the terms hereof, issued
under this Indenture, including any New Notes.
"NYSE" means the New York Stock Exchange.
"Obligor" means the Company.
"Offer Amount" shall have the meaning specified in Section 4.14.
"Offer Price" shall have the meaning specified in Section 4.14.
"Offer to Purchase" means any offer made by the Company to Holders of
the Securities required by the provisions of Section 4.14(a) and made pursuant
to the provisions of Section 4.14(b), otherwise, also referred to as a "Section
4.14 Offer".
"Officer" means, with respect to the Company, the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of the
Company.
"Officers' Certificate" means, with respect to the Company, a
certificate signed by two Officers of the Company or by an Officer and an
Assistant Secretary of the Company and otherwise complying with the
requirements of Sections 14.4 and 14.5.
"Oil and Gas Property Sale" means a sale of Hydrocarbon reserves
attributable to a particular well or wells.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of
Sections 14.4 and 14.5. Unless otherwise required by the Trustee, the counsel
may be outside counsel to the Company.
"Paying Agent" shall have the meaning specified in Section 2.3.
"Payment Blockage Period" shall have the meaning specified in Section
12.3.
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"Permitted Capital Stock" means Capital Stock that is issued by a
United States corporation (i) with outstanding debt securities that have an
Investment Grade Rating and (ii) that has a Public Market Value at least equal
to $1,000,000,000.
"Permitted Hedging Transactions" means non-speculative transactions in
futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged in by the Company or any of its
Subsidiaries as part of its normal business operations as a risk-management
strategy or hedge against adverse changes in market conditions in the natural
gas industry; provided, that such transactions do not, on a monthly basis,
relate to more than 90% of the Company's average net natural gas production per
month for the most recent 12-month period; and provided, further, that, at the
time of such transaction (i) the counter party to any such transaction is an
Eligible Institution or a Person that has an Investment Grade Rating or has an
issue of debt securities or preferred stock outstanding with an Investment
Grade Rating or (ii) such counter party's obligation pursuant to such
transaction is unconditionally guaranteed in full by an Eligible Institution or
a Person that has an Investment Grade Rating or has an issue of debt securities
or preferred stock outstanding with an Investment Grade Rating.
"Permitted Investment" means, when used with reference to the Company or
its Subsidiaries, (i) trade credit extended to persons in the ordinary course
of business; (ii) purchases of (a) readily marketable obligations of, or
obligations guaranteed unconditionally by, the United States of America
maturing in one year or less from the date of purchase, (b) commercial paper
having the highest rating obtainable from either Moody's Investor Service, Inc.
or Standard & Poor's Corporation, Inc., (c) certificates of deposit maturing in
one year or less from the date of purchase issued by, bankers' acceptances and
deposit accounts of, and time deposits with, commercial banks of recognized
standing chartered in the United States of America or Canada with capital,
surplus, and undivided profit aggregating in excess of $250,000,000, (d) demand
or fully insured time deposits used in the ordinary course of business with
commercial banks insured by the Federal Deposit Insurance Corporation, (e)
Eurodollar time deposits, or (f) shares of money market funds, including those
of the Trustee, that invest solely in Permitted Investments of the kind
described in clauses (a) through (e) above; (iii) Investments in Wholly Owned
Subsidiaries of the Company that are engaged in the Related Businesses; (iv)
Interest Swap Obligations permitted to be incurred under Section 4.11; (v) the
receipt of capital stock in lieu of cash in connection with the settlement of
litigation to the extent that cash is not otherwise available to the Person
obligated to make such settlement payment; (vi) advances to officers and
employees in connection with the performance of their duties in the ordinary
course of business in an amount not to exceed $3,000,000 in the aggregate
outstanding at any time; (vii) margin deposits in connection with Permitted
Hedging Transactions; (viii) an Investment in Permitted Capital Stock made
pursuant to clause (A)(iii) or (B) of the first sentence of Section 4.14(a),
provided, that the shares represented by such Investment do not exceed 10% of
the total number of such shares outstanding; (ix) Investments in an amount not
in excess of $46,000,000 in (a) cash or Cash Equivalents or (b) if the Notes
are rated "BB-" or better by Standard & Poor's Corporation, Inc. and "Ba3" or
better by Moody's Investors Service, Inc., debt securities that have an
Investment Grade Rating; (x) an Investment in one or more Unrestricted
Subsidiaries of the Company in an aggregate amount not in excess of
$25,000,000, less the aggregate amount of any Permitted Unrestricted Subsidiary
Guarantees; (xi) an Investment in connection with or related to farm-out, farm-
in, joint operating, joint venture or area of mutual interest agreements or
other similar or customary arrangements entered into in the ordinary course of
business; (xii) a guaranty by any Subsidiary of the Company permitted under
Section 4.11(e); or (xiii) deposits permitted by clause (c) or (i) of the
definition of Permitted Liens or any extension, renewal, or replacement
thereof.
"Permitted Liens" means (a) Liens imposed by governmental authorities
for taxes, assessments, or other charges not yet due or which are being
contested in good faith and by appropriate proceedings, if adequate reserves
with respect thereto are maintained on the books of the Company in accordance
with GAAP; (b) statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen, repairmen, mineral interest owners, or other like Liens arising by
operation of law in the ordinary course of business, provided that (i) the
underlying obligations are not overdue for a period of more than 60 days, or
(ii) such Liens are being contested in good faith and by appropriate
proceedings and adequate reserves with respect thereto are maintained on the
books of the Company in accordance with GAAP; (c) deposits to secure the
performance of bids, trade contracts (other than borrowed money), leases,
statutory obligations, surety bonds, appeal bonds, supersedeas bonds,
performance bonds, and other obligations of
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<PAGE> 17
a like nature incurred in the ordinary course of business; (d) pledges of
assets to secure appeal, supersedeas or performance bonds (or to secure
reimbursement obligations or letters of credit in support of such bonds) in an
aggregate amount outstanding at any time not in excess of $10,000,000; (e)
pledges of assets to secure margin obligations, reimbursement obligations or
letters of credit in connection with Permitted Hedging Transactions, provided
that, at the time of such pledge, the aggregate amount of such obligations and
letters of credit outstanding does not exceed the greater of (i) $50,000,000 or
(ii) 10% of the SEC PV10 indicated on the Company's most recent Reserve Report;
(f) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects incurred in the ordinary course of business
which, in the aggregate, are not material in amount, and which do not in any
case materially detract from the value of the property subject thereto (as such
property is used by the Company or any of its Subsidiaries) or interfere with
the ordinary conduct of the business of the Company or any of its Subsidiaries;
(g) Liens arising by operation of law in connection with judgments, only to the
extent, for an amount and for a period not resulting in an Event of Default
with respect thereto; (h) Liens existing on the date of the Indenture; (i)
pledges or deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance, and other types of social
security legislation; (j) Liens granted on Equipment, Inventory or Receivables;
(k) Liens granted in connection with the Presale of Gas, provided that all of
the proceeds from such Presale of Gas shall be applied to the repurchase of
Senior Notes or Notes pursuant to an Offer to Purchase under Section 4.14; (l)
Liens created on acreage drilled or to be drilled pursuant to Drilling
Programs, on Hydrocarbons produced therefrom and on the proceeds of such
Hydrocarbons to secure the Company's obligations thereunder, provided that (i)
the number of wells included in such program commenced in any fiscal year
(without duplication of wells included in programs commenced in prior years)
does not exceed 30 per fiscal year, (ii) such obligations are limited to a
percentage of production from such wells, (iii) such Liens survive only until
the Person to whom such Lien was granted has received production with a value
equal to the reimbursable costs, expenses and fees related to property and
services provided or paid for by such Person plus an agreed-upon interest
component, and (iv) such Liens secure obligations that are nonrecourse to the
Company and its Subsidiaries; (m) Liens on the assets of any entity existing at
the time such assets are acquired by the Company or any of its Subsidiaries,
whether by merger, consolidation, purchase of assets or otherwise so long as
such Liens (i) are not created, incurred or assumed in contemplation of such
assets being acquired by the Company or such Subsidiary and (ii) do not extend
to any other assets of the Company or any of its Subsidiaries; (n) any
extension, renewal, or replacement of Liens created pursuant to any of clauses
(a) through (g), (i) through (m) or (q) of this definition, provided that such
Liens would have otherwise been permitted under such clauses, and further
provided that the Liens permitted by this clause (n) shall not be spread to
cover any additional Debt or property; (o) Permitted Production and Royalty
Payment Obligations, production payments and royalties resulting from Permitted
Production Payment Asset Sales and transfers or conveyances in connection with
Section 29 Transactions; (p) Liens in favor of the Company; (q) Liens created
on pipeline systems acquired or constructed with the proceeds of Debt Incurred
pursuant to clause (x) of clause (d) of Section 4.11, provided that the
obligations secured by such Liens do not exceed the cost of acquiring or
constructing such pipeline systems plus interest, fees and expenses Incurred in
connection therewith; and (r) Liens that secure Unrestricted Non-Recourse Debt.
"Permitted Production and Royalty Payment Obligations" means (i)
royalties, overriding royalties, revenue interests, net revenue interests, net
profit interests, reversionary interests and production payments, (ii) the
interests of others in pooling or unitization agreements, production sales
contracts and operating agreements, (iii) Liens arising under, in connection
with or related to farm-out, farm-in, joint operating or area of mutual
interest agreements or other similar or customary arrangements, agreements or
interests, and (iv) similar burdens on the property of the Company or any
Subsidiary of the Company, each as incurred in the ordinary course of business
and to the extent such burdens are limited in recourse to (x) the properties
subject to such interests or agreements, (y) the Hydrocarbons produced from
such properties, and (z) the proceeds of such Hydrocarbons.
"Permitted Production Payment Asset Sale" means any conveyance of a
production payment or royalty that the Company elects to treat as an Asset Sale
pursuant to and permitted by Section 4.14(a): provided that, with respect to
the oil and gas properties affected by such production payment or royalty, the
amounts paid or payable in cash or in kind (with amounts attributable to
Hydrocarbons delivered in kind to or for the account of the applicable royalty
or production payment owners exercising a right to take such Hydrocarbons in
kind being determined by the Company
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reasonably and in good faith based upon the volumes of Hydrocarbons delivered
in kind and the market price then prevailing at the applicable point of
delivery) under such production payment or royalty in any month, in combination
with Property Expenses for such month, do not exceed the Production Revenues
for such month.
"Permitted Unrestricted Subsidiary Guarantees" means all guarantees by
the Company or any of its Subsidiaries of any obligations of any Unrestricted
Subsidiaries in an aggregate amount not to exceed at any one time outstanding
$25,000,000.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality or
other entity.
"Presale of Gas" means any advance payment agreement or other
arrangement covering deliveries of Hydrocarbons for a period exceeding 31 days
pursuant to which the Company or its Subsidiaries, having received full payment
of the purchase price for a specified quantity of Hydrocarbons more than 31
days prior to the date of first delivery, is required to deliver, in one or
more installments subsequent to the date of such agreement or arrangement, such
quantity of Hydrocarbons to the purchaser of such Hydrocarbons pursuant to and
during the term of such agreement or arrangement; provided, however, that the
term "Presale of Gas" shall not include (i) a transaction to the extent and
only to the extent that it results in the creation of any Permitted Lien under
clauses (l) or (o) of the definition of "Permitted Liens," (ii) Permitted
Hedging Transactions or (iii) an Oil and Gas Property Sale.
"principal" of any Debt (including the Securities) means the principal
of such Debt plus, without duplication, any applicable premium, if any, on such
Debt.
"Proceeding" shall have the meaning specified in Section 12.2.
"Production Revenues" means, with respect to the oil and gas properties
subject to a Permitted Production Payment Asset Sale, those revenues received
by the Company from the sale or other disposition of Hydrocarbons produced from
or attributable to such oil and gas properties (including within such revenues
amounts as determined by the Company reasonably and in good faith as being
attributable to volumes of Hydrocarbons delivered in kind to or for the account
of the applicable royalty or production payment owners exercising a right to
take such Hydrocarbons in kind based upon the volumes of Hydrocarbons delivered
in kind and the market price then prevailing at the applicable point of
delivery).
"property" means any right or interest in or to property or assets of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Property Expenses" means, for any month, with respect to the oil and
gas properties affected by a Permitted Production Payment Asset Sale, the sum
of (i) all lease-level burdens, costs, and expenses borne by the Company
arising with respect to such affected oil and gas properties in such month,
including, without limitation, all costs of developing and operating such
affected oil and gas properties, all costs of producing, gathering, treating,
processing, transporting, and marketing Hydrocarbons therefrom or attributable
thereto, and all production payments, royalties, taxes and other burdens,
costs, and expenses borne by the Company and associated therewith (with such
costs, for purposes of production payments, royalties, and other burdens under
which Hydrocarbons are delivered in kind to or for the account of the
applicable royalty or production payment owners exercising a right to take such
Hydrocarbons in kind being determined by the Company reasonably and in good
faith based upon the volumes of Hydrocarbons delivered in kind and the market
price then prevailing at the applicable point of delivery), and (ii) the Loss
Carry Forward, if any, for the prior month.
"Public Equity Offering" means an underwritten public offering by a
nationally recognized member of the National Association of Securities Dealers
of Qualified Capital Stock of the Company pursuant to an effective registration
statement filed with the SEC pursuant to the Securities Act.
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"Public Market Value" means, as of any date and with respect to any
Capital Stock, the product of the weighted average number of shares of such
Capital Stock outstanding during the 20 Trading Day-period for such Capital
Stock immediately preceding such date multiplied by the average of the Closing
Prices of such Capital Stock for such period. Notwithstanding the foregoing,
if such Capital Stock is not listed or admitted for trading on any national
securities exchange or the NNM, the Public Market Value shall be zero.
"Purchase Date" shall have the meaning specified in Section 4.14(b).
"Qualified Capital Stock" means any Capital Stock of the Company that is
not Disqualified Capital Stock.
"Receivables" means and includes, as to any Person, any and all of such
Person's now owned or hereafter acquired "accounts" as such term is defined in
Article 9 of the Uniform Commercial Code in the State of New York (excluding
all intercompany accounts), all products and proceeds thereof, and all books,
records, ledger cards, files, correspondence, and computer files, tapes, disks
or software that at any time evidence or contain information relating to the
foregoing.
"Record Date" means a Record Date specified in the Securities regardless
of whether such Record Date is a Business Day.
"Redemption Date" means, when used with respect to any Security to be
redeemed, the date fixed for such redemption pursuant to this Indenture and
Paragraph 5 in the form of Note attached hereto as Exhibit A.
"Redemption Price," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to Paragraph
5 in the form of Note attached hereto as Exhibit A, which shall include,
without duplication, in each case, accrued and unpaid interest to the
Redemption Date.
"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person ended on or immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Notes or the
Indenture.
"Refinancing Debt" shall have the meaning specified in Section 4.11.
"Refinancing Fees" shall have the meaning specified in Section 4.11.
"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreement" means the registration rights agreement
of even date herewith between the Company and the original purchasers of the
Series A Notes.
"Related Business" means the exploration for, acquisition of,
development of, production, transportation, gathering and, in connection with
natural gas only, processing of, crude oil, natural gas, condensate and natural
gas liquids; provided that the term "Related Business" shall not include any
refining or distilling of Hydrocarbons other than processing and fractionating
natural gas liquids.
"Related Person" means (i) any Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Company or
any Subsidiary of the Company or any officer, director, or employee of the
Company or any Subsidiary of the Company or of such Person, (ii) the spouse,
any immediate family member, or any other relative who has the same principal
residence of any Person described in clause (i) above, and any Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with, such spouse, family member or other relative, and (iii) any trust
in which any Person described in clause (i) or (ii), above, is a fiduciary or
has a beneficial interest. For purposes of this definition the term "control"
means (a) the power to direct the management and policies of a Person, directly
or through one or more intermediaries, whether through the
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<PAGE> 20
ownership of voting securities, by contract, or otherwise, or (b) the
beneficial ownership of 10% or more of the voting common equity of such Person
(on a fully diluted basis) or of warrants or other rights to acquire such
equity (regardless of whether presently exercisable).
"Related Person Transaction" shall have the meaning specified in Section
4.10.
"Requisite Balance" means, as of any date of determination, the amount
necessary to satisfy the Company's obligation to pay interest in respect of all
then outstanding Senior Notes on the next Senior Note Interest Payment Date.
"Reserve Report" means a report prepared by independent petroleum
engineers with respect to Hydrocarbon reserves in accordance with guidelines
published by the SEC.
"Restricted Investment" means any direct or indirect Investment by the
Company or any Subsidiary of the Company other than a Permitted Investment.
"Restricted Payment" means, with respect to any Person, (i) any
Restricted Investment, (ii) any dividend or other distribution on shares of
Capital Stock of such Person or any Subsidiary of such Person, (iii) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of such Person or any
Subsidiary of such Person, and (iv) any defeasance, redemption, repurchase or
other acquisition or retirement for value, or any payment in respect of any
amendment in anticipation of or in connection with any such retirement,
acquisition or defeasance, in whole or in part, of any Junior Debt, directly or
indirectly, of such Person or a Subsidiary of such Person prior to the
scheduled maturity or prior to any scheduled repayment of principal in respect
of such Junior Debt; provided, however, that the term "Restricted Payment" does
not include (i) any dividend, distribution or other payment on shares of
Capital Stock of an issuer solely in shares of Qualified Capital Stock of such
issuer that is at least as junior in ranking as the Capital Stock on which such
dividend, distribution or other payment is to be made, (ii) any dividend,
distribution or other payment to the Company, or any of its directly or
indirectly owned Subsidiaries, by any of its Subsidiaries, (iii) any
defeasance, redemption, repurchase or other acquisition or retirement for
value, in whole or in part, of any Debt payable solely in shares of Qualified
Capital Stock of such Person or (iv) any payments or distributions made
pursuant to and in accordance with the Transfer Agreement, the Services
Agreement or the Tax Allocation Agreement.
"SEC" means the Securities and Exchange Commission.
"SEC PV10" means the standardized measure of future net cash flows
discounted at 10%, determined in all material respects in accordance with the
rules and regulations of the SEC, including the assumption of the continuation
of existing economic conditions and estimated by applying period-end gas and
condensate prices, adjusted for future price changes as allowed by contract, to
estimated future production of period-end proved reserves.
"Section 4.14 Offer" shall refer to an "Offer to Purchase," as defined
in Section 4.14.
"Section 29 Transaction" means any transaction entered into for the
purpose of monetizing tax credits under Section 29 of the Internal Revenue Code
of 1986, as amended, involving the conveyance by the Company or any Subsidiary
of the Company of properties subject to such tax credits, which transaction is
structured such that (i) the Company or such Subsidiary would obtain, prior to
or within a reasonable time subsequent to the consummation of such transaction,
a private letter ruling from the Internal Revenue Service allowing such
transaction, (ii) the net present value to the Company or such Subsidiary of
the retained economic interest in such properties plus the payment obligations
of the purchaser of such properties exceeds the net present value of such
properties to the Company or such Subsidiary prior to the conveyance and (iii)
the Company's retained interest in such properties is included in the
Collateral.
"Securities" means the Notes.
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<PAGE> 21
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securities Payment" shall have the meaning specified in Section 12.2.
"Securityholder" means the Person in whose name a Note is registered on
the Registrar's book.
"Senior Debt" means all obligations of the Company now or hereafter
existing with respect to the principal of, and interest on, and all fees and
other amounts payable in connection with, (i) Debt of the Company under the
Senior Notes, including any obligation to indemnify the trustee under the
indenture pursuant to which the Senior Notes were issued and fees and expenses
paid or payable under or in connection with such indenture (ii) Debt of the
Company under the Amended and Restated Accounts Receivable Management and
Security Agreement, dated as of October 31, 1995, among the Company, TTC and
BNY Financial Corporation, as the same may be amended, supplemented and/or
restated from time to time, (iii) Debt of the Company incurred in accordance
with Section 4.11 in respect of any extension, refunding or refinancing, in
whole or in part, of the Senior Debt of the Company and (iv) other Debt of the
Company permitted to be incurred under Section 4.11 if, in the case of any
particular Debt, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Debt shall be senior
in right of payment to the Notes. Notwithstanding the foregoing, Senior Debt
shall not include (i) Debt evidenced by the Notes, (ii) Debt of the Company to
any Affiliate or to a Subsidiary, (iii) Debt that is created, incurred, issued,
assumed or guaranteed in violation of Section 4.11 or Section 4.16, (iv) Debt
of the Company that is subordinated by its terms in right of payment to any
other Debt of the Company, (v) amounts payable or other Debt to trade creditors
created, incurred, assumed or guaranteed by the Company or any Subsidiary, in
the ordinary course of business in connection with obtaining goods or services,
(vi) Debt which is represented by Disqualified Capital Stock, (vii) Debt of or
amounts owed by the Company for compensation to employees or for services, and
(viii) any liability for Federal, state, local, or other taxes owed or owing by
the Company.
"Senior Nonmonetary Default" shall have the meaning specified in Section
12.3.
"Senior Note Interest Payment Date" means the stated due date of an
installment of interest on the Senior Notes.
"Senior Notes" means the 11 1/2% Senior Secured Notes due 2002 of the
Company, as supplemented from time to time in accordance with the terms of the
indenture pursuant to which they were issued, as such indenture may be amended
or supplemented from time to time in accordance with its terms.
"Senior Payment Default" shall have the meaning specified in Section
12.3.
"Series A Notes" and "Series B Notes" mean the 13 1/4% Series A Senior
Subordinated Notes due 2003 and the 13 1/4% Series B Senior Subordinated Notes
due 2003 of the Company.
"Services Agreement" means the Services Agreement among the Company,
TransAmerican and other Subsidiaries of TransAmerican, as in effect on the
Issue Date.
"Special Record Date" for payment of any Defaulted Interest means a date
fixed by the Trustee pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Note, means December
15, 2003.
"Subsidiary," with respect to any Person, means (i) a corporation at
least fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a subsidiary of such Person is, at the time, a general partner of
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<PAGE> 22
such partnership, or (iii) any other Person (other than a corporation or a
partnership) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof has (x) at least a fifty
percent ownership interest or (y) the power to elect or direct the election of
the directors or other governing body of such Person; provided, however, that
"Subsidiary" shall not include any Unrestricted Subsidiary of such Person.
"Surviving Person" shall have the meaning specified in Section 5.1(a).
"TARC" means TransAmerican Refining Corporation, a Texas corporation.
"TARC Indenture" means the indenture, dated as of February 15, 1995, by
and between TARC, TransAmerican Energy Corporation and First Fidelity Bank,
National Association, as trustee, relating to TARC's Guaranteed First Mortgage
Discount Notes and Guaranteed First Mortgage Notes.
"TARC Warrants" means common stock purchase warrants initially
exercisable for 5,811,773 shares of the common stock of TransAmerican Refining
Corporation.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated as
of August 24, 1993, among TransAmerican, the Company, TTC and TransAmerican's
other Subsidiaries, as in effect on the Issue Date.
"TEC Preferred" means the Series A Preferred Stock $.01 par value per
share of TransAmerican Energy Corporation.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the execution of this Indenture.
"Trading Day" means any day on which the securities in question are
quoted on the NYSE, or if such securities are not approved for listing on the
NYSE, on the principal national securities market or exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities market or exchange, on the NNM.
"TransAmerican" means TransAmerican Natural Gas Corporation, a Texas
corporation.
"Transfer Agreement" means the Transfer Agreement, dated as of August
24, 1993, among TransAmerican, the Company, TTC and Mr. John R. Stanley, as in
effect on the Issue Date.
"Trust Officer" means any officer within the corporate trust department
(or any successor group) of the Trustee including any vice president, assistant
vice president, secretary, assistant secretary or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those performed by the Persons who at that time shall be such officers, and
also means, with respect to a particular corporate trust matter, any other
officer of the corporate trust department (or any successor group) of the
Trustee to whom such trust matter is referred because of his knowledge of and
familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"TTC" means TransTexas Transmission Corporation, a Delaware corporation.
