<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1997
REGISTRATION NO.333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___________________________________
TRANSTEXAS GAS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1311 76-0401023
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Code Number) Identification No.)
</TABLE>
1300 N. SAM HOUSTON PARKWAY E., 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 N. SAM HOUSTON PARKWAY E., 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 securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
Title Of Each Class Of Amount To Be Proposed Maximum Proposed Maximum Amount of
Securities To Be Registered Registered Offering Price Per Note Aggregate Offering Price Registration Fee(1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13 3/4% Series D Senior
Subordinated Notes $115,815,000 100% $115,815,000 $ 35,095.45
===============================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(f)(2). For purposes of this calculation,
the Offering Price per Note was assumed to be the principal amount as
shown on the face of the Exchange Notes.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
Subject to Completion, dated August 15, 1997
PROSPECTUS
OFFER TO EXCHANGE
ALL OUTSTANDING
13 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2001
($115,815,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
13 3/4% SERIES D SENIOR SUBORDINATED NOTES DUE 2001
($115,815,000 PRINCIPAL AMOUNT)
OF
TRANSTEXAS GAS CORPORATION
------------------------
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1997, unless extended.
------------------------
TransTexas Gas Corporation, a Delaware corporation (the "Company" or
"TransTexas"), hereby offers (the "Exchange Offer"), upon the terms and subject
to the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange up to an aggregate
principal amount of $115,815,000 of its 13 3/4% Series D Senior Subordinated
Notes due 2001 (the "Exchange Notes") for an equal principal amount of its
outstanding 13 3/4% Series C Senior Subordinated Notes due 2001 (the
"Outstanding Notes" and, together with the Exchange Notes, the "Notes"), in
integral multiples of $1,000. The Exchange Notes will be subordinated
unsecured obligations of the Company and are substantially identical (including
principal amount, interest rate, maturity and redemption rights) to the
Outstanding Notes for which they may be exchanged pursuant to this Exchange
Offer, except for certain transfer restrictions and registration rights
relating to the Outstanding Notes and except for certain interest provisions
relating to such rights. The Outstanding Notes have been, and the Exchange
Notes will be, issued under an Indenture dated as of June 13, 1997 (the
"Indenture"), among the Company and Bank One, NA, as trustee (the "Trustee").
See "Description of the Notes." There will be no proceeds to the Company from
this offering; however, pursuant to a Registration Rights Agreement dated as of
June 13, 1997 (the "Registration Rights Agreement") among the Company and the
persons to whom the Outstanding Notes were originally issued (the "Original
Holders"), the Company will bear certain offering expenses.
(Cover text continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN RISKS
TO BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND IN EVALUATING AN
INVESTMENT IN THE EXCHANGE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 3
The Company will accept for exchange any and all Outstanding Notes
validly tendered on or prior to 5:00 p.m., New York City time, on
, 1997, unless extended (the "Expiration Date"). Tenders of Outstanding Notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date; thereafter, such tenders are irrevocable. Bank One, NA is
acting as Exchange Agent in connection with the Exchange Offer. The Exchange
Offer is not conditioned upon any minimum principal amount of Outstanding Notes
being tendered for exchange, but is otherwise subject to certain customary
conditions.
The Exchange Notes will bear interest from the date of issuance (or
the most recent Interest Payment Date (as defined) to which interest on such
Exchange Notes has been paid) at a rate of 13 3/4% per annum on the same terms
as the Outstanding Notes. Interest on the Exchange Notes will be payable
semiannually on June 30 and December 31 of each year commencing December 31,
1997. Accrued interest on the Outstanding Notes that are tendered in exchange
for the Exchange Notes will be payable on or before December 31, 1997.
Outstanding Notes that are accepted for exchange will cease to accrue interest
on and after the date on which interest on the Exchange Notes will begin to
accrue.
The Outstanding Notes were issued by the Company in June 1997,
pursuant to an Exchange Offer and Consent Solicitation dated May 17, 1997, as
supplemented (the "June Exchange Offer") in exchange for all of the Company's
outstanding 13 1/4% Senior Subordinated Notes due 2003 (the "December 1996
Notes"), which were sold by the Company on December 13, 1996. The issuances of
both the December 1996 Notes and the Outstanding Notes were in transactions not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon the exemption provided in Section 4(2) of the Securities Act.
Accordingly, the Outstanding Notes may not be reoffered, resold or otherwise
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is
available. The Exchange Notes are being offered hereunder in order to satisfy
obligations of the Company under the Registration Rights Agreement. See "The
Exchange Offer."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that Exchange Notes issued pursuant to this
Exchange Offer may be offered for resale, resold and otherwise transferred by a
holder who is not an affiliate of the Company without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holder is acquiring the Exchange Notes in its ordinary course of
business and is not participating in and has no arrangement or understanding
with any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes. Persons wishing to exchange Outstanding
Notes in the Exchange Offer must represent to the Company that such conditions
have been met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
Exchange Notes. The Letter of Transmittal for the Exchange Offer states that
by so acknowledging and delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Outstanding Notes where such
Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
to make this Prospectus available to any Participating Broker-Dealer for use in
connection with any such resale for a period of up to 180 days from the date on
which the registration statement, of which this Prospectus forms a part, is
declared effective. See "Plan of Distribution."