"Unrestricted Non-Recourse Debt" of any Person means (i) Debt of such
Person that is secured solely by a Lien upon the stock of an Unrestricted
Subsidiary of such Person and as to which there is no recourse against such
Person or any of its assets other than against such stock and (ii) Permitted
Unrestricted Subsidiary Guarantees.
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"Unrestricted Subsidiary" of any Person means any other Person ("Other
Person") that would but for this definition of "Unrestricted Subsidiary" be a
Subsidiary of such Person organized or acquired after the Issue Date as to
which all of the following conditions apply: (i) neither such Person nor any of
its other Subsidiaries provides credit support of any Debt of such Other Person
(including any undertaking, agreement or instrument evidencing such Debt),
other than Unrestricted Non-Recourse Debt; (ii) such Other Person is not
liable, directly or indirectly, with respect to any Debt other than
Unrestricted Subsidiary Debt; (iii) neither such Person nor any of its
Subsidiaries has made an Investment in such Other Person unless such Investment
was permitted by the provisions of Section 4.3; and (iv) the Board of Directors
of such Person, as provided below, shall have designated such Other Person to
be an Unrestricted Subsidiary on or prior to the date of organization or
acquisition of such Other Person. Any such designation by the Board of
Directors of such Person shall be evidenced to the Trustee by delivering to the
Trustee a resolution thereof giving effect to such designation and an Officers'
Certificate certifying that such designation complies with the foregoing
conditions. The Board of Directors of any Person may designate any
Unrestricted Subsidiary of such Person as a Subsidiary of such Person; provided
that (a) immediately after giving pro forma effect to such designation, such
Person could incur at least $1.00 of additional Senior Debt pursuant to the
provisions of the second paragraph of Section 4.11, (b) all Debt of such
Unrestricted Subsidiary shall be deemed to be incurred by a Subsidiary of the
Person on the date such Unrestricted Subsidiary becomes a Subsidiary, and (c)
no Default or Event of Default would occur or be continuing after giving effect
to such designation. Any subsidiary of an Unrestricted Subsidiary shall be an
Unrestricted Subsidiary for purposes of this Indenture.
"Unrestricted Subsidiary Debt" means, as to any Unrestricted Subsidiary
of any Person, Debt of such Unrestricted Subsidiary (i) as to which neither
such Person nor any Subsidiary of such Person is directly or indirectly liable
(by virtue of such Person or any such Subsidiary being the primary obligor on,
guarantor of, or otherwise liable in any respect to, such Debt), unless such
liability constitutes Unrestricted Non-Recourse Debt and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Debt of such Person or any Subsidiary of such Person to declare,
a default on such Debt of such Person or any Subsidiary of such Person or cause
the payment thereof to be accelerated or payable prior to its stated maturity,
unless, in the case of this clause (ii), such Debt constitutes Unrestricted
Non-Recourse Debt.
"Upgrade" shall mean the date that the Senior Notes are first rated "B1"
or better by Moody's Investors Service, Inc. and "BB-" or better by Standard &
Poor's Corporation, Inc. and the rating agencies have indicated in writing that
the Senior Notes would continue to have such ratings immediately following the
issuance of the New Notes.
"U.S. Government Obligations" means direct non-callable obligations of,
or non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Vehicles" means all trucks, automobiles, trailers and other vehicles
covered by a certificate of title.
"Voting Stock" means Capital Stock of the Company having generally the
right to vote in the election of directors of the Company.
"Weighted Average Life" means, as of the date of determination, with
respect to any debt instrument, the quotient obtained by dividing (i) the sum
of the products of the number of years from the date of determination to the
dates of each successive scheduled principal payment of such debt instrument
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
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"Wholly Owned Subsidiary" means, with respect to any Person, at any
time, a Subsidiary of such Person, all of the Capital Stock of which (except
any director's qualifying shares, the TARC Warrants and the TEC Preferred) is
at the time owned directly or indirectly by such Person.
"Working Capital" means all current assets of the Company and its
consolidated Subsidiaries, minus (i) all current liabilities of the Company and
its consolidated Subsidiaries and (ii) the Requisite Balance, all in accordance
with GAAP.
Section 1.2 Incorporation by Reference of TIA. Whenever this
Indenture refers to a provision of the TIA, such provision is incorporated by
reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
Section 1.3 Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "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; and
(7) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated
otherwise.
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ARTICLE II
THE SECURITIES
Section 2.1 Form and Dating. The Notes and the Trustee's certificate
of authentication, in respect thereof, shall be substantially in the form of
Exhibit A hereto, which Exhibit is part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Company and the Trustee shall approve the form of the Securities
and any notation, legend or endorsement on them. Any such notations, legends
or endorsements not contained in the form of Note attached as Exhibit A hereto
shall be delivered in writing to the Trustee. Each Security shall be dated the
date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby. In the event of any inconsistency between the Notes and the
Indenture, the Indenture controls.
The Notes are being issued in two series, the Series A Notes and the
Series B Notes.
The Series A Notes are initially being issued pursuant to an exemption
from registration under the Securities Act. After the initial issuance date of
the Series A Notes, Series B Notes will be issued in exchange for an equal
principal amount of outstanding Series A Notes (i) pursuant to the Registered
Exchange Offer (as defined in the Registration Rights Agreement), (ii) if a
registration statement covering the resale of Series B Notes has been declared
effective, in which case the Series A Notes will be exchanged for Series B
Notes immediately prior to the resale of Series B Notes pursuant to the
registration statement, (iii) at the request of the Holder of the Series A
Notes, immediately prior to the disposition of such Notes pursuant to Rule 144
under the Securities Act, if the Holder of the Series A Notes delivers to the
Trustee an Opinion of Counsel stating that as a result of such disposition, the
Series A Notes being disposed of will no longer be restricted securities within
the meaning of Rule 144 or (iv) if the Holder of the Series A Notes delivers to
the Trustee an Opinion of Counsel stating that the Series A Notes are no longer
restricted securities within the meaning of Rule 144 under the Securities Act.
Upon any such exchange, the Series A Notes shall be cancelled in
accordance with Section 2.11 and shall no longer be deemed outstanding for any
purpose.
Section 2.2 Execution and Authentication. Two Officers shall sign, or
one Officer shall sign and one Officer shall attest to, the Notes for the
Company by manual or facsimile signature. The Company's seal shall be
impressed, affixed, imprinted or reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note was an Officer at the time of
such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless and the Company
shall nevertheless be bound by the terms of the Notes and this Indenture.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note but such signature
shall be conclusive evidence that the Note has been authenticated pursuant to
the terms of this Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount shown on the face thereof of up to $189,000,000 upon
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of Securities to be
authenticated and the date on which the Securities are to be authenticated.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is limited to $189,000,000 in principal amount
issued hereunder, except as provided in Section 2.7. Upon the written order of
the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such
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agent. An authenticating agent has the same rights as an Agent to deal with
any Obligor, any Affiliate of any Obligor, or any of their respective
Subsidiaries.
Initially, the Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
Section 2.3 Registrar and Paying Agent. The Company shall maintain an
office or agency in the Borough of Manhattan in the City of New York, New York,
where Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency in the Borough of Manhattan in the City
of New York, New York, where Securities may be presented for payment or
exchange ("Paying Agent"). Notices and demands to or upon the Company in
respect of the Notes may be served as is provided in Section 14.2. The Company
or any Affiliate may act as Registrar or Paying Agent, except that, for the
purposes of Articles III, VIII and XI and Sections 4.14 and 4.16, none of the
Company or any Affiliate shall act as Paying Agent. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-Registrars and one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent. The Company hereby
initially appoints the Trustee as Registrar and Paying Agent, and the Trustee
hereby initially agrees so to act.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee in writing in advance of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
Section 2.4 Paying Agent to Hold Assets in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that each
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
assets held by the Paying Agent for the payment of principal of, or interest
on, the Securities (whether such assets have been distributed to it by the
Company or any other future obligor on the Securities), and shall notify the
Trustee in writing of any Default in making any such payment. If the Company
or an Affiliate of the Company acts as Paying Agent, it shall segregate such
assets and hold them as a separate trust fund for the benefit of the Holders or
the Trustee. The Company at any time may require a Paying Agent to distribute
all assets held by it to the Trustee and account for any assets disbursed and
the Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed.
Upon distribution to the Trustee of all assets that shall have been delivered
by the Company to the Paying Agent, the Paying Agent (if other than the Company
or an Affiliate of the Company) shall have no further liability for such
assets.
Section 2.5 Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Holders. If the Trustee is not the Registrar,
the Company shall furnish to the Trustee on or before the third Business Day
preceding 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
reasonably may require of the names and addresses of Holders.
Section 2.6 Transfer and Exchange. When Securities are presented to
the Registrar or a co-Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal principal amount of
Securities of other authorized denominations, the Registrar or co-Registrar
shall register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Company and the Registrar or co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. The signature of the
Holder or his duly authorized attorney must be guaranteed by a participant in
the Securities Transfer Agents Medallion Program, the Stock Exchanges Medallion
Program or the New York Stock Exchange Inc. Medallion Signature Program. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
request. No service charge shall be made for any registration of transfer or
exchange, but the Company
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or the Trustee may require payment of a sum sufficient to cover any transfer
tax, assessments, or similar governmental charge payable in connection
therewith (other than any such transfer taxes, assessments, or similar
governmental charge payable upon exchanges or transfers pursuant to Section
2.2, 2.10, 3.7, 4.14, 9.5, or 11.1). The Registrar or co-Registrar shall not
be required to register the transfer of or exchange of (a) any Security
selected for redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Security being redeemed in part, or (b) any Security
for a period beginning 15 Business Days before the mailing of a notice of an
offer to repurchase pursuant to Article XI or Section 4.14 or redeem Securities
pursuant to Article III and ending at the close of business on the day of such
mailing.
All Series A Notes issued hereunder shall bear the following legend:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM AND IN ANY EVENT MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH THE INDENTURE, COPIES OF WHICH
ARE AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE TRUSTEE. THE
EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO
PERMIT SALE OR TRANSFER OF THIS SECURITY TO QUALIFIED INSTITUTIONAL BUYERS
(WITHIN THE MEANING OF RULE 144A) WITHOUT REGISTRATION.
EACH HOLDER OF THIS SECURITY REPRESENTS TO THE COMPANY THAT (A) SUCH
HOLDER WILL NOT SELL OR OTHERWISE TRANSFER THIS SECURITY (WITHOUT CONSENT OF
THE COMPANY) PRIOR TO TWO YEARS FROM THE LATER OF DECEMBER 13, 1996 OR THE DATE
ON WHICH THIS SECURITY WAS LAST HELD BY AN AFFILIATE OF THE COMPANY OTHER THAN
(I) TO A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE
144A, (II) TO A NON-U.S. PERSON IN A TRANSACTION COMPLYING WITH REGULATION S
UNDER THE SECURITIES ACT, (III) FOLLOWING TWO YEARS FROM SUCH TIME, IN A
TRANSACTION COMPLYING WITH RULE 144 UNDER THE SECURITIES ACT OR (IV) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IT
BEING UNDERSTOOD THAT AS A CONDITION TO THE REGISTRATION OF TRANSFER OF ANY
SECURITIES, THE COMPANY OR THE TRUSTEE MAY IN CIRCUMSTANCES EITHER OF THEM
BELIEVES APPROPRIATE, REQUIRE EVIDENCE AS TO COMPLIANCE WITH ANY SUCH
EXEMPTION) AND THAT (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OR THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
Each certificate evidencing a Series A Note (and all Series A Notes
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the form set forth on the Forms of Security set forth in Exhibit
A hereto. Prior to any transfer or exchange of a legended Series A Note for a
Series B Note, the Company shall deliver an Officer's Certificate to the
Trustee directing it to transfer or exchange such security for another or
unlegended Note.
Section 2.7 Replacement Securities. If a mutilated Security is
surrendered to the Trustee or if the Holder of a Security claims and submits an
affidavit or other evidence, satisfactory to the Company and Trustee, to the
Trustee to the effect that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
the Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced. The Company and the Trustee may charge such Holder for
its reasonable, out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
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Section 2.8 Outstanding Securities. Securities outstanding at any
time are all the Securities that have been authenticated by the Trustee except
those cancelled by it, those delivered to it for cancellation and those
described in this Section 2.8 as not outstanding. A Security does not cease to
be outstanding because the Company or an Affiliate of the Company holds the
Security, except as provided in Section 2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the 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 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of the Company) holds U.S. Legal Tender or
U.S. Government Obligations sufficient to pay all of the principal and interest
due on the Securities payable on that date, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
Section 2.9 Treasury Securities. In determining whether the Holders
of the required principal amount of Securities have concurred in any direction,
amendment, supplement, waiver or consent, Securities owned by the Company and
its Affiliates shall be disregarded, except that, for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, amendment, supplement, waiver or consent, only Securities that the
Trustee knows or has reason to know are so owned shall be disregarded.
Section 2.10 Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company reasonably
and in good faith considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
so exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as permanent Securities authenticated and
delivered hereunder.
Section 2.11 Cancellation. The Company 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 transfer,
exchange or payment. The Trustee, or at the direction of the Trustee, the
Registrar or the Paying Agent (other than the Company or its Affiliate, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.7, the Company may not issue new Securities
to replace Securities it has paid or delivered to the Trustee for cancellation.
No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this Section 2.11, except as expressly
permitted in the form of Securities and as permitted by this Indenture.
Section 2.12 Interest. On each Interest Payment Date on or after June
30, 2002, the Company shall pay interest on the Notes in cash; provided,
however, that the Company shall not be obligated to make payment of any
installment of interest otherwise coming due on any Interest Payment Date
occurring on or prior to the date on which all principal and interest on the
Senior Notes is paid in full (any such installment of interest being herein
called a "Deferred Installment"), and such Deferred Installment shall not be
deemed to be due and payable hereunder, until, and each such Deferred
Installment shall be due and payable on, the first Business Day occurring after
the date on which all principal and interest on the Senior Notes is paid in
full; and, provided further, that each such Deferred Installment shall bear
interest from its stated Interest Payment Date until paid at the rate of 13
1/4% per annum.
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Note (or one or more predecessor Notes) is registered at the close of
business on the Record Date for such interest.
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Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or
their respective predecessor Securities) are registered at
the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of cash equal to the
aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the
proposed payment, such cash when deposited to be held in
trust for the benefit of the persons entitled to such
Defaulted Interest as provided in this clause (1).
Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and
at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder at his address as it
appears in the Security Register on the 10th day prior to
such Special Record Date. The Trustee may, in its
discretion, in the name and at the expense of the Company,
cause a similar notice to be published at least once in a
newspaper, customarily published in the English language
on each Business Day and of general circulation in the
Borough of Manhattan, The City of New York, but such
publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the
persons in whose names the Securities (or their respective
predecessor Securities) are registered on such Special
Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the
requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to
this clause accompanied by an Opinion of Counsel stating
that the manner of payment complies with this clause, such
manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu
of any other Security shall carry the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Security.
Section 2.13 Computation of Interest. Interest on the Notes and the
Accreted Value will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
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ARTICLE III
REDEMPTION
Section 3.1 Right of Redemption. Redemption of Securities, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article III. The Securities are not
redeemable prior to June 30, 2000, except that, prior to December 31, 1998, the
Company may redeem, at its option, up to $30 million of the Accreted Value of
the Securities at a price equal to 113.250% of the Accreted Value thereof at
the date of redemption, plus accrued and unpaid interest, if any, to the date
of redemption, with certain of the net proceeds of any Public Equity Offering.
In addition, the Company may redeem any or all of the outstanding Securities at
a price of 112.375% of the Accreted Value thereof at the date of redemption,
plus accrued and unpaid interest, if any, to the date of redemption, in the
event of a Major Asset Sale. The Securities may also be redeemed at the
election of the Company, as a whole or from time to time in part, at any time
on or after June 30, 2000, at the applicable Redemption Prices specified in
Paragraph 5 of the form of Note attached as Exhibit A hereto, set forth therein
under the caption "Optional Redemption," in each case, including accrued and
unpaid interest, if any, to the Redemption Date.
Section 3.2 Notices to Trustee. If the Company elects to redeem
Securities pursuant to Paragraph 5 of the Securities, it shall notify the
Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed and whether it wants the Trustee to give notice of
redemption to the Holders.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least 30 days before the Redemption Date (unless a shorter
notice shall be satisfactory to the Trustee).
Section 3.3 Selection of Securities to Be Redeemed. If less than all
of the Securities are to be redeemed pursuant to Paragraph 5 thereof, the
Trustee shall redeem pro rata and in such manner as complies with any
applicable legal and stock exchange requirements.
The Trustee shall make the selection from the Securities outstanding and
not previously called for redemption and shall promptly notify the Company in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 or less may be redeemed only
in whole. The Trustee may select for redemption portions (equal to $1,000 or
any integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption.
Section 3.4 Notice of Redemption. At least 15 days but not more than
60 days before a Redemption Date, the Company shall mail a notice of redemption
by first class mail, postage prepaid, to the Trustee and each Holder whose
Securities are to be redeemed. At the Company's request, the Trustee shall
give the notice of redemption in the Company's name and at the Company's
expense. Each notice for redemption shall identify the Securities to be
redeemed and shall state the following and such other matters as the Trustee
shall deem proper:
(1) the Redemption Date;
(2) the Redemption Price, including, without duplication, the
amount of accrued and unpaid interest to be paid upon such
redemption;
(3) the name, address and telephone number of the Paying
Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent at the address specified in such
notice to collect the Redemption Price;
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(5) that, unless the Company defaults in its obligation to
deposit U.S. Legal Tender with the Paying Agent in
accordance with Section 3.6, interest on Securities called
for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the
Holders of such Securities is to receive payment of the
Redemption Price, including, without duplication, accrued
and unpaid interest, upon surrender to the Paying Agent of
the Securities called for redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion of
the principal amount, equal to $1,000 or any integral
multiple thereof, of such Security that will not be
redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities
in aggregate principal amount equal to the unredeemed
portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion
thereof) to be redeemed, as well as the aggregate
principal amount of such Securities to be redeemed and the
aggregate principal amount of Securities to be outstanding
after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section 3.4
and pursuant to the redemption provisions of Paragraph 5
of the Notes.
Section 3.5 Effect of Notice of Redemption. Once notice of redemption
is mailed in accordance with Section 3.4, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price,
including accrued and unpaid interest. Upon surrender to the Trustee or Paying
Agent, such Securities called for redemption shall be paid at the Redemption
Price, including interest, if any, accrued and unpaid on the Redemption Date;
provided that if the Redemption Date is after a regular Record Date and on or
prior to the Interest Payment Date, the accrued interest shall be payable to
the Holder of the redeemed Securities registered on the relevant Record Date;
and provided, further, that if a Redemption Date is a Legal Holiday, payment
shall be made on the next succeeding Business Day and no interest shall accrue
for the period from such Redemption Date to such succeeding Business Day.
Upon compliance by the Company with the provisions of this Article III,
including but not limited to Section 3.6, interest on the Securities called for
redemption will cease to accrue on and after the Redemption Date, regardless of
whether such Securities are presented for payment.
Section 3.6 Deposit of Redemption Price. On or prior to the
Redemption Date, the Company shall deposit with the Paying Agent (other than
the Company or an Affiliate of the Company) U.S. Legal Tender sufficient to pay
the Redemption Price of, including accrued and unpaid interest on, all
Securities to be redeemed on such Redemption Date (other than Securities or
portions thereof called for redemption on that date that have been delivered by
the Company to the Trustee for cancellation). The Paying Agent shall promptly
return to the Company any U.S. Legal Tender so deposited which is not required
for that purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III, interest on the Securities to be redeemed will
cease to accrue on the applicable Redemption Date, regardless of whether such
Securities are presented for payment. Notwithstanding anything herein to the
contrary, if any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such
payment is made on the unpaid principal and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the rate and in the
manner provided in Section 4.1 and the Security.
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Section 3.7 Securities Redeemed in Part. Upon surrender of a Security
that is to be redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder, without service charge, a new Security
or Securities equal in principal amount to the unredeemed portion of the
Security surrendered.
ARTICLE IV
COVENANTS
Section 4.1 Payment of Securities. The Company shall pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities. An installment of principal of or interest on the
Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company or an Affiliate of the Company) holds for
the benefit of the Holders, on or before 11:00 a.m. Houston, Texas time on that
date, U.S. Legal Tender deposited and designated for and sufficient to pay the
installment; provided, however, that U.S. Legal Tender held by the Trustee or
Paying Agent after receipt of notice provided for in Section 12.3 and for the
benefit of holders of Senior Debt pursuant to the provisions of Article XII
hereof shall not be considered to be designated for the payment of any
installment of principal of or interest on the Securities within the meaning of
this Section 4.1. The making of such payments shall be subject to the
provisions of Article XII; provided that the failure to make a payment on
account of principal of or interest on the Securities by reason of any
provision of Article XII shall not be construed as preventing the occurrence of
a Default or an Event of Default under Section 6.1.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
Notwithstanding anything to the contrary contained in this Indenture,
the Company or the Trustee may, to the extent required by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal, premium or interest payments on the Securities.
Section 4.2 Maintenance of Office or Agency. The Company shall
maintain in the Borough of Manhattan in the City of New York, New York, an
office or agency where Securities may be presented or surrendered for payment,
where Securities may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prior
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the address of the Trustee set forth in Section 14.2.
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, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan in the City of New York, New York, for such purposes. The
Company shall give prior written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency. The Company hereby initially designates the corporate trust office of
the Trustee in the Borough of Manhattan in the City of New York, New York, as
such office of the Company.
Section 4.3 Limitation on Restricted Payments. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, make
any dividend or other distribution on shares of Capital Stock of the Company or
a Subsidiary of the Company or make any payment on account of the purchase,
redemption, or other acquisition or retirement for value of any such shares of
Capital Stock (except to the Company or any of its Subsidiaries) unless such
dividends, distributions or payments are made in cash or Qualified Capital
Stock or a combination thereof. In addition, the Company shall not, and the
Company shall not permit any of its Subsidiaries
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to make, directly or indirectly, any Restricted Payment, if, at the time or
after giving effect thereto on a pro forma basis, (a) the Consolidated Fixed
Charge Coverage Ratio does not exceed 3.5 to 1, (b) the Company's Adjusted
Consolidated Net Tangible Assets are not equal to or greater than 150% of the
total consolidated principal amount of Debt of the Company and its
Subsidiaries, (c) a Default or an Event of Default would occur or be
continuing, or (d) the aggregate amount of all Restricted Payments made by the
Company and its Subsidiaries, including such proposed Restricted Payment (if
not made in cash, then the fair market value of any property used therefor)
from and after the Issue Date and on or prior to the date of such Restricted
Payment, shall exceed the sum of (i) 25% of Consolidated Net Income of the
Company accrued for the period (taken as one accounting period), commencing
with the first full fiscal quarter that commenced after the Issue Date, to and
including the fiscal quarter ended immediately prior to the date of each
calculation (or, in the event Consolidated Net Income for such period is a
deficit, then minus 100% of such deficit), minus (ii) 100% of the amount of any
write-downs, write-offs, other negative reevaluations and other negative
extraordinary charges not otherwise reflected in Consolidated Net Income of the
Company during such period, plus (iii) the aggregate Net Cash Proceeds received
by the Company from the issuance or sale (other than to a Subsidiary of the
Company) of its Qualified Capital Stock from and after the Issue Date and on or
prior to the date of such Restricted Payment.
Nothing in this Section 4.3 shall prohibit the payment of any dividend
(A) within 60 days after the date of its declaration if such dividend could
have been made on the date of its declaration in compliance with the foregoing
provisions, (B) with the Net Cash Proceeds received by the Company from a
concurrent issuance or sale (other than to a Subsidiary of the Company) of its
Qualified Capital Stock, or (C) by TTC or a Subsidiary formed by TTC in
accordance with clause (a)(i)(b) of Section 4.14 so long as TTC or such
Subsidiary is not engaged in any business activity other than that of TTC as of
the date hereof; and, in each such case, no Default or Event of Default shall
have occurred and be continuing. The date of such payment and all such
payments expended in clauses (A) through (C) shall be counted for purposes of
computing amounts expended in clause (d) of the immediately preceding
paragraph.
Section 4.4 Corporate Existence. Subject to Article V, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate or other existence
of each of its Subsidiaries in accordance with the respective organizational
documents of each of them and the rights (charter and statutory) and corporate
franchises of the Company and each of its Subsidiaries; provided, however, that
the Company shall not be required to preserve, with respect to itself, any
right or franchise, and with respect to any of its Subsidiaries, any such
existence, right or franchise, if (a) 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 (b) the loss thereof is not
disadvantageous in any material respect to the Holders.
Section 4.5 Payment of Taxes and Other Claims. The Company shall, and
shall cause each of its Subsidiaries to, pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon the Company
or any of its Subsidiaries or any of their respective properties and assets and
(ii) all lawful claims, whether for labor, materials, supplies, services or
anything else, which have become due and payable and which by law have or may
become a Lien upon the property and assets of the Company or any of its
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which disputed amounts adequate
reserves have been established in accordance with GAAP.
Section 4.6 Maintenance of Properties and Insurance.
(a) The Company shall cause the properties used or useful to the
conduct of its business and the business of each of its Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable
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 its reasonable judgment may be necessary, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
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(b) The Company will maintain with financially sound and reputable
insurers insurance with respect to its properties and business against such
casualties and contingencies as shall be in accordance with general practices
of businesses engaged in similar activities in similar geographic areas. Such
insurance shall be in such minimum amounts that the Company will not be deemed
a co-insurer under applicable insurance laws, regulations and policies.
Without limiting the foregoing, the Company will (i) keep all of its physical
property insured with hazard insurance on an "all risks" basis, with broad form
flood and earthquake coverages and electronic data processing coverage, with a
full replacement cost endorsement and an "agreed amount" clause in an amount
equal to 100% of the full replacement cost of such property, (ii) maintain all
such workers' compensation or similar insurance as may be required by law and
(iii) maintain, in amounts and with deductibles equal to those generally
maintained by businesses engaged in similar activities in similar geographic
areas, general public liability insurance against claims of bodily injury,
death or property damage occurring on, in or about the properties of the
Company.
All policies of insurance shall provide for at least fifteen days' prior
written cancellation notice to the Trustee. In the event of failure by the
Company to provide and maintain insurance as herein provided, the Trustee may,
at its option, provide such insurance and charge the amount thereof to the
Company. The Company shall furnish the Trustee with certificates of insurance
and policies evidencing compliance with the foregoing insurance provision.
Section 4.7 Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee within 60 days after the
end of each of its fiscal quarters, or 90 days after the end of a fiscal
quarter that is also the end of a fiscal year, an Officers' Certificate
complying with Section 314(a)(4) of the TIA and stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
quarter has been made under the supervision of the signing Officers with a view
to determining whether the Company and its Subsidiaries have kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, regardless of
whether the signer knows of any failure by the Company or any Subsidiary of the
Company to comply with any conditions or covenants in this Indenture, or of the
occurrence of any Default, and, if such signor does know of such a failure to
comply or Default, the certificate shall describe such failure or Default with
particularity.
(b) The Company shall deliver to the Trustee within 90 days after the
end of each of its fiscal years a written report of a firm of independent
certified public accountants with an established national reputation stating
that in conducting their audit for such fiscal year, nothing has come to their
attention that caused them to believe that the Company or any Subsidiary of the
Company was not in compliance with the provisions set forth in Section 4.3,
4.10, 4.11 or 4.14.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, immediately upon becoming aware of any
Default or Event of Default under this Indenture, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto. The Trustee shall not be
deemed to have knowledge of a Default or an Event of Default unless one of its
trust officers receives notice of the Default giving rise thereto from the
Company or any of the Holders.
(d) The Company shall deliver to the Trustee an Officers' Certificate
specifying any changes in the composition of the Board of Directors of the
Company or any of its Subsidiaries or of any amendment to the charter or bylaws
of the Company or any of its Subsidiaries. The Officers' Certificate shall
include a description in reasonable detail of such amendment or change and an
explanation why such amendment or change does not constitute a Default or Event
of Default.
Section 4.8 SEC Reports. The Company shall deliver to the Trustee and
each Holder, within 15 days after it files the same with the SEC, copies of all
reports and information (or copies of such portions of any of the foregoing as
the SEC may by rules and regulations prescribe), if any, which the Company is
required to file with the
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SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company agrees to
continue to be subject to and comply with the filing and reporting requirements
of the Commission as long as any of the Notes are outstanding.
Concurrently with the reports delivered pursuant to the preceding
paragraph, the Company shall deliver to the Trustee and to each Holder annual
and quarterly financial statements with appropriate footnotes of the Company
and its Subsidiaries, all prepared and presented in a manner substantially
consistent with those of the Company required by the preceding paragraph. The
Company shall also comply with the other provisions of TIA Section 314(a).
Section 4.9 Limitation on Status as Investment Company or Public
Utility Company. The Company shall not, and shall not permit any of its
Subsidiaries to, become an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or a "holding company," or "public
utility company" (as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended) or otherwise become subject to regulation
under the Investment Company Act or the Public Utility Holding Company Act.
Section 4.10 Limitation on Transactions with Related Persons.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, enter directly or indirectly into, or permit to exist, any
transaction or series of related transactions with any Related Person
(including, without limitation: (i) the sale, lease, transfer or other
disposition of properties, assets or securities to such Related Person, (ii)
the purchase or lease of any property, assets or securities from such Related
Person, (iii) an Investment in such Related Person, and (iv) entering into or
amending any contract or agreement with or for the benefit of a Related Person
(each, a "Related Person Transaction")), except for (A) permitted Restricted
Payments, (B) transactions made in good faith, the terms of which are (x) fair
and reasonable to the Company or such Subsidiary, as the case may be, and (y)
at least as favorable as the terms which could be obtained by the Company or
such Subsidiary, as the case may be, in a comparable transaction made on an
arm's length basis with Persons who are not Related Persons, (C) transactions
between the Company and any of its Wholly Owned Subsidiaries or transactions
between Wholly Owned Subsidiaries of the Company, (D) transactions pursuant to
the Services Agreement, the Transfer Agreement and the Tax Allocation
Agreement, (E) the lease of office space to the Company by TransAmerican or an
Affiliate of TransAmerican, provided that payments thereunder do not exceed
$1,000,000 per year, and (F) any employee compensation arrangement in an amount
which together with the amount of all other cash compensation paid to such
employee by the Company and its Subsidiaries does not provide for cash
compensation in excess of $1,000,000 in any fiscal year of the Company or any
Subsidiary and which has been approved by a majority of the Company's
Independent Directors and found in good faith by such directors to be in the
best interests of the Company or such Subsidiary, as the case may be; provided
further, however, that such $1,000,000 limitation shall not apply to Michael D.
Greenlee with respect to the 1% overriding royalty interest assigned or
assignable to him pursuant to any agreement in effect on the Issue Date.
(b) Without limiting the foregoing, (i) with respect to any Related
Person Transaction or series of related Related Person Transactions (other than
any Related Person Transaction described in clause (C) or (D) of Section
4.10(a)) with an aggregate value in excess of $1,000,000, such transaction must
first be approved by a majority of the Board of Directors of the Company and a
majority of the directors of the Company who are disinterested in the
transaction pursuant to a Board Resolution, as (x) fair and reasonable to the
Company or such Subsidiary, as the case may be, and (y) on terms which are at
least as favorable as the terms that could be obtained by the Company or such
Subsidiary, as the case may be, on an arm's length basis with Persons who are
not Related Persons, and (ii) with respect to any Related Person Transaction or
series of related Related Person Transactions (other than any Related Person
Transaction described in clause (C), (D), (E) or (F) of Section 4.10(a)) with
an aggregate value in excess of $5,000,000, the Company must first obtain a
favorable written opinion as to the fairness of such transaction to the Company
or such Subsidiary, as the case may be, from a financial point of view, from a
"big 6 accounting firm" or a nationally recognized investment banking firm;
provided that such opinion shall not be necessary (1) if approval of the Board
of Directors to such Related Person Transaction has been obtained after receipt
of bona fide bids of at least two other independent parties and such Related
Person Transaction is in the ordinary course of business or (2) with respect to
Investments in Unrestricted Subsidiaries of the Company that, in the aggregate,
do not exceed $25,000,000.
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Section 4.11 Limitation on Incurrences of Additional Debt and Issuances
of Disqualified Capital Stock. Except as set forth in this Section 4.11, from
and after the Issue Date, the Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume, guarantee
or otherwise become liable for, contingently or otherwise (to "Incur" or, as
appropriate, an "Incurrence"), any Debt or issue any Disqualified Capital Stock
(other than Capital Stock of a Subsidiary of the Company issued to the Company
or a Wholly Owned Subsidiary of the Company), except (a) Debt evidenced by the
Notes pursuant to the Indenture; (b) Debt evidenced by the Senior Notes; (c)
Subordinated Debt of the Company solely to any Wholly Owned Subsidiary of the
Company, or Debt of any Wholly Owned Subsidiary of the Company solely to the
Company or to any Wholly Owned Subsidiary of the Company, provided that neither
the Company nor any Subsidiary of the Company shall become liable, pursuant to
such Debt, to any person other than the Company or another Wholly Owned
Subsidiary of the Company; (d) Debt not in excess of (i) $90,000,000 in
aggregate principal amount at any time outstanding plus (ii) interest, fees,
expenses and like charges Incurred in connection with such Debt that (x) is
Incurred by a Subsidiary of the Company in connection with the acquisition or
construction of pipeline systems and, together with all such other Debt
Incurred pursuant to this clause (x), does not exceed $25,000,000 in aggregate
principal amount at any time outstanding, or (y) is Incurred by the Company;
(e) any guaranty of Debt permitted by clause (d) of this paragraph, (f) Debt of
the Company secured by a Permitted Lien that meets the requirements of clause
(d), (k), (l) or (o) of the definition of "Permitted Liens"; (g) Debt of the
Company or any of its Subsidiaries Incurred in connection with Permitted
Hedging Transactions, provided, that, at the time of such Incurrence and after
giving effect to such Incurrence, the aggregate amount of Debt outstanding with
respect to margin obligations, reimbursement obligations and letters of credit
issued in connection therewith does not exceed the greater of (i) $50,000,000
or (ii) 10% of the SEC PV10 indicated on the Company's most recent Reserve
Report; (h) Unrestricted Non-Recourse Debt; (i) obligations under guarantees of
the Debt of Unrestricted Subsidiaries of the Company which, together with all
Permitted Investments in Unrestricted Subsidiaries of the Company, do not
exceed $25,000,000; (j) the Company may Incur Debt as an extension, renewal,
replacement, or refunding of any of the Debt permitted to be Incurred by
clauses (a), (b) or (d) above, or this clause (j) (such Debt is collectively
referred to as "Refinancing Debt"), provided, that (1) the maximum principal
amount of Refinancing Debt (or, if such Refinancing Debt does not require cash
payments prior to maturity, the original issue price of such Refinancing Debt)
permitted under this clause (j) may not exceed the lesser of (x) the principal
amount of the Debt being extended, renewed, replaced, or refunded plus
reasonable financing fees and other associated reasonable out-of-pocket
expenses other than those paid to a Related Person (collectively, "Refinancing
Fees"), or (y) if such Debt being extended, renewed, replaced, or refunded was
issued at an original issue discount, the original issue price, plus
amortization of the original issue discount as of the time of the Incurrence of
the Refinancing Debt plus Refinancing Fees, (2) the Refinancing Debt has a
Weighted Average Life and a final maturity that is equal to or greater than the
Debt being extended, renewed, replaced, or refunded at the time of such
extension, renewal, replacement, or refunding, and (3) the Refinancing Debt
shall rank with respect to the Notes to an extent no less favorable in respect
thereof to the Holders than the Debt being refinanced; (k) Debt represented by
trade payables or accrued expenses, in each case incurred on normal, customary
terms in the ordinary course of business, not overdue for a period of more than
60 days (or, if overdue for a period of more than 60 days, being contested in
good faith and by appropriate proceedings and adequate reserves with respect
thereto being maintained on the books of the Company in accordance with GAAP)
and not constituting any amounts due to banks or other financial institutions;
and (l) the Company may enter into an agreement for the Presale of Gas for cash
if the net proceeds from such sale are used to repay Senior Debt or make an
Offer to Purchase pursuant to Section 4.14, as though the Accumulated Amount
has exceeded $20,000,000 by the amount of the net proceeds from such sale. For
the purpose of determining the amount of outstanding Debt that has been
Incurred pursuant to clause (a), (b) or (d) above, there shall be included in
each such case the principal amount then outstanding of any Debt originally
Incurred pursuant to such clause and, after any refinancing or refunding of
such Debt, any outstanding Debt Incurred pursuant to clause (j) above so as to
refinance or refund such Debt Incurred pursuant to clause (a), (b) or (d) and
any subsequent refinancings or refundings thereof.
Notwithstanding the foregoing provisions of this covenant, the Company
may Incur Senior Debt if, at the time such Senior Debt is Incurred, (i) no
Default or Event of Default shall have occurred and be continuing at the time
or immediately after giving effect to such transaction on a pro forma basis and
(ii) immediately after giving effect to the Consolidated Interest Expense in
respect of such Debt being Incurred and the application of the proceeds
therefrom
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to the extent used to reduce Debt, on a pro forma basis, the Consolidated Fixed
Charge Coverage Ratio of the Company for the Reference Period is greater than 4
to 1 and (iii) the Company's Adjusted Consolidated Tangible Assets are equal to
or greater than 175% of the total consolidated principal amount of Debt of the
Company and its Subsidiaries; and (2) Subordinated Debt if, at the time such
Subordinated Debt is incurred, (i) no Default or Event of Default shall have
occurred and be continuing at the time or immediately after giving effect to
such transaction on a pro forma basis, (ii) immediately after giving effect to
the Consolidated Interest Expense in respect of Subordinated Debt being
incurred and the application of the proceeds therefrom to the extent used to
reduce Debt, on a pro forma basis, the Consolidated Fixed Charge Coverage Ratio
of the Company for the Reference Period is greater than 3 to 1, and (iii) the
Company's Adjusted Consolidated Tangible Assets are equal to or greater than
150% of the total consolidated principal amount of Debt of the Company and its
Subsidiaries.
Debt Incurred and Disqualified Capital Stock issued by any Person that
is not a Subsidiary of the Company, which Debt or Disqualified Capital Stock is
outstanding at the time such Person becomes, or is merged into, or consolidated
with, the Company or a Subsidiary of the Company shall be deemed to have been
Incurred or issued, as the case may be, at the time such Person becomes, or is
merged into, or consolidated with the Company or a Subsidiary of the Company.
For the purpose of determining compliance with this covenant, (A) if an
item of Debt meets the criteria of more than one of the types of Debt described
in the above clauses, the Company shall have the right to determine in its sole
discretion the category to which such Debt applies and shall not be required to
include the amount and type of such Debt in more than one of such categories
and (B) the amount of any Debt which does not pay interest in cash or which was
issued at a discount to face value shall be deemed to be equal to the amount of
the liability in respect thereof determined in accordance with GAAP.
Section 4.12 Limitations on Restricting Subsidiary Dividends. The
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, assume or suffer to exist any consensual encumbrance or
restriction on the ability of any Subsidiary of the Company to pay dividends or
make other distributions on the Capital Stock of any Subsidiary of the Company
or pay any obligation to the Company or any of its Subsidiaries or otherwise
transfer assets or make or pay loans or advances to the Company or any of its
Subsidiaries, except encumbrances and restrictions existing under any agreement
of a Person acquired by the Company or a Subsidiary of the Company, which
restrictions existed at the time of acquisition, were not put in place in
anticipation of such acquisition and are not applicable to any Person or
property, other than the Person or any property of the Person so acquired.
Section 4.13 Limitation on Liens. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, Incur, or suffer to
exist any Lien upon any of its property or assets, whether now owned or
hereafter acquired unless the Notes are equally and ratably secured by such
assets, other than (a) Permitted Liens and (b) Liens securing Senior Debt that
is described in clauses (i), (ii) and/or (iii) of the definition of the term
"Senior Debt." For the purpose of determining compliance with this Section
4.13, if a Lien meets the criteria of more than one of the types of Permitted
Liens, the Company shall have the right to determine in its sole discretion the
category of Permitted Lien to which such Lien applies and shall not be required
to include such Lien in more than one of such categories.
Section 4.14 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale, unless (A) an amount equal to the
Net Cash Proceeds therefrom is applied as follows: (1) if the agreements under
which any Senior Debt is issued require such Net Cash Proceeds to be applied to
the repayment of all or a portion of the principal amount of such Senior Debt,
together with accrued and unpaid interest thereon, such Net Cash proceeds shall
be applied to the extent required, (2) if the Company so elects, and to the
extent not used pursuant to clause (1) or (3) of this paragraph, such Net Cash
Proceeds may be used to permanently retire all or a portion of the principal
amount of Senior Debt, together with accrued and unpaid interest thereon, not
required to be repaid pursuant to clause (1) of this paragraph, and (3) all Net
Cash Proceeds not applied in accordance with clauses (1) and (2) of
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this paragraph shall be used either (x) to repurchase Notes pursuant to an
Offer to Purchase, (y) to make cash payments in the ordinary course of business
and consistent with past practices that are not otherwise prohibited by this
Indenture, provided that the aggregate amount so used pursuant to this clause
(y) from and after the Issue Date does not exceed $50,000,000 (excluding
amounts used to acquire any Capital Assets in accordance with clause (z) below)
or (z) provided that the Company's most recent Reserve Report indicates that
the Company, after giving effect to the Asset Sale and to the addition of
proved reserves associated with any Exchange Assets acquired in connection with
such Asset Sale, has proved reserves at least equal to 200 Bcfe of natural gas
or with an SEC PV10 of at least $150,000,000, to acquire Capital Assets for use
in a Related Business within 180 days after the date of such Asset Sale, and
(B) in the case of any Asset Sale or series of related Asset Sales for total
proceeds in excess of $5,000,000, at least 85% of the value of the
consideration for such Asset Sale consists of cash, Exchange Assets or
Permitted Capital Stock or any combination thereof. Notwithstanding the
foregoing provisions of this Section 4.14:
(i) (a) any Subsidiary of the Company may convey, sell,
lease, transfer, or otherwise dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to the Company or a
Wholly Owned Subsidiary of the Company, and (b) TTC may transfer
its assets or a portion thereof to a newly created Wholly Owned
Subsidiary of the Company or TTC and, so long as TTC or such
Subsidiary is not engaged in any business or activity other than
that of TTC as of the date of the Indenture, either the Company,
TTC or such Subsidiary may sell Qualified Capital Stock of TTC or
such Subsidiary, provided, in either case, that (x) the Company
continues to own, directly or indirectly, Capital Stock of such
Subsidiary representing (A) at least a majority of the equity
interest in such Subsidiary and (B) the power to elect or direct
the election of a majority of the directors or other governing
body of such Subsidiary and (y) the Company uses an amount equal
to the net proceeds of such sale of assets or Capital Stock for
one of the purposes specified in the first sentence of this
paragraph;
(ii) the Company and its Subsidiaries may engage in
Asset Sales in the ordinary course of business and on ordinary
business terms;
(iii) the Company and its Subsidiaries may engage in
Asset Sales not otherwise permitted in clause (i), (ii), (iv),
(v) or (vi), provided that the aggregate proceeds from all such
Asset Sales do not exceed $2,000,000 in any twelve-month period;
(iv) the Company may engage in Asset Sales pursuant to
and in accordance with the provisions of Article V;
(v) the Company and its Subsidiaries may sell, lease,
transfer, abandon or otherwise dispose of (a) damaged, worn out,
or other obsolete property in the ordinary course of business or
(b) other property no longer necessary for the proper conduct of
their business; and
(vi) the Company and its Subsidiaries may engage in
Asset Sales (a)(x) in connection with the settlement of
litigation or (y) the proceeds of which are used in connection
with the settlement of litigation, provided, that the aggregate
amount so used pursuant to this clause (vi)(a) from and after the
Issue Date shall not exceed $15,000,000, or (b) to pay interest
on the Senior Notes or the Notes.
For purposes of this Section 4.14, "Net Cash Proceeds" means the
aggregate amount of cash received by the Company and its Subsidiaries in
respect of an Asset Sale (other than those that constitute a Change of Control
and those expressly permitted in clauses (i) through (vi) above), less the sum
of (a) all reasonable out-of-pocket fees, commissions and other expenses
incurred in connection with such Asset Sale, including the amount (estimated in
good faith by the Company) of income, franchise, sales and other applicable
taxes required to be paid by the Company or any Subsidiary of the Company in
connection with such Asset Sale and (b) the aggregate amount of cash so
received
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which is used to retire any then existing Debt of the Company or its
Subsidiaries (other than the Securities), as the case may be, which is required
by the terms of such Debt to be repaid in connection with such Asset Sale.
The aggregate amount of Net Cash Proceeds (including any cash as and
when received from the proceeds of any property which itself was acquired in
consideration of an Asset Sale) not timely used for the purposes permitted by
this Section 4.14(a) and within the time provided by this Section 4.14(a) shall
be referred to as the "Accumulated Amount".
(b) For the purposes of this Section 4.14, "Minimum Accumulation
Date" means each date on which the Accumulated Amount exceeds $20,000,000. Not
later than 20 Business Days after the Minimum Accumulation Date the Company
shall make an irrevocable, unconditional offer (an "Offer to Purchase") to the
Holders to purchase, on a pro rata basis, Notes having a principal amount (the
"Offer Amount") equal to the Accumulated Amount, at a purchase price (the
"Offer Price") equal to 100% of the Accreted Value thereof, plus accrued but
unpaid interest, if any, to, and including, the date the Notes tendered are
purchased and paid for in accordance with this Section 4.14, which date shall
be no later than 25 Business Days after the first date on which the Offer to
Purchase is required to be made (the "Purchase Date"). Notice of an Offer to
Purchase shall be sent, at least 20 Business Days prior to the close of
business on the Final Put Date (as defined below), by first-class mail, by the
Company to each Holder at its registered address, with a copy to the Trustee.
The notice to the Holders shall contain all information, instructions and
materials required by applicable law or otherwise material to such Holders'
decision to tender Notes pursuant to the Offer to Purchase. The notice, which
shall govern the terms of the Section 4.14 Offer, shall state:
(1) that the Offer to Purchase is being made pursuant to such
notice and this Section 4.14;
(2) the Offer Amount, the Offer Price (including the amount of
accrued and unpaid interest), the Final Put Date, and the
Purchase Date, which Purchase Date shall be on or prior to
forty Business Days following the Minimum Accumulation
Date;
(3) that any Note or portion thereof not tendered or accepted
for payment will continue to accrue interest if interest
is then accruing;
(4) that, unless the Company defaults in depositing U.S. Legal
Tender with the Paying Agent in accordance with the last
paragraph of this clause (b) or such payment is otherwise
prevented, any Note, or portion thereof, accepted for
payment pursuant to the Offer to Purchase shall cease to
accrue interest after the Purchase Date;
(5) that Holders electing to have a Note, or portion thereof,
purchased pursuant to an Offer to Purchase will be
required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent (which may not for
purposes of this Section 4.14, notwithstanding any other
provision of this Indenture, be the Company or any
Affiliate of any of them) at the address specified in the
notice prior to the close of business on the third
Business Day prior to the Purchase Date (the "Final Put
Date");
(6) that Holders will be entitled to withdraw their elections,
in whole or in part, if the Paying Agent receives, prior
to the close of business on the Final Put Date, a
telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the
Notes the Holder is withdrawing and a statement containing
a facsimile signature that such Holder is withdrawing his
election to have such principal amount of Notes purchased;
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(7) that if Notes in a principal amount in excess of the
principal amount of Notes to be acquired pursuant to the
Offer to Purchase are tendered and not withdrawn, the
Company shall purchase Notes on a pro rata basis (with
such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
(8) that Holders whose Notes were purchased only in part will
be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; and
(9) the circumstances and relevant facts regarding such Asset
Sales.