The Company does not intend to list the Exchange Notes on any national
securities exchange or to seek the admission thereof to trading on The Nasdaq
Stock Market. Accordingly, no assurance can be given that an active public or
other market will develop for the Exchange Notes or as to the liquidity of or
the trading market for the Exchange Notes.
Any Outstanding Notes not tendered and accepted in the Exchange Offer
will remain outstanding. To the extent that any Outstanding Notes of other
holders are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Outstanding Notes could be adversely affected. Following
consummation of the Exchange Offer, the holders of Outstanding Notes will
continue to be subject to the existing restrictions upon transfer thereof.
ii
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act with respect to the securities offered by this Prospectus.
Certain information contained in the Registration Statement is omitted from
this Prospectus, and reference is hereby made to the Registration Statement and
exhibits and schedules relating thereto for further information with respect to
the Company and the securities offered by this Prospectus. The Company is
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, files
reports, proxy and information statements and other information with the
Commission. Such reports, proxy and information statements and other
information are available for inspection at, and copies of such materials may
be obtained upon payment of the fees prescribed therefor by the rules and
regulations of the Commission from the Commission at its principal offices
located at Judiciary Plaza, 450 Fifth Street, Room 1024, Washington, D.C.
20549, and at the Regional Offices of the Commission located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and at 7 World Trade Center, Suite 1300, New York, New York 10048.
The Commission maintains a World Wide Web site on the Internet at http: / /
www.sec.gov that contains reports, proxy and information statements and other
information regarding registrants, including the Company, that file
electronically with the Commission. In addition, the common stock of the
Company ("Common Stock") is traded on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol TTXG, and such reports, proxy statements
and other information may be inspected at the offices of The Nasdaq Stock
Market, 1735 K Street N.W., Washington, D.C. 20006.
So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, it is required to furnish the information
required to be filed with the Commission to the Trustee and the holders of the
Notes. The Company has agreed that, even if it is entitled under the Exchange
Act not to furnish such information to the Commission, it will nonetheless
continue to furnish information that would be required to be furnished by the
Company by Section 13 of the Exchange Act to the Trustee and the holders of the
Notes as if it were subject to such periodic reporting requirements.
INFORMATION INCORPORATED BY REFERENCE
The Company's annual report on Form 10-K for the fiscal year ended
January 31, 1997; quarterly report on Form 10-Q for the fiscal quarter ended
April 30, 1997; current reports on Form 8-K dated May 14, 1997 and May 29,
1997; 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 documents filed by the Company pursuant to Section 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 effectiveness of the Registration Statement of which
this Prospectus is a part with respect to registration of the Exchange Notes,
shall be deemed to be incorporated by reference in this Prospectus and a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus, or in
any other subsequently filed document that also is or is deemed to be
incorporated by reference, modifies or replaces 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.
This Prospectus incorporates documents by reference that are not
presented herein or delivered herewith. These documents are available upon
request from TransTexas Gas Corporation, 1300 North Sam Houston Parkway East,
Suite 310, Houston, Texas 77032-2949, Attention: Investor Relations Manager
(telephone number (281) 987-8600). In order to ensure timely delivery of the
documents, any request should be made by [five business days prior to
Expiration Date].
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: The forward-looking statements provided below and in other
locations throughout this document (collectively, "Forward-Looking
iii
<PAGE> 5
Statements") are based on the Company's historical operating trends, its proved
reserves as of February 1, 1997 and other information available to the
management of the Company. Forward-Looking Statements involve certain risks
and uncertainties that could cause actual results to differ materially from
those projected in the Forward-Looking Statements. These statements assume
that market conditions for the Company's oil and gas production are comparable
to those experienced in fiscal 1996 and 1997 and the first three months of
fiscal 1998. These statements also assume that no significant changes will
occur in the operating environment for the Company's oil and gas properties
following the Exchange Offer. Finally, the Forward-Looking Statements assume
no material changes in the composition of the Company's property base as the
result of any material acquisitions or divestitures and that no material
changes will occur in the Company's financial facilities, except as disclosed
herein. The Company cautions that the Forward-Looking Statements are subject
to all the risks and uncertainties discussed under the captions "Risk Factors"
and "The Company." Without limiting the foregoing, potential risks and
uncertainties include such factors as fluctuations in natural gas and crude oil
prices, the ultimate success of drilling programs, the competitive nature of
the oil and gas exploration, development and production industry and
uncertainties associated with the drilling, completion and operation of natural
gas and oil wells. Moreover, the Company may make material acquisitions,
execute new contracts or terminate existing contracts, or enter into new
financing transactions that may affect the accuracy of the Forward-Looking
Statements. None of these events can be predicted with certainty and,
accordingly, are not taken into consideration in the Forward-Looking Statements
made herein. For all of the foregoing reasons, actual results may vary
materially from the Forward-Looking Statements and there is no assurance that
the assumptions used are necessarily the most likely to occur.
iv
<PAGE> 6
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 the business
and assets transferred to TransTexas on August 24, 1993 by TransAmerican
Natural Gas Corporation ("TransAmerican").
THE COMPANY
TransTexas is engaged in the exploration for and development and
production of natural gas, primarily in South Texas. Since 1973, TransTexas has
drilled over 1,400 wells and discovered over 3.5 Tcfe of natural gas.
TransTexas' business strategy is to utilize its extensive experience gained
from over 20 years of drilling and operating wells in South Texas, to continue
to find, develop and produce reserves at a low cost. TransTexas has
traditionally performed most of its own well site preparation, drilling,
workover, completion, pipeline and production services.
In 1994, as part of its strategy to expand its productive reserves
beyond the Lower Wilcox Lobo Trend (the "Lobo Trend") in Webb and Zapata
counties in South Texas, TransTexas began evaluating prospects that exhibited
the potential to add proved reserves of at least 50 Bcfe of natural gas per
development area. Since that time, TransTexas has evaluated over 300 potential
areas and its development of certain of these areas has resulted in substantial
additions to its reserves and production. Since July 31, 1994, TransTexas has
added 812 Bcfe of net proved reserves to its asset base, at an average finding
cost of $0.65 per Mcfe and, as of April 30, 1997, had acquired leasehold
interests in approximately 484,000 gross acres. Management believes that
TransTexas' combination of exploration and development expertise, financial
resources and ability to quickly evaluate and execute acreage acquisition
transactions provides it with a significant competitive advantage over other
oil and gas companies in acquiring prospective acreage in its areas of
operations.
On May 29, 1997, TransTexas entered into and consummated a stock
purchase agreement with an unaffiliated buyer (the "Lobo Sale Agreement"), with
an effective date of March 1, 1997, to effect the sale (the "Lobo Sale") of
the stock of TransTexas Transmission Corporation ("TTC"), its subsidiary that
owned substantially all of TransTexas' Lobo Trend producing properties and
related pipeline transmission system, for a sales price in excess of $1
billion, subject to adjustments as provided for in the Lobo Sale Agreement.
Purchase price adjustments were made for, among other things: the value of
certain NGLs and stored hydrocarbons; the value of gas in TTC's pipeline;
prepaid expenses relating to post-effective date operations; post-closing
expenses related to pre-closing operations; the value of oil and gas produced
and sold between the effective date of the Lobo Sale Agreement and closing
(approximately $44 million); property defects; and estimated costs associated
with liabilities incurred before closing. Purchase price adjustments made at
the closing of the Lobo Sale are subject to a review, reconciliation and
resolution process, which is expected to be completed within 105 days following
the closing. With proceeds from the Lobo Sale, TransTexas repaid certain
indebtedness and other obligations, including production payments, in an
aggregate amount of approximately $84 million. The remaining net proceeds were
used for the repurchase or redemption of the Company's 11 1/2% Senior Secured
Notes due 2002 (the "TransTexas Senior Secured Notes") and for general
corporate purposes.
As of February 1, 1997, the Lobo Trend producing properties divested
in the Lobo Sale had proved reserves of approximately 550 Bcfe. As of April 30,
1997, after giving effect to the Lobo Sale, TransTexas would have owned over
577,000 gross (418,700 net) acres of mineral interests, with net daily
production of approximately 186 MMcfd of natural gas and 2,397 BPD of
condensate and crude oil (the "Continuing Operations"). As of February 1,
1997, TransTexas' proved reserves as estimated by Netherland, Sewell &
Associates, Inc., for the Continuing Operations were 404 Bcfe.
TransTexas' average net daily natural gas production for the year
ended January 31, 1997, was approximately 420 MMcfd, for a total net production
of 153.6 Bcf of natural gas.
1
<PAGE> 7
TransTexas' average net daily production of natural gas and crude and condensate
for the quarter ended April 30, 1997 was approximately 186 MMcfd and 2,397 BPD,
respectively. During the three months ended April 30, 1997, TransTexas
completed approximately 72% of the 29 wells it drilled in the period.