Any such Offer to Purchase shall comply with all applicable provisions
of Federal and state laws, including those regulating tender offers, if
applicable, and any provisions of this Indenture that conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
On or before a Purchase Date, the Company shall (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Offer to Purchase
on or prior to the close of business on the Final Put Date (on a pro rata basis
if required pursuant to paragraph (7) above), (ii) deposit with the Paying
Agent U.S. Legal Tender sufficient to pay the Offer Price for all Notes or
portions thereof so accepted and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate setting forth the Notes or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail
or deliver to Holders of Notes so accepted payment in an amount equal to the
Offer Price for such Notes, and the Trustee shall promptly authenticate and
mail or deliver to such Holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered. Any Notes not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company will publicly announce the results of the Offer to Purchase on or as
soon as practicable after the Purchase Date.
(c) If the amount required to acquire all Notes tendered by Holders
pursuant to the Offer to Purchase (the "Acceptance Amount") shall be less than
the Offer Amount, the excess of the Offer Amount over the Acceptance Amount may
be used by the Company for general corporate purposes without restriction,
unless otherwise restricted by the other provisions of this Indenture. Upon
consummation of any Offer to Purchase made in accordance with the terms of this
Section 4.14, the Accumulated Amount as of the Minimum Accumulation Date shall
be reduced to zero and accumulations thereof shall be deemed to recommence from
the day next following such Minimum Accumulation Date.
Section 4.15 Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it 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 or extension law or any usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of 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 it may
lawfully do so) the Company 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.
It is the intention of the parties hereto to comply strictly with
applicable usury laws; accordingly, notwithstanding any provision to the
contrary in this Indenture or in any of the documents securing the payment of
the Securities or otherwise relating thereto, in no event shall this Indenture
or such documents require or permit the payment, charging, taking, reserving,
or receiving of any sums constituting interest under applicable laws which
exceed the maximum amount permitted by such laws. If any such excess interest
is contracted for, charged, taken, reserved, or received in connection with the
Securities or in any of the documents securing the payment thereof or otherwise
relating thereto, or in any communication by the Holders or any other person to
the Company or any other person, or in the event all or part of the principal
or interest on the Notes shall be prepaid or accelerated, so that under
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any of such circumstances or under any other circumstance whatsoever the amount
of interest contracted for, charged, taken, reserved, or received on the amount
of principal actually outstanding from time to time under the Notes shall
exceed the maximum amount of interest permitted by applicable usury laws, then
in any such event it is agreed as follows: (i) the provisions of this
paragraph shall govern and control, (ii) any such excess shall be deemed an
accidental and bona fide error and canceled automatically to the extent of such
excess, and shall not be collected or collectible, (iii) any such excess which
is or has been paid or received notwithstanding this paragraph shall be
credited against the then unpaid principal balance on the Notes or refunded to
the Company, at the Holders' option, and (iv) the effective rate of interest
shall be automatically reduced to the maximum lawful rate allowed under
applicable laws as construed by courts having jurisdiction hereof or thereof.
Without limiting the foregoing, all calculations of the rate of interest
contracted for, charged, taken, reserved, or received in connection herewith
which are made for the purpose of determining whether such rate exceeds the
maximum lawful rate shall be made to the extent permitted by applicable laws by
amortizing, prorating, allocating and spreading during the period of the full
term of the Notes, including all prior and subsequent renewals and extensions,
all interest at any time contracted for, charged, taken, reserved, or received.
The terms of this paragraph shall be deemed to be incorporated in every
document, security instrument, and communication relating to this Indenture and
the Securities.
Section 4.16 Limitation on Ranking of Future Debt. The Company shall
not, directly or indirectly, incur, create, or suffer to exist any Debt which
is contractually subordinate or junior in right of payment (to any extent) to
any Debt of the Company and which is not expressly by the terms of the
instrument creating such Debt made pari passu with, or subordinated and junior
in right of payment to, the Notes.
Section 4.17 Restriction on Sale and Issuance of Subsidiary Stock. The
Company shall not sell, and shall not permit any of its Subsidiaries to, issue
or sell, any shares of Capital Stock of any Subsidiary of the Company to any
Person other than the Company or a Wholly Owned Subsidiary of the Company,
except that either the Company or TTC (or, if TTC has transferred its assets or
a portion thereof to a newly created Wholly Owned Subsidiary of the Company or
TTC, such Subsidiary) may sell Qualified Capital Stock of TTC or of such
Subsidiary; provided that (i) TTC (or such Subsidiary) is not engaged in any
business or activity other than that of TTC as of the date hereof, (ii) the
Company continues to own Capital Stock of TTC (or such Subsidiary) representing
(x) at least a majority of the equity interest in TTC and (y) the voting power,
under ordinary circumstances, to elect the directors of TTC, and (iii) the
Company uses and amount equal to the net proceeds of such sale for one of the
purposes specified in the first sentence of Section 4.14.
Section 4.18 Limitations on Line of Business. Neither the Company nor
any of its Subsidiaries shall directly or indirectly engage to any substantial
extent in any line or lines of business activity other than a Related Business.
Section 4.19 Separate Existence and Formalities. The Company hereby
covenants and agrees that:
(a) the Company's and its Subsidiaries' funds and other assets will
not be commingled with those of TransAmerican, other than pursuant to the
Services Agreement;
(b) all actions taken by the Company and its Subsidiaries will be
taken pursuant to authority granted by the Board of Directors of the Company
and its Subsidiaries, to the extent required by law or the Company's and its
Subsidiaries' Certificate of Incorporation or By-laws;
(c) the Company and its Subsidiaries will maintain records and books
of account separate from those of TransAmerican in accordance with generally
accepted accounting principles;
(d) the Company and its Subsidiaries will conduct their business at
an office or offices that are identifiably segregated from the offices of
TransAmerican;
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(e) the Company and its Subsidiaries will conduct their business
solely in their own name and will not knowingly or negligently mislead any
other Person as to the identity or authority of the Company and its
Subsidiaries;
(f) all oral and written communications of the Company and its
Subsidiaries, including, without limitation, letters, invoices, purchase
orders, contracts, statements and applications, will be made solely in the name
of the Company and its Subsidiaries;
(g) the Company and its Subsidiaries will provide for all of its
operating expenses and liabilities from its own separate funds;
(h) the Company and its Subsidiaries will maintain correct minutes of
the meetings and other corporate proceedings of the owners of its capital stock
and the Board of Directors and otherwise comply with requisite corporate
formalities required by law;
(i) except as set forth in the Tax Allocation Agreement, the Services
Agreement and the Transfer Agreement, the Company will not hold itself out or
knowingly permit itself to be held out as having agreed to pay or as being
liable for any indebtedness of TransAmerican; and
(j) each of the Company and TTC will take full advantage of the
rights and privileges under the Transfer Agreement, and neither the Company nor
TTC will amend the Transfer Agreement in a manner adverse to the Holders, the
Company or TTC.
Section 4.20 Limitation on Capital Expenditures. If the Company's
Working Capital, as of the end of any fiscal quarter, is less than $20 million,
then the Company's Capital Expenditures for the next succeeding fiscal quarter
may not exceed 90% of (a) the Company's Consolidated EBITDA for such prior
fiscal quarter minus (b) the Company's Consolidated Fixed Charges for such
prior fiscal quarter.
Section 4.21 Limitation on Assets Held by Nominees. Within 270 days
of the acquisition of any Nominee Property by any Nominee, the Company and its
Subsidiaries shall cause such Nominee to assign and transfer to the Company or
any such Subsidiary all of such Nominee's right, title and interest in and to
such Nominee Property.
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1 When the Company May Merge, Etc.
(a) The Company shall not consolidate with or merge with or into any
other Person, or, directly or indirectly, sell, lease, assign, transfer or
convey all or substantially all of its assets (computed on a consolidated
basis), to another Person or group of Affiliated Persons, whether in a single
transaction or through a series of related transactions, unless:
(1) either (a) the Company shall be the continuing Person, or (b) the
Person (if other than the Company) formed by such consolidation
or into which the Company is merged or to which all or
substantially all of the properties and assets of the Company are
transferred as an entirety or substantially as an entirety (the
Company or such other Person being hereinafter referred to as the
"Surviving Person") shall be a corporation or partnership
organized and validly existing under the laws of the United
States, any State thereof or the District of Columbia, and shall
expressly assume, by an indenture supplemental hereto, executed
and delivered to the Trustee on or prior to the consummation of
such transaction, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this
Indenture;
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(2) on a pro forma consolidated basis, immediately after giving
effect to such transaction and the assumption of the obligations
contemplated by clause (1), above, and the incurrence or
anticipated incurrence of any Debt or Disqualified Capital Stock
to be incurred or issued in connection therewith, the (x)
Adjusted Consolidated Tangible Assets less the total consolidated
principal amount of Debt (to the extent not deducted in
determining Adjusted Consolidated Tangible Assets) of the
Surviving Person is at least equal to the Adjusted Consolidated
Tangible Assets less the total consolidated principal amount of
Debt (to the extent not deducted in determining Adjusted
Consolidated Tangible Assets) of the Company and its Subsidiaries
immediately prior to such transaction and (y) the Surviving
Person could incur $1.00 of additional Debt pursuant to the
second paragraph of Section 4.11;
(3) immediately before and on a pro forma basis immediately after
giving effect to such transaction and the assumption of the
obligations as set forth in clause (1), above, and the incurrence
or issuance or anticipated incurrence or issuance of any Debt to
be incurred or Disqualified Capital Stock to be issued in
connection therewith, no Default or Event of Default shall exist
or shall occur;
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation,
merger, assignment, or transfer and such supplemental indenture
comply with this Article V and that all conditions precedent
herein provided relating to such transaction have been satisfied;
and
(5) at the time or within 120 days after such transaction, the Notes
have not been or are not downgraded by Standard & Poor's
Corporation, Inc., Moody's Investors Service, Inc. or any
successor rating agencies to either entity to a rating below that
which existed immediately prior to the time such transaction is
publicly announced.
Notwithstanding the foregoing, any Subsidiary with a net worth (net
worth being the sum of the par or stated value of capital stock outstanding of
such Subsidiary and additional paid-in capital plus retained earnings (or minus
accumulated deficit) of such Subsidiary, determined in accordance with
generally accepted accounting principles, except that there shall be excluded
any amounts attributable to Disqualified Capital Stock of such Subsidiary)
greater than zero, may merge into the Company (or a Wholly Owned Subsidiary of
the Company) at any time, provided the Company shall have delivered to the
Trustee an Officers' Certificate stating that such Subsidiary has a net worth
greater than zero and such merger does not result in a Default or an Event of
Default hereunder.
For purposes of this Section 5.1, the Consolidated Fixed Charge Coverage
Ratio shall be determined on a pro forma consolidated basis (giving effect to
such merger, sale or consolidation) for the four fiscal quarters immediately
preceding such merger, sale or consolidation.
(a) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
Section 5.2 Successor Corporation Substituted. Upon any consolidation
or merger, or any transfer of assets in accordance with Section 5.1, the
Surviving Person formed by such consolidation or into which the Company is
merged or to which such 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 Surviving Person had been named as
the Company herein. When a Surviving Person duly assumes all of the
obligations of the Company pursuant hereto and pursuant to the Securities, the
predecessor shall be released from such obligations.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be caused voluntarily or involuntarily or
effected, without limitation, by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest upon any Security as and
when the same becomes due and payable, and the continuance of such default for
a period of 30 days;
(b) default in the payment of all or any part of the principal of (or
premium, if any, applicable to), the Securities when and as the same becomes
due and payable at maturity, redemption, by acceleration, or otherwise,
including default in the payment of the Change of Control Purchase Price in
accordance with Article XI or the Offer Price in accordance with Section 4.14;
(c) default in the observance or performance of, or breach of, any
covenant, agreement or warranty of the Company contained in the Securities or
this Indenture (other than a default in the performance of any covenant,
agreement or warranty which is specifically dealt with elsewhere in this
Section 6.1), and continuance of such default or breach for the period and
after the notice, if any, specified below;
(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under any mortgage,
indenture or instrument under which there is outstanding any Debt of the
Company or any of its Subsidiaries with an aggregate principal amount in excess
of $15,000,000, or failure to pay such Debt at its stated maturity, provided
that a waiver by the lenders of such debt of such default shall constitute a
waiver hereunder for the same period;
(e) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudging the Company or any of its Subsidiaries as
bankrupt or insolvent, or ordering relief against the Company or any of its
Subsidiaries in response to the commencement of an involuntary bankruptcy case,
or approving as properly filed a petition seeking reorganization or liquidation
of the Company or any of its Subsidiaries under any bankruptcy or similar law,
and such decree or order shall have continued undischarged and unstayed for a
period of 60 days; or a decree or order of a court of competent jurisdiction
over the appointment of a receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of the Company, any of its Subsidiaries, or of the
property of any such Person, or for the winding up or liquidation of the
affairs of any such Person, shall have been entered, and such decree, judgment,
or order shall have remained in force undischarged and unstayed for a period of
60 days;
(f) the Company or any of its Subsidiaries shall institute voluntary
bankruptcy proceedings, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking
reorganization or liquidation under any bankruptcy or similar law or similar
statute, or shall consent to the filing of any such petition, or shall consent
to the appointment of a Custodian, receiver, liquidator, trustee, or assignee
in bankruptcy or insolvency of it or any of its assets or property, or shall
make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due, or shall,
within the meaning of any Bankruptcy Law, become insolvent, fail generally to
pay its debts as they become due, or take any corporate action in furtherance
of or to facilitate, conditionally or otherwise, any of the foregoing;
(g) final judgments not covered by insurance for the payment of
money, or the issuance of any warrant of attachment against any portion of the
property or assets of the Company or any Subsidiary, which, in the aggregate,
equal or exceed $15,000,000 at any one time shall be entered against the
Company or any of its Subsidiaries by a court of competent jurisdiction and not
be stayed, bonded or discharged for a period (during which execution shall not
be
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effectively stayed) of 60 days (or, in the case of any such final judgment
which provides for payment over time, which shall so remain unstayed, unbonded
or undischarged beyond any applicable payment date provided therein);
(h) Independent Directors not constituting a majority of the Board of
Directors of the Company for a period of 90 days in the aggregate in any
twelve-month period;
(i) there having occurred any amendment to the Certificate of
Incorporation or Bylaws of any Obligor that pertains to the directors thereof
and would have an adverse effect on the Securityholders or any other amendment
that would materially adversely affect the interests of the Securityholders
and, in the case of any such other amendment, the failure to correct such other
amendment continues for a period of 90 days after written notice is given to
the Obligor by the Trustee or to the Obligor and the Trustee by the Holders of
at least 25% in aggregate principal amount of the Securities outstanding; or
(j) any Related Person directly or indirectly acquiring any assets
that were owned or leased by the Company or TTC immediately after the Issue
Date, except as permitted by Section 4.10.
A Default under clause (c) above (other than in the case of any Defaults
under Sections 4.3, 4.11, 4.14 or 5.1, which Defaults shall be Events of
Default without the notice specified in this paragraph or Section 4.7(c) and
upon the passage of 10 days) is not an Event of Default until the Trustee
notifies the Company, or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Company and the Trustee of the Default, and
the Company does not cure the Default within 30 days after receipt of the
notice. The notice must specify the Default, demand that it be remedied and
state that the notice is a "Notice of Default". Such notice shall be given by
the Trustee if so requested by the Holders of at least 25% in principal amount
of the Securities then outstanding.
In the case of any Event of Default pursuant to the provisions of this
Section 6.1 occurring by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company or any Subsidiary with the intention
of avoiding the period of time the Securities are not optionally redeemable or
the payment of the premium which the Company would have to pay if the Company
then had elected to redeem the Securities pursuant to Paragraph 5 of the
Securities, an equivalent premium (or, in the case of an Event of Default prior
to the time optional redemptions are permitted, to the extent permitted by law,
a premium equal to the stated interest rate of the Securities multiplied by the
quotient of (i) the number of full years left to maturity plus one, divided by
(ii) seven) shall also become and be immediately due and payable to the extent
permitted by law, anything in this Indenture or in the Securities to the
contrary notwithstanding.
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
6.1(e) or (f) relating to the Company or its Subsidiaries) occurs and is
continuing, then, and in every such case, unless the principal or Accreted
Value, as the case may be, of all of the Securities shall have already become
due and payable, either the Trustee or the Holders of not less than 25% in
aggregate principal amount of then outstanding Securities, by a notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare the Default Amount of the Securities (or
the Change of Control Purchase Price if the Event of Default includes failure
to pay the Change of Control Purchase Price), determined as set forth below,
including in each case accrued interest thereon, to be due and payable
immediately. If an Event of Default specified in Section 6.1(e) or (f)
relating to the Company or its Subsidiaries occurs, all Accreted Value or
principal and accrued interest, as the case may be, on the Securities shall be
immediately due and payable on all outstanding Securities without any
declaration or other act on the part of the Trustee or the Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of a
majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may waive, on behalf of all
Holders, any such declaration of acceleration if:
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(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(1) all overdue interest on all Securities,
(2) the Accreted Value or principal, as the case may
be, of (and premium, if any, applicable to) any
Securities which would become due otherwise than by
such declaration of acceleration, and interest
thereon at the rate borne by the Securities,
(3) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate
borne by the Securities,
(4) all sums paid or advanced by the Trustee hereunder
and the compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel,
and
(a) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 6.12, including, if applicable, any Event of Default
relating to the covenants contained in Section 11.1.
Notwithstanding the previous sentence of this Section 6.2, no waiver
shall be effective for any Event of Default or event which with notice or lapse
of time or both would be an Event of Default with respect to any covenant or
provision which cannot be modified or amended without the consent of the Holder
of each of the outstanding Securities, unless all such affected Holders agree,
in writing, to waive such Event of Default or event. No such waiver shall cure
or waive any subsequent default or impair any right consequent thereon.
Section 6.3 Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in clause (a) or (b) of Section 6.1
occurs and is continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal, premium (if any) and
interest, and, to the extent that payment of such interest shall be legally
enforceable, interest on any overdue principal (and premium, if any) and on any
overdue interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including compensation to, and expenses, disbursements
and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts within 10 days of such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
The Trustee shall also be authorized to take whatever additional action
at law or in equity may appear to be necessary or desirable to collect the
monies necessary to pay the principal, premium (if any) and interest on the
Securities.
Section 6.4 Trustee May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative
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to the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal of the Securities shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Company or any obligor for the
payment of overdue principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise to take any and all actions under
the TIA, including
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities and
to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent
and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any debtor-in-possession custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7.
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.
Section 6.5 Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of compensation to,
and expenses, disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Holders of the Securities in respect
of which such judgment has been recovered.
Section 6.6 Priorities. Subject to the provisions of Article XII, any
money collected by the Trustee pursuant to this Article VI shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money on account of principal, premium (if any) or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to Section
7.7;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, the Securities in respect
of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium (if any) and interest
respectively; and
THIRD: To whomsoever may be lawfully entitled thereto, the remainder,
if any.
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Section 6.7 Limitation on Suits. No Holder of any Security shall have
any right to order or direct the Trustee to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of then
outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities to be
incurred or reasonably probable to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
Section 6.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision of this Indenture,
the Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of, and premium (if any) and
interest on, such Security on the Maturity Dates of such payments as expressed
in such Security and to institute suit for the enforcement of any such payment
after such respective dates, and such rights shall not be impaired without the
consent of such Holder.
Section 6.9 Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in Section 2.7, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 6.10 Delay or Omission Not a Waiver. No delay or omission by
the Trustee or by any Holder of any Security to exercise any right or remedy
arising upon any Event of Default shall impair the exercise of any such right
or remedy or constitute a waiver of any such Event of Default. Every right and
remedy given by this Article VI or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
Section 6.11 Control by Holders. The Holder or Holders of a majority
in aggregate principal amount of then outstanding Securities shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred upon
the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee shall not determine that the action so directed would
be unjustly prejudicial to the Holders not taking part in such direction or
that such action may involve the Trustee in personal liability, and
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(c) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 6.12 Waiver of Past Default. Subject to Section 6.8, the
Holder or Holders of not less than a majority in aggregate principal amount of
the outstanding Securities may, on behalf of all Holders, prior to the
declaration of the maturity of the Securities, waive any past default hereunder
and its consequences, except a default
(a) in the payment of the principal of, premium, if any, or interest
on, any Security as specified in clauses (a) and (b) of Section 6.1, or
(b) in respect of a covenant or provision hereof which, under Article
IX, cannot be modified or amended without the consent of the Holder of each
outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
Section 6.13 Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Security by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, 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, suffered or omitted to be taken
by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of the outstanding Securities, or to any suit
instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Security on or after the respective
Maturity Date expressed in such Security (including, in the case of redemption,
on or after the Redemption Date).
Section 6.14 Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.1 Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
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(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others,
and no covenants or obligations shall be implied in or
read into this Indenture which are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to
determine regardless of whether they conform to the
requirements of this Indenture.
(a) The Trustee may not be relieved from liability for its own gross
negligence (whether by action, omission, or failure to act), or its own willful
misconduct, except that:
(3) This paragraph does not limit the effect of paragraph (b)
of this Section 7.1.
(4) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved
that the Trustee was grossly negligent in ascertaining the
pertinent facts.
(5) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.2 or
Section 6.11.
(a) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or at the request, order or direction of the
Holders or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(b) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section
7.1.
(c) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
Section 7.2 Rights of Trustee. Subject to Section 7.1:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting on any document believed by it to be genuine and to have
been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 14.4 and 14.5. 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 its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights
or powers.
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(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Whenever by the terms of this Indenture, the Trustee shall be
required to transmit notices or reports to any or all Holders, the Trustee
shall be entitled to rely on the information provided by the Registrar as to
the names and addresses of the Holders as being correct. If the Registrar is
other than the Trustee, the Trustee shall not be responsible for the accuracy
of such information.
Section 7.3 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, its Subsidiaries, or their respective
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 7.4 Trustee's Disclaimer. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Securities and it shall
not be accountable for the Company's use of the proceeds from the Securities,
and it shall not be responsible for (i) the use or application of any funds
received by a Paying Agent other than the Trustee or (ii) any statement in the
Securities, other than the Trustee's certificate of authentication.
The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the
part of the Obligors hereunder or in any Security Documents, except as
specifically set forth herein or therein.
Section 7.5 Notice of Default. If a Default or an Event of Default
occurs and is continuing and if it is known to the Trustee pursuant to Section
4.7(c), the Trustee shall mail to each Securityholder notice of the uncured
Default or Event of Default within 90 days after such Default or Event of
Default occurs. Except in the case of a Default or an Event of Default in
payment of principal (or premium, if any,) of, or interest on, any Security
(including all payments due on any Maturity Date), the Trustee may withhold the
notice if and so long as the Board of Directors and/or responsible officers of
the Trustee in good faith determine that withholding the notice is in the
interest of the Holders.
Section 7.6 Reports by Trustee to Holders. Within 60 days after each
May 15 beginning with the May 15 following the date of this Indenture, the
Trustee shall, if required, mail to each Securityholder a brief report dated as
of such May 15 that complies with 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 Security Holders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
Section 7.7 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time compensation for its services (in whatever capacity
rendered) in accordance with the Trustee's fee schedule, as may be amended from
time to time. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and counsel.
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The Company shall indemnify the Trustee (in its capacity as Trustee) and
each of its officers, directors, attorneys-in-fact and agents for, and hold it
harmless against, any claim, demand, expense (including but not limited to,
compensation, disbursements and expenses of the Trustees' agents and counsel),
loss or liability incurred by it without negligence or bad faith on its part,
arising out of or in connection with the administration of this trust and its
rights or duties hereunder including the reasonable costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the Trustee for which
it may seek indemnity. The Company shall defend the claim and the Trustee
shall provide reasonable cooperation at the Company's expense in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel; provided that the Company will not be
required to pay such fees and expenses if it assumes the Trustee's defense and
there is no conflict of interest as reasonably determined by the Trustee
between the Company and the Trustee in connection with such defense. The
Company need not pay for any settlement made without its written consent, which
shall not be unreasonably withheld. The Company need not reimburse any expense
or indemnify against any loss or liability to the extent incurred by the
Trustee through its gross negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal (and premium, if any,) or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(e) or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's obligations pursuant to Article VIII and any
rejection or termination of this Indenture under any Bankruptcy Law.
Section 7.8 Replacement of Trustee. The Trustee may resign by so
notifying the Company in writing. The Holder or Holders of a majority in
principal amount of the outstanding Securities may remove the Trustee by so
notifying the Company and the Trustee in writing and may appoint a successor
trustee with the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver, Custodian, or other public officer
takes charge of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holder or 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. Immediately after that
and provided that all sums owing to the Trustee provided for in Section 7.7
have been paid, the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided in Section 7.7,
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 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holder or Holders of at least 10% in principal amount of the outstanding
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 Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
the Company's obligations under Section 7.7 shall continue for the benefit of
the retiring Trustee.
Section 7.9 Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the resulting,
surviving or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise eligible hereunder,
be the successor Trustee.
Section 7.10 Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA Section 310(a)(1), (a)(2) and (a)(5).
The Trustee shall 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.
Section 7.12 No Bond. The Trustee shall not be required to give any
bond or surety in respect to the execution of its trusts, powers, rights and
duties under this Indenture or otherwise in respect of the premises.
Section 7.13 Condition to Action. Notwithstanding anything elsewhere
in this Indenture to the contrary, the Trustee shall have the right, but shall
not be required, to demand, in respect of the authentication of any Securities
or any other action within the purview of this Indenture, any showings,
certificates, opinions, or other information, or corporate action or evidence
thereof in addition to that by the terms hereof required, as a condition of
such action by the Trustee if reasonably deemed desirable by the Trustee for
the purpose of establishing the right to the authentication of any Securities
or the taking of any other action by the Trustee.
Section 7.14 Investment. The Trustee shall not be responsible or
liable for any loss suffered in connection with any investment of funds made by
it at the direction of the Company.
ARTICLE VIII
SATISFACTION AND DISCHARGE
Section 8.1 Satisfaction, Discharge of the Indenture and Defeasance of
the Securities. The Company shall be deemed to have paid and discharged the
entire Debt on the Securities and the provisions of this Indenture shall cease
to be of further effect (subject to Sections 8.3 and 8.7), if:
(a) The Company irrevocably deposits in trust for the benefit of the
Holders of the Securities with the Trustee, pursuant to an irrevocable trust
and security agreement in form and substance reasonably satisfactory to the
Trustee, (i) U.S. Legal Tender, (ii) U.S. Government Obligations or (iii) a
combination thereof which, after payment of all Federal, state and local taxes
or other charges or assessments in respect thereof payable by the Trustee,
through the payment of principal and interest will provide, not later than one
day before the due date of payment in respect of the Securities, U.S. Legal
Tender in an amount which, in the opinion of a nationally recognized firm of
independent certified public accountants expressed in a written certification
thereof (in form and substance reasonably satisfactory to the Trustee)
delivered to the Trustee, is sufficient to pay the principal of, premium, if
any, and each installment
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of principal and interest on the Securities then outstanding, on the dates on
which any such payments are due and payable in accordance with the terms of
this Indenture and of the Securities;
(b) Such deposits shall not cause the Trustee to have a conflicting
interest as defined in and for purposes of the TIA;
(c) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur on or before the 91st day
(or one day after such greater period of time in which any such deposit of
trust funds may remain subject to bankruptcy or insolvency laws) after the date
of such deposit, and such deposit will not result in a Default or Event of
Default under this Indenture or a breach or violation of, or constitute a
default under, any other instrument to which the Company or any Subsidiary of
the Company is a party or by which it or its property is bound;
(d) The deposit, defeasance and discharge will not be deemed, or
result in, a Federal income taxable event to the Holders of the Securities and
the Holders will be subject to Federal income tax in the same amounts and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred;
(e) The deposit shall not result in the Company, the Trustee or the
trust being subject to regulation under the Investment Company Act of 1940;
(f) After the passage of 90 days (or any greater period of time in
which any such deposit of trust funds may remain subject to set aside or
avoidance under Bankruptcy Laws insofar as those laws apply to the Company)
following the irrevocable deposit of the trust funds, such funds will not be
subject to any Bankruptcy Laws affecting creditors' rights generally;
(g) Holders of the Securities will have a valid, perfected and
unavoidable (under applicable bankruptcy or insolvency laws), subject to the
passage of time referred to in clause (f) above, first-priority security
interest in the trust funds; and
(h) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel (who may be outside counsel to the Company, but not
in-house counsel to the Company), each in form and substance satisfactory to
the Trustee, stating that all conditions precedent specified herein relating to
the defeasance contemplated by this Section 8.1 have been complied with.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Company.
In the event that the Company takes the necessary action to comply with
the provisions described in this Section 8.1 and the Securities are declared
due and payable because of the occurrence of an Event of Default within the
time period specified in Section 8.1(c), or at any time under Section 8.3, the
Company will remain liable for all amounts due on the Securities at the time of
acceleration resulting from such Event of Default in excess of the amount of
U.S. Legal Tender and U.S. Government Obligations deposited with the Trustee
pursuant to this Section 8.1 at the time of such acceleration.
Section 8.2 Termination of Obligations Upon Cancellation of the
Securities. In addition to the Company's rights under Section 8.1, the Company
may terminate all of its obligations under this Indenture (subject to Sections
8.3 and 8.7) when:
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(a) all Securities theretofore authenticated and delivered (other
than Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.7) have been delivered to the Trustee
for cancellation;
(b) the Company has paid or caused to be paid all sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent specified
herein relating to the satisfaction and discharge of this Indenture have been
complied with.
Section 8.3 Survival of Certain Obligations. Notwithstanding the
satisfaction and discharge of this Indenture and of the Securities referred to
in Section 8.1 or 8.2, the respective obligations of the Company and the
Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.11, 2.12, Article III,
4.1, 4.2, 4.4, 6.8, 7.7, 7.8, 8.5, 8.6, 8.7 and this Section 8.3 shall survive
until the Securities are no longer outstanding, and thereafter the obligations
of the Company and the Trustee under Sections 6.8, 7.7, 7.8, 8.5, 8.6, 8.7 and
this Section 8.3 shall survive. Nothing contained in this Article VIII shall
abrogate any of the obligations or duties of the Trustee under this Indenture.
Section 8.4 Acknowledgment of Discharge by Trustee. After (i) the
conditions of Section 8.1 or 8.2 have been satisfied, (ii) the Company has paid
or caused to be paid all other sums payable hereunder by the Company and (iii)
the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent referred to in
clause (i), above, relating to the satisfaction and discharge of this Indenture
have been complied with, the Trustee upon request shall acknowledge in writing
the discharge of each of the Obligor's obligations under this Indenture except
for those surviving obligations specified in Section 8.3.
Section 8.5 Application of Trust Assets. The Trustee shall hold any
U.S. Legal Tender or U.S. Government Obligations deposited with it in the
irrevocable trust established pursuant to Section 8.1. The Trustee shall apply
the deposited U.S. Legal Tender or U.S. Government Obligations, together with
earnings thereon, through the Paying Agent (other than the Company or any
Subsidiary of the Company), in accordance with this Indenture and the terms of
the irrevocable trust agreement, to the payment of principal of and interest on
the Securities.
Section 8.6 Repayment to the Company. Upon termination of the trust
established pursuant to Section 8.1, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them.
The Trustee and the Paying Agent shall pay to the Company upon request,
and, if applicable, in accordance with the irrevocable trust established
pursuant to Section 8.1, any U.S. Legal Tender or U.S. Government Obligations
held by them for the payment of principal of or interest on the Securities that
remain unclaimed for two years after the date on which such payment shall have
become due; 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 customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City
of New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining shall be repaid
to the Company. After payment to the Company, Holders entitled to such payment
must look to the Company for such payment as general creditors unless an
applicable abandoned property law designates another Person.
Section 8.7 Reinstatement. If the Trustee or Paying Agent is unable
to apply any U.S. Legal Tender or U.S. Government Obligations in accordance
with Section 8.1 or 8.2 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 Obligors' obligations under this
Indenture, the Security Documents and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.1 or 8.2
until such time as the Trustee or Paying Agent is permitted to apply all such
U.S. Legal Tender or U.S. Government Obligations in accordance with
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Section 8.1 or 8.2; provided, however, that if the Company has made any payment
of principal of or interest on any Securities because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the U.S. Legal Tender or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Company, when authorized by Board
Resolutions, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency, or to make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause (a) shall not adversely
affect the interests of any Holder in any respect;
(b) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company or
to make any other change that does not adversely affect the rights of any
Holder, provided that the Company has delivered to the Trustee an Opinion of
Counsel stating that such change does not adversely affect the rights of any
Holder;
(c) to secure the Securities pursuant to the requirements of Section
4.13;
(d) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the obligations of the Company, herein
and in the Securities in accordance with Article V;
(e) to comply with the TIA;
(f) to provide for the issuance of the Series B Notes;
(g) to provide for the amendment of the definition of the term
"Working Capital" and/or the amendment of Section 4.20 to the same extent as
the definition of the term " Working Capital" (as used in the indenture under
which the Senior Notes are outstanding) and/or Section 4.21 of the indenture
under which the Senior Notes are outstanding may be amended from time to time;
or
(h) to provide for the issuance of the New Notes.
Section 9.2 Amendments, Supplemental Indentures and Waivers with
Consent of Holders. Subject to Section 6.8, with the consent of the Holders of
not less than a majority in aggregate principal amount of then outstanding
Securities, by written act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by Board Resolutions, and the Trustee may
amend or supplement this Indenture or the Securities or enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or the Securities or of modifying in any manner the rights of the
Holders under this Indenture or the Securities. Subject to Section 6.8, the
Holder or Holders of not less than a majority in principal amount of then
outstanding Securities may waive compliance by the Company with any provision
of this Indenture or the Securities. Notwithstanding any of the above,
however, no such amendment, supplemental indenture or waiver shall, without the
consent of the Holder of each outstanding Security affected thereby:
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(a) 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;
(b) reduce the rate or extend the time for payment of interest on any
Security;
(c) reduce the Accreted Value or the principal amount of any
Security, or reduce the Change of Control Purchase Price, the Offer Price or
the Redemption Price;
(d) change the Stated Maturity or the Change of Control Payment Date
or the Purchase Date of any Security;
(e) alter the redemption provisions of Article III or of paragraph 5
of the Notes or the terms or provisions of Article XII, in any case, in a
manner adverse to any Holder;
(f) make any changes in the provisions concerning waivers of Defaults
or Events of Default by Holders of the Securities (except to increase any
required percentage or to provide that certain other provisions hereof cannot
be modified or waived without the consent of the Holders of each outstanding
Security affected thereby) or the rights of Holders to recover the principal or
premium of, interest on, or redemption payment with respect to, any Security;
(g) make any changes in Section 6.4, 6.7 or this third sentence of
this Section 9.2; or
(h) make the principal of, or the interest on, any Security payable
with anything or in any manner other than as provided for in this Indenture
(including changing the place of payment where, or the coin or currency in
which, any Security or any premium or the interest thereon is payable) and the
Securities as in effect on the date hereof.
Notwithstanding the foregoing, (i) the consent of at least 66-2/3% of
the aggregate principal amount of Notes then outstanding shall be required to
approve any amendment, supplement or waiver, including a waiver pursuant to
Section 6.12, that makes any changes in the terms or provisions of Section 4.14
(other than the Offer Price) and (ii) the consent of at least 90% of the
aggregate principal amount of the Notes then outstanding shall be required to
approve any amendment, supplement or waiver, including a waiver pursuant to
Section 6.12, that makes any changes in Article XI.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
After an amendment, supplement or waiver under this Section 9.2 or 9.4
becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or
waiver.
Section 9.3 Compliance with TIA. Every amendment, waiver or
supplement of this Indenture or the Securities shall comply with the TIA as
then in effect.
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Section 9.4 Revocation and Effect of Consents. Until an amendment,
waiver or supplement becomes effective, a consent to it by a Holder is a
continuing consent by 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, any such Holder or subsequent Holder may revoke the consent as to his
Security or portion of his Security by written notice to the Company or the
Person designated by the Company as the Person to whom consents should be sent
if such revocation is received by the Company or such Person before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
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,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, regardless of whether such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder; provided that any such waiver shall not impair or
affect the right of any Holder to receive payment of principal and premium of
and interest on a Security, on or after the respective dates set for such
amounts to become due and payable expressed in such Security, or to bring suit
for the enforcement of any such payment on or after such respective dates.
Section 9.5 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 or require the Holder
to put an appropriate notation on the Security. 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. Any failure to
make the appropriate notation or to issue a new Security shall not affect the
validity of such amendment, supplement or waiver.
Section 9.6 Trustee to Sign Amendments, Etc. The Trustee shall
execute any amendment, supplement or waiver authorized pursuant to this Article
IX, provided that the Trustee may, but shall not be obligated to, execute any
such amendment, supplement or waiver which affects the Trustee's own rights,
duties or immunities under this Indenture. The Trustee at the expense of the
Company shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article IX is authorized or
permitted by this Indenture.
ARTICLE X
MEETINGS OF SECURITYHOLDERS
Section 10.1 Purposes for Which Meetings May Be Called. A meeting of
Securityholders may be called at any time and from time to time pursuant to the
provisions of this Article X for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to waive or to consent to the waiving of any
Default or Event of Default hereunder and its consequences, or to take any
other action authorized to be taken by Securityholders pursuant to any of the
provisions of Article VI;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article VII;
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(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 9.2; or
(d) to take any other action (i) authorized to be taken by or on
behalf of the Holder or Holders of any specified aggregate principal amount of
the Securities under any other provision of this Indenture, or authorized or
permitted by law or (ii) which the Trustee deems necessary or appropriate in
connection with the administration of this Indenture.
Section 10.2 Manner of Calling Meetings. The Trustee may at any time
call a meeting of Securityholders to take any action specified in Section 10.1,
to be held at such time and at such place in the City of New York, New York or
elsewhere as the Trustee shall determine. Notice of every meeting of
Securityholders, setting forth the time and place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
by the Trustee, first-class postage prepaid, to the Company and to the Holders
at their last addresses as they shall appear on the registration books of the
Registrar, not less than 10 nor more than 60 days prior to the date fixed for a
meeting.
Any meeting of Securityholders shall be valid without notice if the
Holders of all Securities then outstanding are present in Person or by proxy,
or if notice is waived before or after the meeting by the Holders of all
Securities outstanding, and if the Company and the Trustee are either present
by duly authorized representatives or have, before or after the meeting, waived
notice.
Section 10.3 Call of Meetings by Company or Holders. In case at any
time the Company, pursuant to a Board Resolution, or the Holders of not less
than 10% in aggregate principal amount of the Securities then outstanding,
shall have requested the Trustee to call a meeting of Securityholders to take
any action specified in Section 10.1, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 20 days after
receipt of such request, then the Company or the Holders of Securities in the
amount above specified may determine the time and place in the City of New
York, New York or elsewhere for such meeting and may call such meeting for the
purpose of taking such action, by mailing or causing to be mailed notice
thereof as provided in Section 10.2, or by causing notice thereof to be
published at least once in each of two successive calendar weeks (on any
Business Day during such week) in a newspaper or newspapers printed in the
English language, customarily published at least five days a week of a general
circulation in the City of New York, State of New York, the first such
publication to be not less than 10 nor more than 60 days prior to the date
fixed for the meeting.
Section 10.4 Who May Attend and Vote at Meetings. To be entitled to
vote at any meeting of Securityholders, a Person shall (a) be a registered
Holder of one or more Securities, or (b) be a Person appointed by an instrument
in writing as proxy for the registered Holder or Holders of Securities. The
only Persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.5 Regulations May Be Made by Trustee; Conduct of the
Meeting; Voting Rights; Adjournment. Notwithstanding any other provision of
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any action by or any meeting of Securityholders, in regard to
proof of the holding of Securities and of the appointment of proxies, and in
regard to the appointment and duties of inspectors of votes, and submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall think
appropriate. Such regulations may fix a record date and time for determining
the Holders of record of Securities entitled to vote at such meeting, in which
case those and only those Persons who are Holders of Securities at the record
date and time so fixed, or their proxies, shall be entitled to vote at such
meeting regardless of whether they shall be such Holders at the time of the
meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 10.3, in which case the
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Company or the Securityholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the Holders of a
majority in principal amount of the Securities represented at the meeting and
entitled to vote.
At any meeting each Securityholder or proxy shall be entitled to one
vote for each $1,000 principal amount of Securities held or represented by him;
provided, however that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not then outstanding. The chairman of the
meeting shall have no right to vote other than by virtue of Securities held by
him or instruments in writing as aforesaid duly designating him as the proxy to
vote on behalf of other Securityholders. Any meeting of Securityholders duly
called pursuant to the provisions of Section 10.2 or Section 10.3 may be
adjourned from time to time by vote of the Holder or Holders of a majority in
aggregate principal amount of the Securities represented at the meeting and
entitled to vote, and the meeting may be held as so adjourned without further
notice.
Section 10.6 Voting at the Meeting and Record to Be Kept. The vote
upon any resolution submitted to any meeting of Securityholders shall be by
written ballots on which shall be subscribed the signatures of the Holders of
Securities or of their representatives by proxy and the principal amount of the
Securities voted by the ballot. The permanent chairman of the meeting shall
appoint two inspectors of votes, who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at
the meeting. A record in duplicate of the proceedings of each meeting of
Securityholders shall be prepared by the secretary of the meeting and there
shall be attached to such record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more Persons
having knowledge of the facts, setting forth a copy of the notice of the
meeting and showing that such notice was mailed as provided in Section 10.2 or
published as provided in Section 10.3. The record shall be signed and verified
by the affidavits of the permanent chairman and the secretary of the meeting
and one of the duplicates shall be delivered to the Company and the other to
the Trustee to be preserved by the Trustee, the latter to have attached thereto
the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 Exercise of Rights of Trustee or Securityholders May Not
Be Hindered or Delayed by Call of Meeting. Nothing contained in this Article X
shall be deemed or construed to authorize or permit, by reason of any call of a
meeting of Securityholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any
right or rights conferred upon or reserved to the Trustee or to the
Securityholders under any of the provisions of this Indenture or of the
Securities.
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
Section 11.1 Repurchase of Securities at Option of the Holder Upon
Change of Control
(a) In the event that a Change of Control occurs, each Holder of
Securities shall have the right, at such Holder's option, upon the terms and
conditions of this Article XI, to require the Company to repurchase all or any
part of such Holder's Notes on a date that is no later than 60 Business Days
after the occurrence of a Change of Control (the date on which the repurchase
is effected being referred to herein as the "Change of Control Payment Date"),
at a cash purchase price (the "Change of Control Purchase Price") equal to 101%
of the Accreted Value thereof, plus accrued and unpaid interest, if any, to and
including the Change of Control Payment Date.
(b) Within 20 Business Days after the Company knows, or reasonably
should know, of the occurrence of a Change of Control, the Company shall make
an irrevocable unconditional offer (a "Change of Control Offer")
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to the Holders to purchase for U.S. Legal Tender all of the Securities pursuant
to the offer described in clause (c) of this Section 11.1 at the Change of
Control Purchase Price. Within five Business Days after each date upon which
the Company knows, or reasonably should know, of the occurrence of a Change of
Control requiring the Company to make a Change of Control Offer pursuant to
this Section 11.1, the Company shall so notify the Trustee.
(c) Notice of a Change of Control Offer shall be sent, at least 20
Business Days prior to the Final Change of Control Put Date (as defined below),
by first class mail, by the Company to each Holder at its registered address,
with a copy to the Trustee. The notice to the Holders shall contain all
instructions and materials required by applicable law and shall contain or make
available to Holders other information material to such Holders' decision to
tender Securities pursuant to the Change of Control Offer. The notice, which
shall govern the terms of the Offer, shall state:
(d) that the Change of Control Offer is being made pursuant to such
notice and this Section 11.1 and that all Notes, or portions thereof, tendered
will be accepted for payment;
(e) the Change of Control Purchase Price, the Change of Control
Payment Date and the Final Change of Control Put Date (as defined below);
(f) that any Note, or portion thereof, not tendered or accepted for
payment will continue to accrue interest, if interest is then accruing;
(g) that, unless the Company defaults in depositing U.S. Legal Tender
with the Paying Agent in accordance with the last paragraph of this clause (c),
or payment is otherwise prevented, any Note, or portion thereof, accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(h) that Holders electing to have a Note, or portion thereof,
purchased pursuant to a Change of Control Offer will be required to surrender
the Note, with the form entitled "Option of Holder to Elect Purchase or
Exchange" on the reverse of the Note completed, to the Paying Agent (which may
not for purposes of this Section 11.1, notwithstanding anything in this
Indenture to the contrary, be the Company or any Affiliate of the Company) at
the address specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Payment Date (the "Final Change of
Control Put Date");
(i) that Holders will be entitled to withdraw their election if the
Paying Agent receives, prior to the close of business on the Final Change of
Control Put Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Securities the Holder
is withdrawing and a statement containing a facsimile signature that such
Holder is withdrawing his election to have such principal amount of Securities
purchased;
(j) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; and
(k) a brief description of the events resulting in such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof properly tendered pursuant to
the Change of Control Offer prior to the close of business on the Final Change
of Control Put Date, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Change of Control Purchase Price (including accrued and
unpaid interest) of all Securities so tendered and (iii) deliver or cause to be
delivered to the Trustee Securities so accepted together with an Officers'
Certificate listing the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the Change of Control Purchase Price
(including accrued and unpaid interest), and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
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principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date. Any such Change of Control Offer shall comply with all
applicable provisions of Federal and state laws, rules and regulations,
including those regulating tender offers, if applicable, and, if such laws,
rules or regulations require or prohibit any action inconsistent with the
foregoing, compliance by the Company with such laws, rules and regulations will
not constitute a breach of the Company's obligations with respect to the
foregoing.
Section 11.2 Exchange of Securities at Option of the Holder Upon
Upgrade.
(a) As provided below, within 90 days after the earlier to occur of
(i) the Upgrade, (ii) the terms of the Senior Notes permitting an Exchange or
(iii) the Senior Notes being no longer outstanding (each, an "Exchange Event"),
each Holder of Securities shall have the right, at such Holder's option, upon
the terms and conditions of this Section 11.2, to require the Company to
exchange all or any part of such Holder's Notes, for an amount of new notes
(the "New Notes") of the Company which New Notes will be substantially
identical to the Notes, except that the New Notes will provide for the payment
of interest in cash.
(b) Within 60 days after the Company knows, or reasonably should
know, of the occurrence of an Exchange Event, the Company shall make an
irrevocable unconditional offer (an "Exchange Offer") to the Holders to
exchange all of the outstanding Securities for New Notes pursuant to an offer
described in clause (c) of this Section 11.2. Within five Business Days after
each date upon which the Company knows, or reasonably should know, of the
occurrence of an Exchange Event requiring the Company to make an Exchange Offer
pursuant to this Section 11.2, the Company shall so notify the Trustee.
(c) Notice of an Exchange Offer shall be sent, at least 20 Business
Days prior to the Final Exchange Date (as defined below), by first class mail,
postage prepaid by the Company to each Holder at its registered address, with a
copy to the Trustee. The notice to the Holders shall contain all instructions
and materials required by applicable law and shall contain or make available to
Holders all other information material to such Holders' decision to tender
Securities pursuant to the Exchange Offer. The notice, which shall govern the
terms of the Exchange Offer, shall state:
(1) that the Exchange Offer is being made pursuant to such
notice and this Section 11.2 and that all Notes, or portions
thereof, tendered will be accepted for exchange;
(2) the date on which the Exchange is to be effected (the
"Exchange Date") and the Final Exchange Date (as defined below);
(3) that any Note, or portion thereof, not tendered or
accepted for exchange will continue to accrue interest, if
interest is then accruing, payable in the manner specified
herein;
(4) that, unless the Company defaults in depositing New Notes
with the Paying Agent in accordance with the last paragraph of
this clause (c), any Note, or portion thereof, accepted for
exchange pursuant to the Exchange Offer shall cease to accrue
interest after the Exchange Date;
(5) that Holders electing to have a Note, or portion thereof,
exchanged pursuant to an Exchange Offer will be required to
surrender the Note, with the form entitled "Option of Holder to
Elect Purchase or Exchange" on the reverse of the Note completed,
to the Paying Agent (which may not for purposes of this Section
11.2, notwithstanding anything in this Indenture to the contrary,
be the Company or any Affiliate of the Company) at the address
specified in the notice prior to the close of business on the
third Business Day prior to the Exchange Date (the "Final
Exchange Date");
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(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, prior to the close of business on
the Final Exchange Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Securities the Holder is withdrawing and
a statement containing a facsimile signature that such Holder is
withdrawing his election to have such principal amount of
Securities exchanged;
(7) that Holders whose Notes were exchanged only in part will
be issued New Notes equal in principal amount to the unexchanged
portion of the Notes surrendered; and
(8) a reasonably detailed description of the events resulting
in such Exchange Event.