TransTexas' integrated drilling services division provides oil field
services including drilling, oil and natural gas well workover, stimulation and
completion, drilling fluids provision, pipeline construction and equipment
repair and maintenance to TransTexas. As of April 30, 1997, the assets of this
division included 22 land drilling rigs, nine workover rigs and two fracture
stimulation fleets. Complementary drilling, completion and workover service
equipment includes a ready-mix concrete plant, twin cementing trucks, a coiled
tubing unit, a snubbing unit, electric line and logging units, slickline units,
tag units and an extensive fleet of construction, inspection and other rolling
stock.
Activity in the contract drilling industry and related oil services
businesses has shown significant improvement over the last two years due to
increased worldwide demand for oil and natural gas. The supply of land drilling
rigs in the United States has declined over the last several years while the
demand for such rigs has recently increased, resulting in some of the highest
average annual rig utilization rates and dayrates since 1985. This has led to
improved market valuations for contract drilling and oil service companies. To
capitalize on these trends, TransTexas intends to contribute the assets of its
drilling services division to its wholly owned subsidiary, TransTexas Drilling
Services, Inc. ("TTXD"). Thereafter, TransTexas intends to consider
alternatives to maximize stockholder value with respect to TTXD, including
options such as a spin-off, a sale to a third party, a merger or another
business combination. In connection with the Lobo Sale, TransTexas entered into
a long-term agreement, which can be transferred to TTXD, pursuant to which it
will provide drilling and certain other services to the new operator of the
Lobo Trend properties divested in the Lobo Sale.
The address of the Company's principal executive offices is 1300 North
Sam Houston Parkway East, Suite 310, Houston, Texas 77032-2949 and its
telephone number at that address is (281) 987-8600.
RECENT EVENTS
On June 13, 1997, TransAmerican Energy Corporation ("TEC"), which
directly and indirectly owns approximately 73% of the Company's outstanding
common stock, completed a private offering (the "TEC Notes Offering") of $475
million aggregate principal amount of 11 1/2% Senior Secured Notes due 2002
(the "TEC Senior Secured Notes") and $1.13 billion aggregate principal amount
of 13% Senior Secured Discount Notes due 2002 (the "TEC Senior Secured Discount
Notes" and, together with the TEC Senior Secured Notes, the "TEC Notes") for
net proceeds of approximately $1.3 billion.
With the proceeds of the TEC Notes Offering, TEC made intercompany
loans to TransTexas of $450 million (the "TransTexas Intercompany Loan") and to
TEC's wholly owned subsidiary, TransAmerican Refining Corporation ("TARC"), of
$676 million (the "TARC Intercompany Loan" and together with the TransTexas
Intercompany Loan, the "Intercompany Loans"). The TransTexas Intercompany Loan
bears interest at a rate of 10 7/8% per annum, payable semi-annually in cash in
arrears, and the TARC Intercompany Loan accretes principal at 16% per annum,
compounded semi-annually, to a final accreted value of $920 million, and
thereafter pays interest semi-annually in cash in arrears on the accreted value
thereof, at a rate of 16% per annum. The Intercompany Loans will mature on
June 1, 2002. The Intercompany Loan agreements contain certain restrictive
covenants, including, among others, limitations on incurring additional debt,
asset sales, dividends and transactions with affiliates.
On June 13, 1997, the Company completed a tender offer for the
TransTexas Senior Secured Notes for 111 1/2% of their principal amount (plus
accrued and unpaid interest). Approximately $785.4 million principal amount of
TransTexas Senior Secured Notes were tendered and accepted by the Company.
TransTexas completed the redemption of the TransTexas Senior Secured Notes
remaining outstanding on June 30, 1997 pursuant to the terms of the governing
indenture.
2
<PAGE> 8
On June 19, 1997, the Company completed the June Exchange Offer in
which the Outstanding Notes were issued in exchange for the December 1996
Notes.
As a result of the Lobo Sale, the Tender Offer and the June Exchange
Offer, TransTexas expects to record a pretax gain of approximately $600 million
and a pretax extraordinary charge of approximately $120 million during the
quarter ending July 31, 1997.
TransTexas has implemented a stock repurchase program (the "Stock
Repurchase Program") pursuant to which it plans to repurchase common stock from
its public stockholders and from its affiliates, including TEC and TARC, in an
aggregate amount of approximately $400 million in value of stock purchased. It
is anticipated that TransTexas will acquire four times the number of shares
from its affiliated stockholders than it acquires from its public stockholders.
Shares may be purchased through open market purchases, negotiated transactions
or tender offers, or combination of the above. It is anticipated that the
price paid to affiliated stockholders will equal the weighted average price
paid to purchase shares from the public stockholders. At July 31, 1997, the
Company had acquired 3.1 million shares of its common stock from unaffiliated
stockholders at prices ranging from $13.625 to $16.250 for an aggregate
purchase price of $49.6 million.
Pursuant to a disbursement agreement (the "Disbursement Agreement")
among TransTexas, TEC and Firstar Bank of Minnesota, N.A., the trustee under
the indenture governing the TEC Notes and disbursement agent, approximately
$400 million of the proceeds of the TransTexas Intercompany Loan was placed in
an account (the "Disbursement Account") to be held and invested by the
disbursement agent until disbursed. Funds in the Disbursement Account will be
disbursed to TransTexas as needed to fund the Stock Repurchase Program.
TransTexas may at any time request disbursement of interest earned on the funds
in the Disbursement Account. As of July 31, 1997, approximately $49.6 million
had been disbursed to TransTexas out of the Disbursement Account to fund
purchases of common stock from the public pursuant to the Stock Repurchase
Program.
3
<PAGE> 9
THE EXCHANGE OFFER
The Outstanding Notes . . . . . The Outstanding Notes were issued by the
Company in June 1997, pursuant to the
June Exchange Offer.
Registration Requirements . . . Pursuant to the June Exchange Offer, the
Company and the Original Holders entered
into the Registration Rights Agreement,
which grants the holders of the
Outstanding Notes certain exchange and
registration rights. The Exchange Offer
is intended to satisfy such exchange
rights. By execution and delivery of the
accompanying Letter of Transmittal, each
exchanging holder of Outstanding Notes
confirms its obligations under the
Registration Rights Agreement, including
indemnity obligations in connection with
this Exchange Offer. If applicable law
or applicable interpretations of the
staff of the Commission do not permit the
Company to effect the Exchange Offer, the
Company has agreed to file a shelf
registration (the "Shelf Registration
Statement") covering resales of the
Outstanding Notes. See "The Exchange
Offer -- Shelf Registration Statement."
The Exchange Offer . . . . . . The Company is offering to exchange
$1,000 principal amount of the Exchange
Notes for each $1,000 principal amount of
Outstanding Notes. As of the date
hereof, $115,815,000 aggregate principal
amount of Outstanding Notes are
outstanding. The Company will issue the
Exchange Notes to holders of Outstanding
Notes on , 1997 (the "Exchange Date").
Based on an interpretation of the staff
of the Commission set forth in no-action
letters issued to third parties, the
Company believes that Exchange Notes
issued pursuant to the Exchange Offer in
exchange for Outstanding Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other
than any such holder which is an
"affiliate" of the Company within the
meaning of Rule 405 under the Securities
Act) without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that such Exchange Notes are
acquired in the ordinary course of such
holder's business and that such holder
does not intend to participate and has no
arrangement or understanding with any
person to participate in the distribution
of such Exchange Notes.
Each Participating Broker-Dealer must
acknowledge that it will deliver a
prospectus in connection with any resale
of Exchange Notes. The Letter of
Transmittal for the Exchange Offer states
that by so acknowledging and by
delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it
may be amended or supplemented from time
to time, may be used by a broker-dealer
in connection with resales of Exchange
Notes received in exchange for
Outstanding Notes where such Outstanding
Notes were acquired by such broker-dealer
as a result of market-making activities
or other trading activities. The Company
has agreed to make this Prospectus
available to any Participating
Broker-Dealer for use in connection with
any such resale for a period of up to 180
days from the date the registration
statement of which this Prospectus forms
a part is declared effective. See "Plan
of Distribution."
Any holder who tenders in the Exchange
Offer with the intention to participate,
or for the purpose of participating, in a
distribution of the
4
<PAGE> 10
Exchange Notes and cannot rely on the
position of the staff of the Commission
enunciated in Exxon Capital Holdings
Corporation (available April 13, 1989) or
similar no-action letters and, in the
absence of an exemption therefrom, must
comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with the
resale transaction. Failure to comply
with such requirements in such instance
may result in such holder incurring
liability under the Securities Act for
which the holder is not indemnified by
the Company.
Expiration Date . . . . . . . . 5:00 p.m., New York City time, on
, 1997.
Procedures for Tendering
Outstanding Notes . . . . . . Each holder of Outstanding Notes wishing
to accept the Exchange Offer must
complete, sign and date the accompanying
Letter of Transmittal, or a facsimile
thereof, in accordance with the
instructions contained herein and
therein, and mail or otherwise deliver
such Letter of Transmittal, or such
facsimile, together with the Outstanding
Notes and any other required
documentation to the Exchange Agent at
the address set forth herein. By
executing the Letter of Transmittal, each
holder will represent to the Company
that, among other things, the holder or
the person receiving such Exchange Notes,
whether or not such person is the holder,
is acquiring the Exchange Notes in the
ordinary course of business and that
neither the holder nor any such other
person has any arrangement or
understanding with any person to
participate in the distribution of such
Exchange Notes.
Special Procedures for
Beneficial Owners . . . . . . Any beneficial owner whose Outstanding
Notes are registered in the name of a
broker-dealer, commercial bank, trust
company or other nominee and who wishes
to tender should contact such registered
holder promptly and instruct such
registered holder to tender on such
beneficial owner's behalf.