On or before the Exchange Date, the Company shall (i) accept for
exchange Securities or portions thereof properly tendered pursuant to the
Exchange Offer prior to the close of business on the Final Exchange Date, (iii)
deposit with the Trustee or a Paying Agent the New Notes in principal amount
equal to such Notes validly tendered into the Exchange Offer (including accrued
and unpaid interest) and (iv) deliver or cause to be delivered to the Trustee
Securities so accepted, together with an Officers' Certificate listing the
Securities or portions thereof being exchanged by the Company. The Paying
Agent shall promptly deliver to the Holders of Securities so accepted New Notes
in an amount equal to the Securities so tendered (including accrued and unpaid
interest), and the Trustee shall promptly authenticate and deliver to such
Holders a new Security equal in principal amount to any unexchanged portion of
the Security surrendered. Any Securities not so accepted shall be promptly
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Exchange Offer on or as soon as practicable after
the Final Exchange Date. Any such Exchange Offer shall comply with all
applicable provisions of Federal and state laws, rules and regulations,
including those regulating tender offers, if applicable, and, if such laws,
rules or regulations require or prohibit any action inconsistent with the
foregoing, compliance by the Company with such laws, rules and regulations will
not constitute a breach of the Company's obligations with respect to the
foregoing.
ARTICLE XII
SUBORDINATION
Section 12.1 Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article (subject to the provisions of
Article VIII), the payment of the principal of (and premium, if any) and
interest on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Debt.
Section 12.2 Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company, then and in any such event specified in (a), (b) or (c) above (each
such event, if any, herein sometimes referred to as a "Proceeding") the holders
of Senior Debt shall be entitled to receive payment in full of all amounts due
or to become due on or in respect of all Senior Debt, or provisions shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, before the Holders of the
Securities are entitled to receive any payment or distribution of any kind or
character, whether in cash, property or securities (including any payment or
distribution which may be payable or deliverable by reason of the payment of
any other Debt of the Company subordinated to the payment of the
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Securities, such payment or distribution being herein after referred to as a
"Junior Subordinated Payment") on account of principal of (or premium, if any)
or interest on the Securities or on account of any purchase or other
acquisition of Securities by the Company or any Subsidiary of the Company (all
such payments, distributions, purchases and acquisitions herein referred to,
individually and collectively, a "Securities Payment"), and to that end the
holders of Senior Debt shall be entitled to receive, for application to the
payment of the Senior Debt, any Securities Payment which may be payable or
deliverable in respect of the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
Securities Payment before all Senior Debt is paid in full or payment thereof
provided for in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, and if such fact shall, at or prior to the time
of such Securities Payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such Securities Payment shall be
paid over or delivered forthwith to the Trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person making payment
or distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of stock or securities
of the Company provided for by a plan of reorganization or readjustment, or of
any other corporation provided for by such plan of reorganization or
readjustment authorized by an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy law
which stock or securities are subordinated in right of payment to all then
outstanding Senior Debt to substantially the same extent as the Securities are
so subordinated as provided in this Article. The consolidation of the Company
with, or the merger of the Company into, another Person or the liquidation or
dissolution of the Company following the conveyance or transfer of all or
substantially all of its properties and assets as an entirety to another Person
upon the terms and conditions set forth in Article V shall not be deemed a
Proceeding for the purposes of this Section if the person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer such properties and assets as an entirety, as the
case may be, shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions set forth in Article V.
Section 12.3 No Payment When Senior Debt in Default.
In the event that any Senior Payment Default (as defined below) shall
have occurred and be continuing, then no Securities Payment shall be made
unless and until such Senior Payment Default shall have been cured or waived or
shall have ceased to exist or all amounts then due and payable in respect of
Senior Debt shall have been paid in full, or provision shall have been made for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt. "Senior Payment Default" means any default in
the payment of principal of (or premium, if any) or interest on Senior Debt
when due, whether at the Stated Maturity of any such payment or by declaration
of acceleration, call for redemption or otherwise.
In the event that any Senior Nonmonetary Default (as defined below)
shall have occurred and be continuing, then, upon the receipt by the Company
and the Trustee of written notice of such Senior Nonmonetary Default from a
trustee or agent on behalf of the holders of such Senior Debt, no Securities
Payment shall be made during the period (the "Payment Blockage Period")
commencing on the date of such receipt of such written notice and ending on the
earlier of (i) the date on which such Senior Nonmonetary Default shall have
been cured or waived or shall have ceased to exist and any acceleration of
Senior Debt shall have been rescinded or annulled or the Senior Debt to which
such Senior Nonmonetary Default relates shall have been discharged or (ii) the
179th day after the date of such receipt of such written notice; provided,
however, that no more than one Payment Blockage Period may be commenced with
respect to the Securities during any 360-day period and there shall be a period
of at least 181 consecutive days in each 360-day period when no Payment
Blockage Period is in effect. For all purposes of this paragraph, no Senior
Payment Default or Senior Nonmonetary Default that existed or was continuing on
the date of commencement of any Payment
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Blockage Period shall be, or be made, the basis for the commencement of a
subsequent Payment Blockage Period by holders of Senior Debt or their
representatives unless such Senior Payment Default or Senior Nonmonetary
Default shall have been cured for a period of not less than 90 consecutive
days. "Senior Nonmonetary Default" means the occurrence or existence and
continuance of any event of default, or of any event which, after notice or
lapse of time (or both), would become an event of default, under the terms of
any instrument pursuant to which any Senior Debt is outstanding, permitting
(after notice or lapse of time or both) one or more holders of such Senior Debt
(or a trustee or agent on behalf of the holders thereof) to declare such Senior
Debt due and payable prior to the date on which it would otherwise become due
and payable, other than a Senior Payment Default.
In the event that, notwithstanding the foregoing, the Company shall make
any Securities Payment to the Trustee or any Holder prohibited by the foregoing
provisions of this Section, and if such fact shall, at or prior to the time of
such Securities Payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such Securities Payment shall be
paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any Securities Payment
with respect to which Section 12.2 would be applicable.
Section 12.4 Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any Proceeding referred to in this Section 12.2 or under the
conditions described in Section 12.3, from making Securities Payments, or (b)
the application by the Trustee of any money deposited with it hereunder to
Securities Payments or the retention of such Securities Payment by the Holders,
if, at the time of such application by the Trustee, it did not have knowledge
that such Securities Payment would have been prohibited by the provisions of
this Article.
Section 12.5 Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become due on or
in respect of Senior Debt, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Debt, the Holders of the Securities shall be subrogated to the rights of the
holders of such Senior Debt to receive payments and distributions of cash,
property and securities applicable to the Senior Debt until the principal of
(and premium, if any) and interest on the Securities shall be paid in full.
For purposes of such subrogation, no payments or distributions to the holders
of the Senior Debt of any cash, property or securities to which the Holders of
the Securities or the Trustee would be entitled except for the provisions of
this Article, and no payments pursuant to the provisions of this Article to the
holders of Senior Debt by Holders of the Securities or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Debt and the
Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Debt.
Section 12.6 Provisions Solely to Define Relative Rights.
The provisions of this Article 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 Debt on the other hand. Nothing contained in this Article or
elsewhere in this Indenture or in the Securities is intended to or shall (a)
impair, as among the Company, its creditors other than holders of Senior Debt
and the Holders of the Securities, the obligation of the Company, which is
absolute and unconditional (and which, subject to the rights under this Article
of the holders of Senior Debt, is intended to rank equally with all other
general obligations of the Company) to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the Holders of the Securities
and creditors of the Company other than the holders of Senior Debt; or (c)
prevent the Trustee or the Holder of any Security from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject to the rights,
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<PAGE> 66
if any, under this Article of the holders of Senior Debt to receive cash,
property and securities otherwise payable or deliverable to the Trustee or such
holder.
Section 12.7 Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
Section 12.8 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided 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, in good faith, by any such holder, or by any noncompliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do
any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Debt, or
otherwise amend or supplement in any manner Senior Debt, or otherwise amend or
supplement in any manner Senior Debt or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
collection of Senior Debt; and (iv) exercise or refrain from exercising any
rights against the Company and any other Person.
Section 12.9 Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by
the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Article VII, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section at least two (2) Business Days prior to the
date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (and
premium, if any) or interest on any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it within two (2) Business Days prior to such date.
Subject to the provisions of Article VII, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior Debt (or a trustee therefor) to establish that
such notice has been given by a holder of Senior Debt (or a trustee therefor).
In the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights
60
<PAGE> 67
of such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such Person to receive such payment.
Section 12.10 Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Article VII, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other
Person making such payment or distribution, delivered to the Trustee or to the
Holders of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt 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.
Section 12.11 Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Debt and shall not be liable to any such holders if it shall in good
faith mistakenly pay over or distribute to Holders of Securities or to the
Company or to any other Person cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article or
otherwise.
Section 12.12 Rights of Trustee as Holder of Senior Debt; Preservation
of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.
Section 12.13 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Section 12.12 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
Section 12.14 Defeasance of this Article XII.
The subordination of the Securities provided by this Article XII is
expressly made subject to the provisions for defeasance or covenant defeasance
in Article VIII hereof and, anything herein to the contrary notwithstanding,
upon the effectiveness of any such defeasance or covenant defeasance, the
Securities then outstanding shall thereupon cease to be subordinated pursuant
to this Article XII.
ARTICLE XIII
[INTENTIONALLY OMITTED]
61
<PAGE> 68
ARTICLE XIV
MISCELLANEOUS
Section 14.1 TIA Controls. If any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by operation of the TIA, the
imposed duties, upon qualification of this Indenture under the TIA, shall
control.
Section 14.2 Notices. Any notices or other communications to the
Company or the Trustee required or permitted hereunder shall be in writing, and
shall be sufficiently given if made by hand delivery, by telex, by telecopier
or registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company:
TransTexas Gas Corporation
1300 East North Belt
Suite 310
Houston, Texas 77032
Attention: Ed Donahue
if to the Trustee:
Bank One, Columbus, NA
Attention: Corporate Trust Department
100 East Broad Street
8th Floor
Columbus, Ohio 43271-0181
The Company or the Trustee by notice to each other party may designate
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered, if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and five Business Days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address
shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his 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 Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, regardless of whether the addressee receives it.
Section 14.3 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA Section 312(c).
Section 14.4 Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
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<PAGE> 69
(1) an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel (in form and substance
reasonably satisfactory to the Trustee) stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
Section 14.5 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 the Person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he
has made such examination or investigation as is necessary to
enable him to express an informed opinion as to regardless of
whether such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each
such Person, such condition or covenant has been complied with;
provided, however, that with respect to matters of fact an
Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
Section 14.6 Rules by Trustee, Paying Agent, Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Securityholders.
The Paying Agent or Registrar may make reasonable rules for its functions.
Section 14.7 Legal Holidays. A "Legal Holiday" used with respect to a
particular place of payment is a Saturday, a Sunday or a day on which banking
institutions at such place are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for
the intervening period.
Section 14.8 GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE
SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
63
<PAGE> 70
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY
OTHER JURISDICTION.
Section 14.9 No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt
agreement of any of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
Section 14.10 No Recourse against Others. A director, officer,
employee, stockholder or incorporator, as such, of the Company shall not have
any liability for any obligations of the Obligor under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Securityholder by accepting a Security
waives and releases all such liability. Such waiver and release are part of
the consideration for the issuance of the Securities.
Section 14.11 Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 14.12 Duplicate Originals. All parties may sign any number of
copies or counterparts of this Indenture. Each signed copy or counterpart
shall be an original, but all of them together shall represent the same
agreement.
Section 14.13 Severability. In case any one or more of the provisions
in this Indenture or in the Securities shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
Section 14.14 Table of Contents, Headings, Etc. The Table of Contents,
Cross-Reference Table and headings of the Articles and the Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
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<PAGE> 71
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the date first written above.
TRANSTEXAS GAS CORPORATION
By:
-----------------------------------
Name:
Title:
BANK ONE, COLUMBUS, NA,
as Trustee
By:
-----------------------------------
Name: Jeffery L. Eubank
Title: Authorized Signatory
<PAGE> 72
EXHIBITS
Exhibit A - Form of Note
<PAGE> 73
Exhibit A
[FORM OF NOTE]
TRANSTEXAS GAS CORPORATION
THIS NOTE WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") WITHIN THE
MEANING OF SECTION 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE
ISSUE DATE OF THIS NOTE IS [____________, 1996]. THE ISSUE PRICE OF THIS NOTE
WILL BE [$_____________]. THE ISSUE PRICE OF THIS NOTE REPRESENTS A YIELD TO
DECEMBER 15, 2001 OF [_______%] PER ANNUM COMPUTED ON A SEMI-ANNUAL BOND
EQUIVALENT BASIS AND CALCULATED FROM DECEMBER 13, 1996]. THE AMOUNT OF OID ON
THIS NOTE WILL BE [$______________].
[IF SERIES A NOTES, THEN INSERT --
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM AND IN ANY EVENT MAY BE SOLD
OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH THE INDENTURE, COPIES OF WHICH
ARE AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE TRUSTEE. THE
EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO
PERMIT SALE OR TRANSFER OF THIS SECURITY TO QUALIFIED INSTITUTIONAL BUYERS
(WITHIN THE MEANING OF RULE 144A) WITHOUT REGISTRATION.
EACH HOLDER OF THIS SECURITY REPRESENTS TO THE COMPANY THAT (A) SUCH
HOLDER WILL NOT SELL OR OTHERWISE TRANSFER THIS SECURITY (WITHOUT CONSENT OF
THE COMPANY) PRIOR TO TWO YEARS FROM THE LATER OF DECEMBER, 1996 OR THE DATE ON
WHICH THIS SECURITY WAS LAST HELD BY AN AFFILIATE OF THE COMPANY OTHER THAN (I)
TO A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A,
(II) TO A NON-U.S. PERSON IN A TRANSACTION COMPLYING WITH REGULATION S UNDER
THE SECURITIES ACT, (III) FOLLOWING [TWO] YEARS FROM SUCH TIME, IN A
TRANSACTION COMPLYING WITH RULE 144 UNDER THE SECURITIES ACT OR (IV) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IT
BEING UNDERSTOOD THAT AS A CONDITION TO THE REGISTRATION OF TRANSFER OF ANY
SECURITIES, THE COMPANY OR THE TRUSTEE MAY IN CIRCUMSTANCES EITHER OF THEM
BELIEVES APPROPRIATE, REQUIRE EVIDENCE AS TO COMPLIANCE WITH ANY SUCH
EXEMPTION) AND THAT (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.]
[IF SERIES A NOTES, THEN INSERT -- 13 1/4% SERIES A SENIOR SUBORDINATED
NOTE DUE 2003]
[IF SERIES B NOTES, THEN INSERT -- 13 1/4% SERIES B SENIOR SUBORDINATED
NOTE DUE 2003]
No. _________________ $__________________
CUSIP Number 893895-AC-6
A-1
<PAGE> 74
TransTexas Gas Corporation, a Delaware corporation (hereinafter called
the "Company," which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to ______________________, or registered assigns, the principal sum of
________________ Dollars, on December 31, 2003.
Interest Payment Dates: June 30 and December 31, commencing June 30,
2002.
Record Dates: June 15 and December 15
Reference is made to the further provisions of this Note on the reverse
side, which will, for all purposes, have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated:
TRANSTEXAS GAS CORPORATION
By:
---------------------------------
Its:
--------------------------------
Attest:
- ------------------------------
Secretary
[Seal]
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
Bank One, Columbus, NA,
as Trustee
By:
-----------------------------------------
Authorized Signatory
Dated:
---------------
A-2
<PAGE> 75
TRANSTEXAS GAS CORPORATION
[IF SERIES A NOTES, THEN INSERT 13 1/4% SERIES A SENIOR SUBORDINATED NOTE DUE
2003]
[IF SERIES B NOTES, THEN INSERT 13 1/4% SERIES B SENIOR SUBORDINATED NOTE DUE
2003]
1. Interest.
TransTexas Gas Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the Accreted Value of this Security at a rate of 13
1/4% per annum from and after December 15, 2001, prior to which date this Note
shall not bear interest. To the extent it is lawful, the Company promises to
pay interest on any interest payment due but unpaid on such principal amount at
a rate of 13 1/4% per annum compounded semi-annually.
The Company will pay interest semi-annually on June 30 and December 31
of each year (each, an "Interest Payment Date"), commencing June 30, 2002,
provided, however, that the Company shall not be obligated to make payment of
any installment of interest otherwise coming due on any Interest Payment Date
occurring on or prior to the date on which all principal and interest on the
Senior Notes is paid in full (any such installment of interest being defined in
the Indenture as a "Deferred Installment"), and such Deferred Installment shall
not be deemed to be due and payable, until, and each such Deferred Installment
shall be due and payable on, the first Business Day occurring after the date on
which all principal and interest on the Senior Notes is paid in full; and,
provided further, that each such Deferred Installment shall bear interest from
its stated Interest Payment Date until paid at the rate of 13 1/4% per annum.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from December 15,
2001. Interest on the Securities will be computed on the basis of a 360-day
year consisting of twelve 30-day months.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. Except as provided below, the Company shall pay principal and
interest in such coin or currency of the United States of America as at the
time of payment shall be legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal and interest by
wire transfer of Federal funds, or interest by its check payable in such U.S.
Legal Tender. The Company shall deliver any such interest payment to the
Paying Agent who shall remit such payment to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar.
Initially, Bank One, Columbus, NA (the "Trustee") will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders. The Company or an Affiliate of any of
them may, subject to certain exceptions, act as Paying Agent, Registrar or co-
Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
December 13, 1996 (the "Indenture"), between the Company 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, as in effect on the date of the Indenture. The
Securities are subject to all such terms, and Holders of Securities are
referred to the Indenture and said Act for a statement of them. The
A-3
<PAGE> 76
Securities are senior subordinated obligations of the Company limited in
Accreted Value to $189,000,000 plus amounts sufficient to pay interest on
outstanding Securities.
5. Optional Redemption.
The Securities are not redeemable prior to June 30, 2000, except that,
prior to December 31, 1998, the Company may redeem, at its option, up to $30
million of the Accreted Value of the Securities at a price equal to 113.250% of
the Accreted Value thereof at the date of redemption, plus accrued and unpaid
interest, if any, to the date of redemption, with certain of the net proceeds
of any Public Equity Offering. In addition, the Company may redeem any or all
of the outstanding Securities at a price of 112.375% of the Accreted Value
thereof at the date of redemption, plus accrued and unpaid interest, if any, to
the date of redemption, in the event of a Major Asset Sale.
The Securities may be redeemed in whole or from time to time in part at
any time on and after June 30, 2000, at the option of the Company, at the
Redemption Price (expressed as a percentage of Accreted Value) set forth below
with respect to the indicated Redemption Date, in each case, together with any
accrued but unpaid interest, if any, to the Redemption Date.
<TABLE>
<CAPTION>
==============================================================================
If redeemed during the period: Redemption Price
- ------------------------------------------------------------------------------
<S> <C>
On or after June 30, 2000, but before December 31, 2000 108.290%
- ------------------------------------------------------------------------------
On or after December 31, 2000, but before December 31, 2001 106.625%
- ------------------------------------------------------------------------------
On or after December 31, 2001, but before December 31, 2002 103.313%
- ------------------------------------------------------------------------------
On or after December 31, 2002 100.000%
==============================================================================
</TABLE>
Any such redemptions will comply with Article III of the Indenture.
6. Notice of Redemption.
Notice of redemption will be mailed by first class mail at least 15 days
but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at his registered address.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption
shall have been deposited with the Paying Agent on such Redemption Date the
Securities called for redemption will cease to bear interest and the only right
of the Holders of such Securities will be to receive payment of the Redemption
Price and any accrued and unpaid interest, if any, to the Redemption Date.
7. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, initially in
denominations of $1,000 and integral multiples of $1,000. A Holder may
register the transfer of, 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 register
the transfer of or exchange any Securities selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
A-4
<PAGE> 77
9. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee and the Paying Agent(s) will pay the money back to the
Company at its written request. Thereafter, all liability of the Trustee and
such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits into an irrevocable trust with the
Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the
principal of and interest on the Securities to redemption or maturity and
complies with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Securities (including the financial covenants, but excluding its obligation to
pay the principal of and interest on the Securities).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency
(provided such amendment or supplement does not adversely affect the rights of
any Holder of a Security).
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Subsidiaries to, among other things, Incur additional Debt or issue
Disqualified Capital Stock, make payments in respect of its Capital Stock,
enter into transactions with Related Persons, incur Liens, sell assets, change
the nature of its business, merge or consolidate with any other Person and
sell, lease, transfer or otherwise dispose of substantially all of its
properties or assets. The limitations are subject to a number of important
qualifications and exceptions. The Company must deliver a quarterly report to
the Trustee on compliance with such limitations.
13. Change of Control.
In the event there shall occur any Change of Control, each Holder of
Securities shall have the right, at such Holder's option but subject to the
limitations and conditions set forth in the Indenture, to require the Company
to purchase on the Change of Control Payment Date in the manner specified in
the Indenture, all or any part of such Holder's Securities at a Change of
Control Purchase Price equal to 101% of the Accreted Value thereof, together
with accrued and unpaid interest, if any, to the Change of Control Payment
Date.
14. Exchange.
Within 90 days after the occurrence of an Exchange Event, each Holder
shall have the right, at such Holder's option, upon the terms and conditions
specified in the Indenture, to require the Company to exchange all or any part
of such Holder's Securities for an amount of New Notes of the Company which New
Notes will be substantially identical to the Securities except that the New
Notes will provide for the payment of interest in cash.
15. Successors.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
A-5
<PAGE> 78
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before
it enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the Securities then
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of any continuing
Default or Event of Default (except a Default in payment of principal, premium,
if any, or interest, including a Default at any Maturity Date), if it
determines that withholding notice is in their interest.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligation of the Company 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 of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security 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). Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to them in the Indenture.
20. 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 the 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.
21. Ranking
As provided in the Indenture, the Securities shall be subordinated in
right of payment to the prior payment in full of all Senior Debt, and the
Company may not incur any Debt that is senior to the Securities and
contractually subordinated in right of payment to any Debt.