If such beneficial owner wishes to tender
on such owner's own behalf, such owner
must, prior to completing and executing
the Letter of Transmittal and delivering
its Outstanding Notes, either make
appropriate arrangements to register
ownership of the Outstanding Notes in
such owner's name or obtain a properly
completed bond power from the registered
holder. The transfer of registered
ownership may take considerable time.
Guaranteed Delivery
Procedures . . . . . . . . . Holders of Outstanding Notes who wish to
tender their Outstanding Notes and whose
Outstanding Notes are not immediately
available or who cannot deliver their
Outstanding Notes, the Letter of
Transmittal or any other documents
required by the Letter of Transmittal to
the Exchange Agent prior to the
Expiration Date must tender their
Outstanding Notes according to the
guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights . . . . . . . Tenders may be withdrawn at any time
prior to 5:00 p.m., New York City time,
on the Expiration Date pursuant to the
procedures described under "The Exchange
Offer -- Withdrawal of Tenders."
5
<PAGE> 11
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes . . . . . . . Subject to certain conditions, the
Company will accept for exchange any and
all Outstanding Notes that are properly
tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer
will be delivered on the Exchange Date.
See "The Exchange Offer -- Terms of the
Exchange Offer."
Federal Income Tax
Consequences . . . . . . . . The exchange pursuant to the Exchange
Offer should not be a taxable event for
federal income tax purposes. See
"Certain Federal Income Tax
Consequences."
Effect on Holders of
Outstanding Notes . . . . . . As a result of the making of this
Exchange Offer, the Company will have
fulfilled one of its obligations under
the Registration Rights Agreement, and,
with certain exceptions noted below,
holders of Outstanding Notes who do not
tender their Outstanding Notes will not
have any further registration rights
under the Registration Rights Agreement
or otherwise. Such holders will continue
to hold the untendered Outstanding Notes
and will be entitled to all the rights
and subject to all the limitations
applicable thereto under the Indenture,
except to the extent such rights or
limitations, by their terms, terminate or
cease to have further effectiveness as a
result of the Exchange Offer. All
untendered Outstanding Notes will
continue to be subject to certain
restrictions on transfer. Accordingly,
if any Outstanding Notes are tendered and
accepted in the Exchange Offer, the
trading market of the untendered
Outstanding Notes could be adversely
affected. See "Risk Factors -- Exchange
Offer Procedures."
Exchange Agent . . . . . . . . Bank One, NA
SUMMARY OF TERMS OF THE EXCHANGE NOTES
Securities Offered . . . . . . $115,815,000 aggregate principal amount
of 13 3/4% Series D Senior Subordinated
Notes due 2001.
Maturity Date . . . . . . . . . December 31, 2001.
Interest Payment Dates . . . . June 30 and December 31 of each year,
commencing December 31, 1997.
Optional Redemption . . . . . . The Notes are not redeemable prior to
June 30, 2000, except that, prior to June
30, 1999, the Company may redeem, at its
option, up to $35 million of the Notes at
a price equal to 113.250% of the
principal amount thereof, plus accrued
and unpaid interest, if any, to the date
of redemption, with certain of the net
proceeds of any Public Equity Offering.
The Notes 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 prices set
forth herein, together with any accrued
but unpaid interest to the date of
redemption.
6
<PAGE> 12
Ranking . . . . . . . . . . . . The Exchange Notes will be senior
subordinated obligations of the Company,
subordinated to all Senior Debt (as
defined) and ranking pari passu with all
other debt of the Company. As of June
30, 1997, the Company had approximately
$478 million of Senior Debt. Subject to
certain limitations set forth in the
Indenture, the Company may incur
additional Senior Debt and other Debt.
See "Description of the Notes --
Ranking."
Change of Control . . . . . . . Upon a Change of Control, the Company may
be required, subject to certain
conditions, to offer to repurchase all
outstanding Notes at 101% of the
principal amount thereof, plus accrued
and unpaid interest to the date of
purchase. See "Description of the Notes
-- Change of Control."
Certain Covenants . . . . . . . The Indenture contains certain covenants,
including, but not limited to, covenants
limiting the Company with respect to the
following: (i) asset sales; (ii)
restricted payments; (iii) the incurrence
of additional indebtedness and the
issuance of certain redeemable preferred
stock; (iv) liens; (v) lines of business;
(vi) dividend and other payment
restrictions affecting subsidiaries;
(vii) mergers and consolidations; and
(viii) transactions with affiliates. See
"Description of the Exchange Notes --
Certain Covenants."
RISK FACTORS
For a discussion of certain risks that should be considered in
connection with the Exchange Offer and in evaluating an investment in the
Exchange Notes, see "Risk Factors."
7
<PAGE> 13
SUMMARY HISTORICAL AND PROFORMA FINANCIAL AND OPERATING DATA
In January 1996, the Company changed its fiscal year end for financial
reporting purposes from July 31 to January 31. The following tables set forth
selected historical financial data of the Company for and at the end of each of
the four 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, the fiscal year ended January 31, 1997 and the
comparable year ended January 31, 1996, and the three months ended April 30,
1996 and 1997, and operating data of the Company for such periods, and pro
forma financial data for and at the end of the three months ended April 30,
1997 and for the year ended January 31, 1997. The historical financial data
for the fiscal years ended July 31, 1992, 1993, 1994 and 1995, the six months
ended January 31, 1996, and the year ended January 31, 1997 have been derived
from the audited consolidated financial statements of the Company. The
historical financial data for the six months ended January 31, 1995, the year
ended January 31, 1996 and the three months ended April 30, 1996 and 1997, are
derived from the unaudited consolidated financial statements of the Company.
The data for the six months ended January 31, 1995, the year ended January 31,
1996 and the three months ended April 30, 1996 and 1997, 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 these periods presented are not necessarily
indicative of the results to be expected for an entire year. The pro forma
information at April 30, 1997, and for the three month period ended April 30,
1997 and the year ended January 31, 1997, gives effect to the consummation of
the Lobo Sale and the transactions described under "-- Recent Events" as of
April 30, 1997 for the balance sheet data and as of February 1, 1997 and 1996,
respectively, for the statement of operations data. The pro forma data are not
necessarily indicative of the operating results or financial position that
would have been obtained had the transactions to which they give pro forma
effect actually occurred on the dates indicated or the results of operations
for any future date or period. The summary historical and pro forma financial
data should be read in conjunction with the consolidated historical and pro
forma financial statements and notes thereto included elsewhere or incorporated
by reference in this Prospectus.
<TABLE>
<CAPTION>
Six Months
Year Ended July 31, Ended January 31,
-------------------------------------------- ------------------------
1992 1993 1994 1995 1995 1996
---------- --------- -------- --------- ----------- ---------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Gas, condensate, and natural gas
liquids . . . . . . . . . . . . . $ 227,208 $ 294,753 $302,522 $ 275,627 $ 143,304 $ 124,663
Transportation revenues . . . . . 30,749 30,816 33,240 36,787 19,161 15,892
Other revenues . . . . . . . . . . 223 247 157 285 52 601
---------- --------- -------- --------- ----------- ---------
258,180 325,816 335,919 312,699 162,517 141,156
Operating costs and expenses . . . 75,416 99,982 103,459 99,310 50,893 45,629
Depreciation, depletion, and
amortization . . . . . . . . . 96,523 95,016 113,858 129,964 70,345 60,894
General and administrative
expenses . . . . . . . . . . . . 27,855 23,613 40,311 31,935 12,595 13,685
Litigation settlements . . . . . . -- (5,600) (1,000) -- (18,300) (18,300)
Net interest expense . . . . . . . 1,703 2,442 50,155 65,797 29,059 40,436
Income taxes and other . . . . . . 4,274 16,746 5,380 (2,415) (131) (416)
Extraordinary loss, net of taxes . -- -- -- 56,637 -- --
---------- --------- -------- --------- ----------- ---------
Net income (loss) . . . . . . $ 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) $ -- $ --
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) . . 17.8x 34.9x(4) 1.5x --(5) --(5) --(5)
OTHER FINANCIAL DATA:
EBITDA(6) . . . . . . . . . . . . $ 156,573 $ 208,635 $195,044 $ 184,695 $ 100,224 $ 103,413
Net cash provided (used) by:
Operating activities(14) . . . . 131,869 184,466 136,243 94,312 74,332 52,172
Investing activities . . . . . . (88,515) (142,848) (237,781) (309,415) (105,326) (136,664)
Financing activities . . . . . . (1,652) 507 484,631 284,224 18,249 13,055
OPERATING DATA:
Gas sales volumes (Bcf)(9) . . . . 128.4(7) 119.3 130.9 147.9 76.9 66.9
Average gas prices (dry)(per
Mcf)(10) . . . . . . . . . . . $1.36 $1.98 $1.96 $1.40 $1.41 $1.65
Average finding costs (per Mcfe) . .66(8) 1.01 1.12 .21 .32 1.06