A-6
<PAGE> 79
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this security to
------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
-------------------- ------------------------------------
(Sign exactly as your name appears
on the other side of this Security)
A-7
<PAGE> 80
ASSIGNMENT FORM
[ALTERNATE ASSIGNMENT FORM TO COME FROM BANK ONE]
A-8
<PAGE> 81
OPTION OF HOLDER TO ELECT PURCHASE OR EXCHANGE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.14 or 11.1 of the Indenture or exchanged pursuant to
Section 11.2 of the Indenture, check the appropriate box:
[ ] Section 4.14 [ ] Section 11.1 [ ] Section 11.2
If you want to elect to have only part of this Security purchased or
exchanged by the Company pursuant to Section 4.14, 11.1 or 11.2 of the
Indenture, as the case may be, state the principal amount you want to be
purchased or exchanged: $_____________
Date: Signature:
--------------- -----------------------------------------
(Sign exactly as your name appears on the
other side of this Security)
Your Social Security or Tax Identification Number:
--------------------
Signature Guarantee:
------------------------------
A-9
<PAGE> 1
EXHIBIT 4.14
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of December 13, 1996
among
TRANSTEXAS GAS CORPORATION
and
[THE PURCHASERS WHO ARE SIGNATORIES HERETO]
--------------------
13 1/4% Series A Senior Subordinated Notes due 2003
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Registered Exchange Offer . . . . . . . . . . . . . . . . 5
SECTION 3. Shelf Registration . . . . . . . . . . . . . . . . . . . 7
SECTION 4. Additional Interest for Illiquidity . . . . . . . . . . . 8
SECTION 5. Hold-Back Agreements . . . . . . . . . . . . . . . . . . 9
SECTION 6. Registration Procedures. . . . . . . . . . . . . . . . . 10
SECTION 7. Registration Expenses. . . . . . . . . . . . . . . . . 16
SECTION 8. Indemnification. . . . . . . . . . . . . . . . . . . . . 17
SECTION 9. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . 21
SECTION 10. Underwritten Registrations . . . . . . . . . . . . . . . 21
SECTION 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
-2-
<PAGE> 3
This REGISTRATION RIGHTS AGREEMENT dated as of December 13, 1996, among
TransTexas Gas Corporation (the "Company") and the persons listed as purchasers
on the signatures pages hereof (the "Purchasers"), is made pursuant to the
separate but identical Note Purchase Agreements dated as of the date hereof
between the Company and each of the Purchasers (said separate but identical
Note Purchase Agreements being hereinafter referred to collectively as the
"Note Purchase Agreement"), pursuant to which the Company will issue and sell
its 13 1/4% Senior Subordinated Notes due 2003 in an aggregate original
principal amount of $100,000,000 (the "Notes"). In order to induce the
Purchasers to enter into the Note Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Registration Rights
Agreement. The execution of this Registration Rights Agreement is a condition
to the issuance and sale of the Notes pursuant to the Note Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Note Purchase
Agreement or, if not set forth therein, set forth in the Indenture.
Notwithstanding the preceding sentence, as used in this Agreement, the
following terms shall have the following meanings:
"Advice" shall have the meaning set forth in the last paragraph of
Section 6.
"Affiliate" of any specified person shall mean any other person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person. For purposes of this definition, control
of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person, whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of Section 2, an "Affiliate" of the
Company shall mean and include, in addition, any Person deemed an affiliate
thereof under the Securities Act or the Exchange Act in connection with the
Registered Exchange Offer.
"Consummated" shall mean, when used with reference to a Registered
Exchange Offer, the point at which a Registered Exchange Offer has been made in
accordance with this Agreement and, to the extent accepted, Exchange Notes have
been issued in exchange for Registrable Notes.
"Consummation Date" shall mean the date which is 30 days (or, if longer,
the period during which the Company is required under applicable federal and
state securities laws to keep the Registered Exchange Offer open) after the
Effectiveness Date.
"Cure Date" shall have the meaning set forth in Section 4(a).
"Effectiveness Date" shall mean the date which is 120 days after the
Closing Date.
<PAGE> 4
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Exchange Notes" shall mean the Notes received in the Registered
Exchange Offer for the Notes purchased pursuant to the Note Purchase Agreement.
"Exchange Period" shall have the meaning set forth in Section 2(a).
"Filing Date" shall mean the date which is 45 days after the Closing
Date.
A "Holder" of notes shall mean the registered holder or any beneficial
owner of such notes.
"Illiquidity Event" with respect to any Registrable Notes shall mean any
of the following events:
(i) as of the Effectiveness Date (which shall be deemed the
date such Illiquidity Event occurs), the Exchange Notes offered in
exchange for such Registrable Notes are not the subject of a
Registration Statement for a Registered Exchange Offer which has become
effective (and which, if applicable pursuant to Section 2(a), covers
resales of such Exchange Notes) and as of such date such Registrable
Notes are not the subject of an Initial Shelf Registration which has
become effective;
(ii) as of the Consummation Date (which shall be deemed the
date such Illiquidity Event occurs), a Registered Exchange Offer for
such Registrable Notes has not been Consummated (excluding the
consummation of any resales covered by the Registration Statement for
such Registered Exchange Offer) and as of such date such Registrable
Notes are not the subject of an Initial Shelf Registration which has
become effective;
(iii) the Exchange Notes offered in exchange for such
Registrable Notes are the subject of a Registration Statement for a
Registered Exchange Offer which was effective (and which, if applicable
pursuant to Section 2(a), covers resales of such Exchange Notes) but
which ceased to be effective for any reason as of any date (which shall
be deemed the date such Illiquidity Event occurs) prior to the end of
the Exchange Period; or
(iv) such Registrable Notes are the subject of an Initial Shelf
Registration or Subsequent Shelf Registration which was effective but
which has ceased to be effective for any reason (other than because all
such Registrable Notes have been sold) as of any date (which shall be
deemed the date such Illiquidity Event occurs) prior to the end of the
Effectiveness Period, unless there is an effective Subsequent Shelf
Registration in respect of such Registrable Notes.
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<PAGE> 5
An Illiquidity Event with respect to any Registrable Notes shall be
deemed to cease to exist on the date subsequent to the occurrence of such
Illiquidity Event on which:
(w) either a Registration Statement for a Registered Exchange
Offer for such Registrable Notes (which, if applicable pursuant to
Section 2(a), covers resales of the Exchange Notes exchanged for such
Registrable Notes) or an Initial Shelf Registration covering such
Registrable Notes shall become effective, in the case of an Illiquidity
Event described in clause (i) above;
(x) a Registered Exchange Offer for such Registrable Notes
shall have been Consummated (excluding the consummation of any resales
covered by the Registration Statement for such Registered Exchange
Offer) or an initial Shelf Registration covering such Registrable Notes
shall become effective, in the case of an Illiquidity Event described in
clause (ii) above;
(y) either a Registration Statement for a Registered Exchange
Offer for such Registrable Notes or an Initial Shelf Registration
covering such Registrable Notes shall become effective, in the case of
an Illiquidity Event described in clause (iii) above; or
(z) a Subsequent Shelf Registration covering such Registrable
Notes shall become effective, in the case of an Illiquidity Event
described in clause (iv) above.
The term "including" means including, without limitation, whether or not
expressly so limited.
"Indemnified Holder" shall have the meaning set forth in Section 8(a).
The term "indemnified party" and "indemnifying party" shall have the
respective meanings set forth in Section 8(c).
"Indenture" shall mean the Indenture dated as of [ ],
between the Company and [ ], as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
"Initial Shelf Registration" shall have the meaning set forth in Section
3(a).
"Inspectors" shall have the meaning set forth in Section 6(p).
"Losses" shall have the meaning set forth in Section 8(a).
"Managing Underwriters" shall mean the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
-3-
<PAGE> 6
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
"Notes" shall mean the 13 1/4% Series A or Series B Senior Subordinated
Notes due 2003 of the Company purchased pursuant to the Note Purchase Agreement
or received pursuant to the Registered Exchange Offer, respectively.
"Person" shall mean an individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other entity.
"Proceeding" shall have the meaning set forth in Section 8(c).
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable Notes
covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Purchasers" shall mean those persons listed as purchasers of the Notes
on the signature pages hereof.
"Registered Exchange Offer" shall have the meaning set forth in Section
2(a).
"Registrable Notes" shall mean the Notes upon original issuance thereof,
and at all times subsequent thereto, until, in the case of any such Note, (i) a
Registration Statement covering such Note, or the Exchange Note to be exchanged
for such Note, has been declared effective and such Note has been disposed of
or exchanged (or, in any case where such Registration Statement covers the
resale of such Note, such Note has been exchanged and the Exchange Note
received therefor has been resold), as case may be, in accordance with such
effective Registration Statement, (ii) it is sold in compliance with Rule 144,
(iii) it shall have been otherwise transferred and a new certificate for any
such Note not bearing a legend restricting further transfer shall have been
delivered by the Company or (iv) it ceases to be outstanding.
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Registrable Notes or the Exchange Notes, as the
case may be, pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such Registration Statement,
including post-effective amendments, all exhibits, and all material
-4-
<PAGE> 7
incorporated by reference in such Registration Statement. For purposes of the
foregoing, unless the context requires otherwise, a Registration Statement for
a Registered Exchange Offer shall not be deemed to cover Exchange Notes issued
in exchange for Registrable Notes held by a Restricted Person unless such
Registration Statement covers the resale of such Exchange Notes by such
Restricted Person.
"Restricted Person" shall mean any Affiliate of the Company or any
broker dealer or any Affiliate thereof, in each case which is an original
purchaser of Notes.
"Rule 144" and "Rule 144A" shall mean, respectively, Rule 144 and Rule
144A promulgated under the Securities Act, as such rules may be amended from
time to time, or any similar rules or regulations hereafter adopted by the SEC.
"Rule 415" shall mean Rule 415 promulgated under the Securities Act, as
such rule may be amended form time to time, or any similar rule or regulation
hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Shelf Notice" shall have the meaning set forth in Section 2(b).
"Shelf Registration" shall have the meaning set forth in Section 3(b).
"Special Counsel" shall mean Ropes & Gray, special counsel to the
Purchasers, or any other special counsel to the Holders of Registrable Notes or
Exchange Notes.
"Subsequent Shelf Registration" shall have the meaning set forth in
Section 3(b).
"TIA" shall mean the Trust Indenture Act of 1939, as amended, and the
rules and regulations of the SEC promulgated thereunder.
The term "underwritten registration or underwritten offering" shall mean
a registration in which securities are sold to an underwriter for reoffering to
the public.
SECTION 2. Registered Exchange Offer.
(a) The Company shall use its best efforts to file with the SEC on or
prior to the Filing Date a Registration Statement for an offer to exchange (a
"Registered Exchange Offer") any and all of the Registrable Notes (subject to
Section 2(c)) for a like aggregate principal amount of Notes which are in all
material respects identical to the Registrable Notes (the
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<PAGE> 8
"Exchange Notes") and which are entitled to the benefits of a trust indenture
which is in all material respects identical to the Indenture and which has been
qualified under the TIA) except that they have been registered pursuant to an
effective Registration Statement under the Securities Act. The Registered
Exchange Offer shall be registered under the Securities Act on the appropriate
form of Registration Statement and duly registered or qualified under
applicable blue sky or state securities law and shall comply with all
applicable tender offer rules and regulations under the Exchange Act and with
all other applicable laws. Subject to section 2(c), such Registration
Statement shall also cover any resales of Exchange Notes by any Restricted
Person.
The Company shall use its best efforts (i) to cause the Registration
Statement covering the Registered Exchange Offer to become effective under the
Securities Act on or prior to the Effectiveness Date, (ii) to keep the
Registered Exchange Offer open for a period of not less than the period
required under applicable federal and state securities laws (provided; that in
no event shall such period be less than 30 days), (iii) to maintain such
Registration Statement continuously effective for a period (the "Exchange
Period") of not less than the longer of (A) the period until the consummation
of the Registered Exchange Offer and (B) the period of up to 180 days, subject
to extension pursuant to the last paragraph of Section 6, ending when any
resales of Exchange Notes covered by such Registration Statement have been
made, (iv) to consummate the Registered Exchange Offer prior to the
Consummation Date and (v) to deliver to the Registrar under the Indenture for
cancellation an amount of Notes having the same aggregate principal amount as
the aggregate principal amount of Notes exchanged by Holders thereof for
Exchange Notes pursuant to the Registered Exchange Offer.
Each of the Purchasers (other than any Restricted Person) represents,
and each Holder of the Registrable Notes to be exchanged in the Registered
Exchange Offer (other than any Restricted Person) shall be required to
represent, that any Exchange Notes to be received by it shall be acquired in
the ordinary course of its business and that at the time of the consummation of
the Registered Exchange Offer it shall have no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes. Upon consummation of a Registered Exchange Offer in
accordance with this Section 2 and compliance with the other provisions of this
Section 2, the Company shall, subject to Sections 2(b) and 2(c), have no
further obligation to register Registrable Notes pursuant to Section 3 of this
Agreement; provided, that the other provisions of this Agreement shall continue
to apply as set forth in such provisions.
(b) In the event that the Company reasonably determines in good faith
and after conferring with counsel that (i) the Exchange Notes would not, upon
receipt in the Registered Exchange Offer by any Holder of Registrable Notes
(other than any Restricted Person), be tradeable by each Holder thereof without
restriction under the Securities Act and the Exchange Act and without material
restriction under applicable blue sky or state securities laws, (ii) the SEC is
unlikely to permit the Registration Statement covering the Registered Exchange
Offer to become effective prior to the Effectiveness Date (except in the
circumstances set forth in
-6-
<PAGE> 9
clause (c)(i)(B) of this Section 2) or (iii) the Registered Exchange Offer may
not be made in compliance with applicable laws, then the Company shall promptly
deliver notice thereof (the "Shelf Notice") to the Holders of Registrable Notes
and the Trustee and shall thereafter file an Initial Shelf Registration
pursuant to, and otherwise comply with, the provisions of Section 3. Following
the delivery of a Shelf Notice in accordance with this Section 2(b) and
compliance with Section 3, the Company shall not have any further obligation
under this Section 2.
(c) In the event that the Company reasonably determines in good faith
and after conferring with counsel that (i)(A) the Exchange Notes would not,
upon consummation of any resale thereof by a Restricted Person to any Person
other than another Restricted Person, be tradeable by each Holder thereof
without restriction under the Securities Act and the Exchange Act and without
material restriction under applicable blue sky or state securities laws, or (B)
the SEC is unlikely to permit the Registration Statement covering the
Registered Exchange Offer to become effective prior to the Effectiveness Date
solely because such Registration Statement covers resales of the Exchange Notes
by Restricted Persons, then the Company shall promptly deliver a Shelf Notice
to the Restricted Persons who are Holders of Registrable Notes and the Trustee
and the Company shall thereafter file an Initial Shelf Registration pursuant
to, and otherwise comply with, the provisions of Section 3; provided; that such
Initial Shelf Registration need only cover resales of Registrable Notes by
Restricted Persons if a Shelf Notice is not then otherwise required to be
delivered pursuant to Section 2(b). Following the delivery of a Shelf Notice
in accordance with this Section 2(c) and compliance with Section 3, the Company
shall not have any further obligation under this Section 2 with respect to the
filing of an offer to exchange the Registrable Notes held by Restricted Persons
(including, without limitation, any obligation to provide that a Registration
Statement filed pursuant to Section 2(a) cover resales of Exchange Notes by
Restricted Persons).
SECTION 3. Shelf Registration. If a Shelf Notice is delivered in
accordance with Section 2(b) or (c) then the Company shall comply with the
following provisions of this Section 3:
(a) Initial Shelf Registration. The Company shall use its best
efforts to prepare and file with the SEC, on or prior to the Filing Date, a
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Notes (or, if a Shelf
Notice is delivered solely pursuant to Section 2(c), all of the Registrable
Notes held by any Restricted Persons) (the "Initial Shelf Registration"). The
Initial Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by the Holders
thereof in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). No securities (other than
Registrable Notes) shall be included in the Initial Shelf Registration or any
Subsequent Shelf Registration without the consent of the Holders of a majority
in aggregate principal amount of the Notes covered thereby. The Company shall
use its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act on or prior to the Effectiveness Date and to
keep the Initial Shelf Registration continuously effective under the Securities
Act for a period
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<PAGE> 10
of two years (subject to extension pursuant to the last paragraph of Section 6)
(the "Effectiveness Period") after the Effectiveness Date, or such shorter
period ending when (i) all Registrable Notes covered by the Initial Shelf
Registration have been sold or (ii) a Subsequent Shelf Registration covering
all of such Registrable Notes remaining unsold has been declared effective
under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for
any reason at any time during the Effectiveness Period after the Effectiveness
Date (other than because of the sale of all of the Registrable Notes covered
thereby), the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within 60 days of such cessation of effectiveness amend such Initial
Shelf Registration or Subsequent Shelf Registration in a manner reasonably
expected to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of such Registrable Notes remaining unsold (a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company
shall use its best efforts to cause the Subsequent Shelf Registration to be
declared effective as soon as practicable after such filing and to keep such
Registration Statement continuously effective for a period after the date of
such effectiveness equal in length to the length of the Effectiveness Period,
less the aggregate number of days during which the Initial Shelf Registration
or any Subsequent Shelf Registration was previously effective. As used herein,
the term "Shelf Registration" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall supplement and
amend the Shelf Registration if (i) required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, (ii) otherwise required by the Securities Act or (iii) reasonably
requested by the Holders of a majority in aggregate principal amount of the
Notes covered by such Registration Statement or by any underwriter of such
Notes
(d) Selection of Underwriters. If at any time or from time to time
any of the Holders of the Registrable Notes included in any Shelf Registration
desire to sell Registrable Notes in an underwritten offering, the Managing
Underwriters shall be selected by the Holders of a majority in aggregate
principal amount of the Notes included in such offering; provided that such
Managing Underwriters shall be reasonably satisfactory to the Company.
SECTION 4. Additional Interest for Illiquidity.
(a) The Company acknowledges and agrees that the Purchasers (and any
subsequent Holders of the Notes) have acquired the Notes in reliance on the
Company's covenant to cause a Registration Statement for the Registered
Exchange Offer or an Initial Shelf Registration to become effective on or prior
to the Effectiveness Date and to maintain the effectiveness thereof as
described herein, and that the failure of the Company to fulfill such covenant
will have an adverse effect on the Holders of the Notes. Therefore, the
Company agrees that in the event
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<PAGE> 11
an Illiquidity Event with respect to any Registrable Notes shall occur and be
continuing, interest (in addition to the interest set forth in paragraph 1 of
the Notes) shall accrue with respect to Notes which are then included in such
Registrable Notes, until such time as such Illiquidity Event shall cease to
exist (and provided no other Illiquidity Event with respect to such Registrable
Notes shall then be continuing), at the rate of one percent (1.00%) per annum,
which additional interest shall be payable by the Company to the Holders of
such Notes at the times, in the manner and subject to the same terms and
conditions as set forth in the Indenture, as nearly as may be, as though the
interest rate provided in paragraph 1 of the Notes had been increased by one
percent (1.00%) per annum. Any such additional interest accrued on such Notes
but unpaid on the date on which such interest ceases to accrue (the "Cure
Date") shall be due and payable on the next Interest Payment Date (as such term
is defined in the Indenture) after such Cure Date to the Holders of record of
such Notes at the close of business on the business day preceding such Due
Date.
(b) The Company shall notify the Trustee of the occurrence of any
Illiquidity Event promptly (and in any case within three business days
thereof).
SECTION 5. Hold-Back Agreements.
(a) Restrictions on Sale by Holders of Registrable Notes. Each
Holder of Registrable Notes whose Registrable Notes are covered by a
Registration Statement agrees not to effect any public sale or distribution of
Registrable Notes, including pursuant to Rule 144, during the period beginning
10 days prior to, and ending 90 days after, the closing date of any
underwritten offering made pursuant to a Registration Statement filed pursuant
to Section 3 in which such Holder is participating, to the extent timely
requested in writing by the Managing Underwriters of such offering (except as
part of such offering).
The foregoing provisions shall not apply to any Holder of Registrable
Notes if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; provided, however, that any such Holder shall
undertake, in its request to participate in any underwritten offering made
pursuant to a Registration Statement filed pursuant to Section 3, not to effect
any public sale or distribution of Registrable Notes (except as part of such
underwritten offering) during the period commencing on the closing date of such
underwritten offering and ending 90 days thereafter, unless it has provided 45
days prior written notice of such sale or distribution to the Company and the
Managing Underwriters.
(b) Restrictions on Sale by the Company. The Company agrees (i) that
it shall not effect any public or private sale or distribution of its debt
securities, including a sale pursuant to Regulation D under the Securities Act,
during the period beginning 10 days prior to, and ending 90 days after, the
closing date of any underwritten offering made pursuant to a Registration
Statement filed pursuant to Section 3, to the extent timely requested in
writing by the Managing Underwriters (except as part of such underwritten
registration or pursuant to registrations on Form S-4 or S-8 or any successor
form to such Form) and (ii) to cause each
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<PAGE> 12
holder of privately placed debt securities of the Company issued at any time on
or after the date of this Agreement (other than the Holders of Registrable
Notes) to agree on or before the date such securities are issued (unless
prevented by applicable statute or regulation) not to effect any public sale or
distribution of any such securities during such period, including a sale
pursuant to Rule 144 (except as part of such registration, if permitted).
SECTION 6. Registration Procedures. In connection with the
registration of any Registrable Notes or Exchange Notes pursuant to Section 2
or 3 hereof, the Company shall use its best efforts to effect such registration
to permit the sale of such Registrable Notes or Exchange Notes in accordance
with the intended method or methods of disposition thereof, and pursuant
thereto the Company shall, as expeditiously as possible:
(a) Prepare and file with the SEC, as soon as practicable after the
date hereof but in any event prior to the Filing Date, a Registration Statement
or Registration Statements as prescribed by Section 2 or 3, and use its best
efforts to cause each such Registration Statement to become effective and
remain effective for the applicable period as provided herein; provided,
however, that (i) the Company shall afford any Restricted Person which is a
Holder of Registrable Notes or Exchange Notes and its Special Counsel an
opportunity to review copies of all such documents proposed to be filed and
(ii) if such filing is pursuant to Section 3, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto (including
documents that would be incorporated therein by reference after the initial
filing of the Registration Statement), the Company shall afford the Holders of
the Registrable Notes covered by such Registration Statement, their Special
Counsel and the Managing Underwriters, if any, an opportunity to review copies
of all such documents proposed to be filed. The Company shall not file any
Registration Statement or related Prospectus, and any amendments or supplements
thereto (including such documents incorporated by reference), if any such
Restricted Person (in the event resales of such Restricted Person's Exchange
Notes are covered by such Registration Statement), the Holders of a majority in
aggregate principal amount of the Notes covered by such Registration Statement,
their Special Counsel, or the Managing Underwriters, if any, shall reasonably
object, in writing, on a timely basis and such objection shall not be resolved
on a basis reasonably satisfactory to all such parties.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration as may be necessary to keep such
Registration Statement continuously effective for the applicable period as
provided herein; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act,
the Exchange Act and the rules and regulations of the SEC promulgated
thereunder with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented
in accordance with the intended methods of disposition by the sellers of
Registrable Notes covered thereby set forth therein.
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(c) If a Shelf Registration is filed pursuant to Section 3, notify
the selling Holders of Registrable Notes, their Special Counsel and the
Managing Underwriters, if any, promptly (but no later than five Business Days)
after the Company becomes aware thereof, and confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to a Registration Statement or any post-
effective amendment, when the same has become effective, (ii) of any request by
the SEC for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or
Prospectus or the initiation of any proceedings for that purpose, (iv) if at
any time the representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated by Section 6(o)
below cease to be true and correct, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the Registrable Notes
for offer of sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (vi) of the existence of any fact known to the
Company which results in such Registration Statement or related Prospectus or
any document incorporated therein by reference containing any untrue statement
of a material fact or omitting to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (vii) if
the Company reasonably determines that the filing of a post-effective amendment
to such Registration Statement would be appropriate.
(d) If a Shelf Registration is filed pursuant to Section 3, use its
best efforts to prevent the issuance of any order suspending the effectiveness
of a Registration Statement or of any order preventing or suspending the use of
a Prospectus or suspending the qualification (or exemption from qualification)
of any of the Registrable Notes for sale in any jurisdiction and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the Managing Underwriters or a Holder of Registrable Notes being
sold in connection with an underwritten offering, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information as the
Managing Underwriters and the Holders of a majority in aggregate principal
amount of the Registrable Notes being sold reasonably agree should be included
therein relating to the sale of the Registrable Notes, including, without
limitation, information with respect to the aggregate principal amount of
Registrable Notes being sold to the underwriters of such offering, the purchase
price being paid therefor by such underwriters and any other terms of the
underwritten (or best efforts underwritten) offering of the Registrable Notes
to be sold in such offering and (ii) make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
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<PAGE> 14
(f) If a Shelf Registration is filed pursuant to Section 3, furnish
to each selling Holder of Registrable Notes who so requests and to Special
Counsel and each Managing Underwriter, if any, without charge, one conformed
copy of the Registration Statement or Statements and each post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference).
(g) If a Shelf Registration is filed pursuant to Section 3, deliver
to each selling Holder of Registrable Notes, Special Counsel and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each preliminary prospectus) and each amendment or
supplement thereto as such persons may reasonably request; and, subject to the
last paragraph of this Section 6, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders of Registrable Notes and the underwriters, if any, in connection with
the offering and sale of the Registrable Notes covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes, register or
qualify, and cooperate with the selling Holders of Registrable Notes, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, such Registrable Notes for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any selling Holder or the Managing Underwriters reasonably request in writing
(provided; that where Registrable Notes are offered other than through an
underwritten offering, the Company agrees to cause its counsel to perform blue
sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 6(h)); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective; and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Notes covered by the applicable Registration
Statement.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the Managing Underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Notes to be sold, which certificates shall not bear
any restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Notes to be in such denominations and
registered in such names as the Managing Underwriters, if any, or Holders may
reasonably request at least two business days prior to any sale of Registrable
Notes in a firm commitment underwritten public offering, or at least 10
business days prior to any other such sale.
(j) Cause the Registrable Notes covered by the Registration Statement
or the Exchange Notes, as the case may be, to be registered with or approved by
such other governmental agencies or authorities within the United States as may
be necessary to enable the seller or sellers thereof or the underwriters, if
any, to consummate the disposition of such
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<PAGE> 15
Registrable Notes or to enable the Holders thereof to consummate the Registered
Exchange Offer.
(k) If a Shelf Registration is filed pursuant to Section 3, upon the
occurrence of any event contemplated by Section 6(c), prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any documents incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Notes, such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement or the Exchange Notes, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Notes covered by such Registration
Statement or the Exchange Notes, as the case may be, or the Managing
Underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Notes which are Registrable Notes or the Exchange Notes, as the
case may be, (i) provide the Trustee with printed certificates for such Notes
in a form eligible for deposit with The Depository Trust Company and (ii)
provide a CUSIP number for such Notes.
(n) Use its best efforts to cause all Registrable Notes covered by
such Registration Statement or the Exchange Notes, as the case may be, to be
(i) listed on each securities exchange, if any, on which similar securities
issued by the Company are then listed or (ii) authorized to be quoted on NASDAQ
or the National Market System of NASDAQ if similar securities of the Company
are so authorized, in each case, if requested by the Holders of a majority in
aggregate principal amount of the Notes covered by such Registration Statement
or the Exchange Notes, as the case may be, or the Managing Underwriters, if
any. It is understood by the parties hereto that the 11 1/2% Senior Secured
Notes due 2002 of the Company are not "similar securities" for purposes of the
preceding sentence.
(o) If a Shelf Registration is filed pursuant to Section 3, enter
into such agreements (including underwriting agreements) and take all other
appropriate actions in order to expedite or facilitate the registration or the
disposition of such Registrable Notes and, in connection therewith, whether or
not an underwriting agreement is entered into and whether or not the
registration involves an underwritten offering, (i) make such representations
and warranties to the Holders of such Registrable Notes and the underwriters,
if any, in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings and covering matters including,
but not limited to, those set forth in the Note Purchase Agreement; (ii) obtain
opinions of counsel to the Company and updates thereof (which opinions (in
form, scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the Holders of a majority in aggregate principal
amount of the Notes
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<PAGE> 16
being sold) addressed to each selling Holder and the underwriters, if any,
covering such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such Holders and underwriters; (iii) obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company (and,
if necessary, any other independent certified public accountants of any
subsidiary of the Company or any business acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each selling Holder of Registrable
Notes and the underwriters, if any, in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
primary underwritten offerings; (iv) if an underwriting agreement is entered
into, cause the same to contain indemnification provisions and procedures no
less favorable than those set forth in Section 8 (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
the Notes covered by such Registration Statement and the Managing Underwriters,
if any) with respect to all parties to be indemnified pursuant to Section 8;
and (v) deliver such documents and certificates as may be requested by the
Holders of a majority in aggregate principal amount of the Notes being sold and
the Managing Underwriters, if any, to evidence compliance with Section 6(k) and
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The foregoing actions set forth in this
Section 6(o) shall be performed at (A) the effectiveness of such Registration
Statement and each post-effective amendment thereto, (B) each closing under any
underwriting or similar agreement as and to the extent required thereunder and
(C) from time to time as may be reasonably requested by any selling Holder in
connection with the disposition of Registrable Notes pursuant to such
Registration Statement, provided, in the case of actions taken pursuant to
clause (C), such actions are taken at the requesting Holder's sole expense.
(p) If a Shelf Registration is filed pursuant to Section 3, make
available for inspection by a representative of the Holders of a majority in
aggregate principal amount of the Notes being sold, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney or accountant retained by such representative of the Holders or
underwriter (collectively, the "Inspectors"), during reasonable business hours,
all financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information in each
case reasonably requested by any such Inspector in connection with such
Registration Statement; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at the
time of delivery of such information, shall be kept confidential by such
Inspector (other than as to Holders of Registrable Notes) and by any Holders of
Registrable Notes receiving such information, unless (i) disclosure of such
information is required by court or administrative order, (ii) disclosure of
such information is necessary to avoid or correct a misstatement or omission of
a material fact in the Registration Statement, Prospectus or any supplement or
post-effective amendment thereto or disclosure is otherwise required by law,
(iii) such information becomes generally available to the public other than as
a result of a disclosure by such Inspector in violation of
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<PAGE> 17
this Section 6(p) or (iv) such party rightfully receives the information from
any third party without an accompanying obligation of confidentiality, the
information is already in such party's possession without an accompanying
obligation of confidentiality or the information is approved for release by the
Company in writing.
(q) Provide a Trustee for the Registrable Notes or the Exchange
Notes, as the case may be, and use its best efforts to cause the Indenture or
the trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the Effective Date; and in connection
therewith, cooperate with the Trustee under any such indenture and the Holders
of the Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA and execute, and use its best efforts to cause the Trustee to execute,
all documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable such indenture to be
so qualified in a timely manner.
(r) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its
securityholders earnings statements satisfying the provisions of Section 11(a)
of the Securities Act (in accordance with Rule 158 thereunder or otherwise) no
later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the beginning of the first fiscal quarter of the Company following that in
which Registrable Notes are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(s) Cooperate with and assist each selling Holder of Registrable
Notes and each underwriter participating in the disposition of such Registrable
Notes and their respective counsel in connection with any filings required to
be made with the NASD and in the performance of any due diligence investigation
by any underwriter, including any "qualified independent underwriter" that is
required to be retained in connection with the rules and regulations of the
NASD.
For purposes of the covenants set forth in this Section 6, references to
a Shelf Registration, including a Shelf Registration filed pursuant to Section
3, shall be deemed to include any Registration Statement, filed pursuant to
Section 2, which covers resales of Exchange Notes held by Restricted Persons as
provided in Section 2, and, in connection with such resales, such Restricted
Persons shall be entitled to exercise all rights, receive all notices and
copies of documents, and otherwise receive all benefits afforded to sellers or
Holders of Registrable Notes under this Section 6 in connection with a Shelf
Registration. Without limiting the generality of the foregoing, the Company
agrees to fulfill its obligations set forth in Sections 6(a), (b), (c), (d),
(e), (f), (g), (i), (k), (o) and (p) with respect to any such Registration
Statement filed pursuant to Section 2 insofar as it covers such resales.
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<PAGE> 18
The Company may require each Holder of Registrable Notes as to which any
registration is being effected to furnish to the Company (i) such information
regarding the distribution of such Registrable Notes as the Company may, from
time to time, reasonably request in writing and which is required by the
Securities Act to be included in the Registration Statement and (ii) such other
information as the Company may from time to time, reasonably request in
writing, which is required by the Securities Act to be included in the
Registration Statement and which is in the sole possession of such Holder.
Each Holder of Registrable Notes agrees by acquisition of such
Registrable Notes that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 6(c)(ii), 6(c)(iii),
6(c)(v) or 6(c)(vi), such Holder shall forthwith discontinue disposition of
such Registrable Notes covered by such Registration Statement or Prospectus
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(k), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
reused, and has received copies of any amendments or supplements thereto. In
the event the Company shall give any such notice, the length of the
Effectiveness Period or the 180-day period referred to in Section 2(a)(iii)(B),
as applicable, shall be extended by the number of days during such period from
and including the date of the giving of such notice to and including the date
when each seller of Registrable Notes covered by such Registration Statement
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 6(k) or (y) the Advice.
SECTION 7. Registration Expenses.
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company,
whether or not the Registered Exchange Offer or a Shelf Registration is filed
or becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees and expenses with respect
to filings required to be made with the NASD in connection with the
Registration Statement, including, if applicable, the fees and expenses of any
"qualified independent underwriter" or other independent appraiser (and its
counsel) that is required to be retained in accordance with the rules and
regulations of the NASD and legal fees and expenses in connection with any such
filings and (B) fees and expenses of compliance with state securities or blue
sky laws (including, without limitation, fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the Holders
of Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 6(h), in the case of Registrable Notes)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the Managing Underwriters, if any, or by the
Holders of a majority in aggregate principal amount of the Notes covered by any
Registration Statement or by any Restricted Person which is a
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<PAGE> 19
Holder of Registrable Notes or Exchange Notes), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company and
of Special Counsel for the sellers of Registrable Notes (subject to the
provisions of Section 7(b)), (v) fees and disbursements of all independent
certified public accountants referred to in Section 6(o) (iii) (including,
without limitation, expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) fees and disbursement of
underwriters (excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals relating
to the distribution of the Registrable Notes or legal expenses of any Person
other than the Company and the selling Holders), (vii) rating agency fees,
(viii) Securities Act liability insurance, if the Company desires such
insurance, (ix) fees and expenses of all other Persons, including special
experts, retained by the Company, (x) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties), (xi) the
expense of any annual audit of the Company's financial statements by the
Company's independent auditors and (xii) the fees and expenses incurred in
connection with the listing of the Registrable Notes or Exchange Notes on any
securities exchange or quotation system.
(b) In connection with any Registration Statement hereunder, the
Company shall reimburse the Holders of the Registrable Notes being registered
in such registration for the reasonable fees and disbursements of not more than
one counsel chosen by the Holders of the majority in aggregate principal amount
of Notes being registered.
SECTION 8. Indemnification.
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless each Holder of Registrable
Notes, the officers, directors, agents, advisers, counsel and employees of each
of them and each Person who controls such Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (each such Person
being sometimes hereinafter referred to as an "Indemnified Holder") from and
against any and all losses, claims, damages, liabilities, costs and expenses
(including, without limitation, reasonable costs of investigation)
(collectively, "Losses"), as incurred, arising out of, resulting from or based
upon any untrue or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of, resulting from or based
upon any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, except to
the extent that the same arise out of, results from or are based upon
information furnished in writing to the Company by such Indemnified Holder or
the related Holder of a Registrable Note expressly for use therein; provided,
however, that the Company shall not be liable to any Indemnified Holder to the
extent that any such Losses arise out of, result from or are based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus if (i) such Indemnified Holder or the
related Holder of a Registrable Note failed to send or deliver a copy of the
Prospectus, including any amendments or supplements thereto,
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<PAGE> 20
with or prior to the delivery of written confirmation of the sale by such
Indemnified Holder or the related Holder of a Registrable Note to the person
asserting the claim from which such Losses arise in any case where such
delivery is required by the Securities Act, (ii) the Prospectus, including any
amendments or supplements thereto, would have corrected such untrue statement
or alleged untrue statement or such omission or alleged omission and (iii) the
Company has complied with its obligations under Sections 6(c), 6(g) and 6(k)
prior to such delivery of confirmation; provided further, that the Company
shall not be liable in any such case to the extent that any such Losses arise
out of, result from or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the Prospectus, if (A) such untrue
statement or alleged untrue statement, omission or alleged omission is
corrected in an amendment or supplement to the Prospectus, (B) such Indemnified
Holder or the related Holder of a Registrable Note thereafter fails to deliver
such Prospectus as so amended or supplemented, prior to or concurrently with
the sale of a Registrable Note to the Person asserting the claim from which
such Losses arise in any case where such delivery is required by the Securities
Act, and (C) the Company has complied with its obligations under Sections 6(c),
6(g) and 6(k) prior to such sale. The Company shall also indemnify
underwriters (including any Holder of Registrable Notes in respect of resales
of Exchange Notes covered by the Registration Statement for the Registered
Exchange Offer), selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, their officers,
directors, agents and employees and each Person who controls such Person within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, to the same extent as provided above with respect to the indemnification
of the Holders of Registrable Notes.
(b) Indemnification by Holder of Registrable Notes. Each Holder of
Registrable Notes agrees severally to indemnify and hold harmless the Company,
its officers, directors, agents, counsel and employees and each Person who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against all Losses arising out of,
resulting from or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of, resulting from or based upon any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
or alleged untrue statement is contained in, or such omission or alleged
omission is required to be contained in, any information relating to such
Holder furnished in writing by such Holder to the Company expressly for use in
such Registration Statement or Prospectus, or in any amendment or supplement
thereto or in any preliminary prospectus and that such information was used by
the Company in preparation of such Registration Statement or Prospectus or such
amendment or supplement thereto or such preliminary prospectus. In no event
shall the liability of any selling Holder of Registrable Notes hereunder be
greater in amount than the dollar amount of the proceeds (net of payment of all
expenses) received by such Holder upon the sale of the Registrable Notes giving
rise to such indemnification obligation. The Company shall be entitled to
receive indemnities from underwriters, selling
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<PAGE> 21
brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information furnished in writing by such Persons specifically for
inclusion in any Prospectus or Registration Statement or any amendment or
supplement thereto or any preliminary prospectus.
(c) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation or inquiry) (a
"Proceeding") shall be brought or asserted against any Person who is entitled
to indemnity hereunder ("indemnified party"), such indemnified party shall give
prompt notice to the party or parties from which such indemnity is sought (each
an "indemnifying party") of the commencement of such Proceeding if a claim in
respect thereof is to be made hereunder; provided, however, that the failure so
to notify an indemnifying party shall not relieve such indemnifying party from
any obligation or liability except to the extent that such indemnifying party
has been materially prejudiced by such failure. The indemnifying party or
parties shall have the right, exercisable by giving written notice to an
indemnified party promptly after the receipt of written notice from such
indemnified party of such Proceeding, to assume, at such indemnifying party's
or parties' expense, the defense of any such Proceeding, with counsel
reasonably satisfactory to such indemnified party; provided, however, that an
indemnified party or parties (if more than one such indemnified party is named
in any Proceeding) shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such indemnified party or parties
unless: (1) the indemnifying party or parties agree to pay such fees and
expenses; or (2) the indemnifying party or parties fail promptly to assume the
defense of such Proceeding or fail to employ counsel reasonably satisfactory to
such indemnified party or parties; or (3) the indemnified party or parties
shall have been advised in writing by counsel, in its reasonable judgment, that
there is reasonably likely to be a conflict between the positions of the
indemnifying party or parties and such indemnified party or parties in
conducting the defense of such Proceeding or that there are reasonably likely
to be one or more legal defenses available to such indemnified party or parties
that are different from or additional to those available to the indemnifying
party or parties (in which case, if such indemnified party or parties notify
the indemnifying party or parties in writing that it or they elect to employ
separate counsel at the expense of the indemnifying party or parties, the
indemnifying party or parties shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the indemnifying party or
parties, it being understood, however, that, unless there exists a conflict
among indemnified parties, the indemnifying party or parties shall not, in
connection with any one such Proceeding or separate but substantially similar
or related Proceedings in the same jurisdiction, arising out of the same
general allegations or circumstances, be liable for the fees and expense of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party or parties and any other
indemnified party or parties, which firm shall be designated in writing by such
indemnified parties). No indemnifying party shall be liable for any settlement
of any Proceeding made without its written consent (but such consent shall not
be unreasonably withheld); provided that, if such Proceeding is settled with
its written consent or if there shall
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<PAGE> 22
be a final judgment for the claimant or plaintiff in such Proceeding, such
indemnifying party shall indemnify and hold harmless the indemnified party or
parties from and against any Losses by reason of such settlement or judgment
for which the indemnified party or parties would be entitled to indemnification
hereunder. No indemnifying party shall, without the consent of an indemnified
party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release, in form and substance
satisfactory to such indemnified party, from all liability in respect of such
Proceeding for which such indemnified party would be entitled to
indemnification hereunder.
(d) Contribution. If the indemnification provided for in the
foregoing provisions of this Section 8 is unavailable to an indemnified party
(for any reason other than by reason of the exceptions set forth in those
provisions) or is insufficient to hold such indemnified party harmless for any
Losses in respect of which the foregoing provisions of this Section 8 would
otherwise apply by their terms, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the amount paid or payable by such indemnified
party as a result of such Losses, in such proportion as is appropriate to
reflect the relative fault of such indemnifying party, on the one hand, and
such indemnified party, on the other hand, in connection with the statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one
hand, and such indemnified party, on the other hand, shall be determined by
reference to, among other things, whether any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact has been taken, or relates to information supplied by or on
behalf of such indemnifying party, on the one hand, or by or on behalf of such
indemnified party, on the other hand, and such parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
statement or omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include any legal or other fees and expenses
incurred by such party in connection with any Proceeding, to the extent such
party would have been indemnified for such fees and expense if the
indemnification provided for in Section 8(a) or 8(b) was available to such
party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) 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 the immediately preceding
paragraph. Notwithstanding the provisions of this Section 8(d), no Indemnified
Holder shall be required to contribute any amount which, when added to the
amounts contributed by any related Indemnified Holders, is in excess of the
amount by which the total price at which the Registrable Notes sold by such
Indemnified Holder (or related selling Holder of Registrable Notes) and
distributed to the public were offered to the public exceeds the amount of any
damages that such Indemnified Holder and related Indemnified Holders have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission and for which they have not been
reimbursed by the
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Company. 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.
SECTION 9. Rules 144 and 144A. The Company covenants that it shall
file the reports required to be filed by it under the Securities Act and the
Exchange Act (or, if the Company is not required to file such reports, the
Company shall (i) upon the request of any Holder of Registrable Notes made
after 21 months from the Closing Date (or at such earlier date as is necessary
to enable Holders to sell Registrable Notes under Rule 144) make publicly
available such information as is necessary to enable Holders to sell
Registrable Notes pursuant to Rule 144 and (ii) deliver such information to a
prospective purchaser as is necessary to enable Holders to sell Registrable
Notes pursuant to Rule 144A), and the Company shall take such further action as
any Holder of Registrable Notes may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Notes
without registration under the Securities Act within the limitations of the
exemptions provided by Rule 144 and Rule 144A. Upon the request of any Holder
or Registrable Notes or the Trustee, the Company shall deliver to such Holder
or the Trustee, as the case may be, a written statement as to whether it has
complied with such requirements. Notwithstanding the foregoing, nothing in
this Section 9 shall be deemed to require the Company to register any of its
securities under any section of the Exchange Act.
SECTION 10. Underwritten Registrations. No Person may participate in
any underwritten registration hereunder unless such Person (a) agrees to sell
such Person's securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements. Nothing in this Section 10 shall be
construed to create any additional rights regarding the registration of
Registrable Notes in any Person otherwise than as set forth herein.
SECTION 11. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder of Registrable Notes, in addition
to being entitled to exercise all rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by them of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, they shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of the date
hereof, nor shall it, on or after the date hereof, enter into, any agreement
with respect to its securities that
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<PAGE> 24
is inconsistent with the rights granted to the Holders of Registrable Notes
herein or otherwise conflicts with the provisions hereof.
(c) Adjustments Affecting Registrable Notes. The Company shall not,
directly or indirectly, take any action with respect to the Registrable Notes
as a class (i) which would adversely affect the ability of the Holders of
Registrable Notes in a registration undertaken pursuant to this Agreement or
(ii) that would adversely affect the marketability of such Registrable Notes in
any such registration.
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Notes, provided that, with respect to any matter that directly or
indirectly affects the rights of any Restricted Person hereunder, the Company
shall obtain the written consent of each such Restricted Person against which
such amendment, qualification, supplement, waiver or consent is to be
effective. Notwithstanding the foregoing (except for the foregoing proviso), a
waiver or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders of Registrable Notes
whose Notes are being sold pursuant to a Registration Statement and that does
not directly or indirectly affect the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being sold by such Holders pursuant to such
Registration Statement; provided, however, that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(e) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee)
provided for or permitted hereunder shall be made in writing and delivered by
hand delivery, registered first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current
address given by such Holder to the Company in accordance with the
provisions of this Section 11(e), which address initially is, with
respect to each Purchaser, the address set forth on its respective
signature page attached hereto, with a copy to Ropes & Gray, One
International Place, Boston, Massachusetts 02110, Attention: Robert L.
Nutt, Esq.; and
(ii) if to the Company, initially to TransTexas Gas
Corporation, 1300 East Northbelt, Houston, Texas 77032, Attention: Ed
Donahue, Vice President and Chief Financial Officer, with a copy to
Gardere & Wynne, L.L.P., 3000 Thanksgiving Tower, 1601 Elm, Suite 3000,
Dallas, Texas 75201, Attention: C. Robert Butterfield, Esq.
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<PAGE> 25
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered for a next-day delivery; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment or any consent by the Company thereto, subsequent Holders of
Registrable Notes. The Company hereby agrees to extend the benefits of this
Agreement to any Holder of Notes and any such Holder may specifically enforce
the provisions of this Agreement as if an original party hereto.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE SUPREME COURT OF NEW YORK, NEW YORK COUNTY OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE COMPANY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PURCHASER TO SERVE PROCESS IN ANY MANNER
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<PAGE> 26
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(k) Entire Agreement. This Agreement, together with the Note
Purchase Agreement and Indenture, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties thereto in respect
of the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than these set forth or referred to
herein and therein. This Agreement, together with the Note Purchase Agreement
and the Indenture, supersedes all prior agreements and understandings between
the parties thereto with respect to such subject matter.
(l) Notes Held by the Company, etc. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Registrable Notes
is required hereunder, Registrable Notes held by the Company, its Affiliates
(other than the Purchasers or subsequent Holders of Registrable Notes if such
subsequent Holders are deemed to be such Affiliates solely by reason of their
holdings of such Registrable Notes) shall not be counted in determining whether
such approval was given by the Holders of such required percentage.
(m) Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses and any other
available remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TRANSTEXAS GAS CORPORATION
By
------------------------------------------
Name:
Title:
Registration Rights Agreement
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<PAGE> 1
Exhibit 15.1
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: TransTexas Gas Corporation (the "Company")
Registration Statement on Form S-3
Ladies and Gentlemen:
We are aware that our reports dated December 14, 1995, June 14, 1996,
September 16, 1996 and December 16, 1996 on our review of interim condensed
consolidated financial information of the Company for the three month period
ended October 31, 1995, the three month period ended April 30, 1996, the three
and six month periods ended July 31, 1996 and the three and nine month periods
ended October 31, 1996, respectively, which are included in the Company's
reports on Form 10-Q for the quarters then ended, are incorporated by reference
in Post-Effective Amendment No. 5 to the Company's Registration Statement on
Form S-3 (No. 33-91494), filed with the Securities and Exchange Commission on
December 20, 1996. Pursuant to Rule 436(c) under the Securities Act of 1933,
as amended (the "Act"), these reports should not be a part of the registration
statement prepared or certified by us within the meaning of Sections 7 and 11
of the Act.
COOPERS & LYBRAND, L.L.P.
Houston, Texas
December 20, 1996
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post Effective
Amendment No. 5 to the Registration Statement of TransTexas Gas Corporation on
Form S-3 (File No. 33-91494) of our report dated April 29, 1996 relating to our
audit of the consolidated balance sheet of TransTexas Gas Corporation as of
January 31, 1996 and July 31, 1995 and 1994; the related consolidated
statements of operations and cash flows for the six months ended January 31,
1996 and each of the three years ended July 31, 1995; and the statement of
stockholders' deficit for the six months ended January 31, 1996 and each of the
two years ended July 31, 1995. We also consent to the reference to our firm
under the caption "Independent Accountants."
COOPERS & LYBRAND L.L.P.
Houston, Texas
December 20, 1996