Average lifting costs (per Mcfe) . .19 .22 .24 .21 .21 .23
Number of gross wells drilled . . 71 103 140 97 60 65
Percentage of wells drilled
completed . . . . . . . . . . . 82% 85% 83% 77% 78% 74%
Net proved reserves(11):
Gas (Mmcf) . . . . . . . . . . . 686,212 695,011 717,367 1,122,645 943,427 1,139,127
Condensate (MBbls) . . . . . . . 2,171 1,968 1,935 3,049 2,637 2,903
SEC PV10(12) . . . . . . . . . . $ 623,173 $ 701,434 $544,387 $ 547,646 $ 533,281 $ 808,062
<CAPTION>
July 31, January 31,
------------------------------------ -----------------------------
1992 1993 1994 1995 1995 1996 1997
------- ------ ------- ------ --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)(13) . . $ (35,295) $ 56,949) $ (8,865) $106,836 $ (56,749) $ 43,602 $ 71,586
Net property and equipment . . . 292,587 341,976 462,340 601,460 498,165 715,340 846,393
Total assets . . . . . . . . . . 306,842 360,241 583,591 826,570 594,738 938,829 1,053,152
Total debt . . . . . . . . . . . 3,246 8,270 500,000 800,000 518,701 824,241 941,922
Stockholders' equity (deficit) . 153,741 204,575 (85,139) (153,668) (85,383) (154,440) (150,795)
</TABLE>
<TABLE>
<CAPTION>
Year Ended Three Months
January 31, Ended April 30,
------------------------- -----------------------
1996 1997 1996 1997
----------- ---------- ------------ --------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Gas, condensate, and natural gas
liquids . . . . . . . . . . . . . $ 256,986 $ 363,459 $ 79,802 $ 72,882
Transportation revenues . . . . . 33,518 34,423 8,195 9,291
Other revenues . . . . . . . . . . 834 8,465 7,961 178
----------- ---------- ------------ --------
291,338 406,347 95,958 82,351
Operating costs and expenses . . . 94,046 137,019 32,622 32,356
Depreciation, depletion, and
amortization . . . . . . . . . 120,513 132,453 30,099 33,557
General and administrative
expenses . . . . . . . . . . . . 33,025 45,596 7,439 15,140
Litigation settlements . . . . . . (18,300) (96,000) --
Net interest expense . . . . . . . 77,174 91,463 21,152 23,664
Income taxes and other . . . . . . (2,700) 12,491 1,626 (7,828)
Extraordinary loss, net of taxes . 56,637 -- -- --
----------- ---------- ------------ --------
Net income (loss) . . . . . . $ (69,057) $ 83,325 $ 3,020 $(14,538)
=========== ========== ============ ========
Net income (loss) per share: (1)
Income (loss) before extraordinary
item . . . . . . . . . . . . . $ (0.17) $ 1.13 $ 0.04 $ (0.20)
Extraordinary item . . . . . . . (0.77) -- -- --
----------- ---------- ------------ --------
Net income (loss) . . . . . . . . $ (0.94) $ 1.13 $ 0.04 $ (0.20)
=========== ========== ============ ========
Dividends declared per common
share (2) . . . . . . . . . . . . -- -- -- --
Ratio of earnings to
consolidated fixed charges(3) . . --(5) 1.7x(4) 1.0x --(5)
OTHER FINANCIAL DATA:
EBITDA(6) . . . . . . . . . . . . $ 187,705 $ 325,962 $ 57,242 $ 36,853
Net cash provided (used) by:
Operating activities(14) . . . . 72,152 221,061 67,049 92,037
Investing activities . . . . . . (340,753) (272,883) (64,837) (104,001)
Financing activities . . . . . . 279,030 64,135 461 70
OPERATING DATA:
Gas sales volumes (Bcf)(9) . . . . 137.9 153.6 36.2 35.4
Average gas prices (dry)(per
Mcf)(10) . . . . . . . . . . . $1.51 $2.14 $2.03 $1.67
Average finding costs (per Mcfe) . n/a 2.21 n/a n/a
Average lifting costs (per Mcfe) . .23 .29 .35 .43
Number of gross wells drilled . . 102 151 52 29
Percentage of wells drilled
completed . . . . . . . . . . . 75% 68% 75% 72%
Net proved reserves(11):
Gas (Mmcf) . . . . . . . . . . . 1,139,127 919,718 n/a n/a
Condensate (MBbls) . . . . . . . 2,903 5,738 n/a n/a
SEC PV10(12) . . . . . . . . . . $808,062 $1,449,068 n/a n/a
<CAPTION>
April 30,
------------------------
1996 1997
-------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)(13) . . $ (17,865) $ 7,565
Net property and equipment . . . 774,302 909,481
Total assets . . . . . . . . . . 1,002,528 1,114,260
Total debt . . . . . . . . . . . 833,837 934,202
Stockholders' equity (deficit) . (151,420) (106,055)
</TABLE>
8
<PAGE> 14
<TABLE>
<CAPTION>
Year Ended Three Months Ended
January 31, 1997 April 30, 1997
---------------- --------------------
(pro forma) (pro forma)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Gas, condensate and natural gas liquids . . $189,698 $ 36,020
Transportation . . . . . . . . . . . . . . -- --
Gain on sale of assets . . . . . . . . . . . 7,856 --
Other . . . . . . . . . . . . . . . . . . . 609 178
-------- --------
Total revenues . . . . . . . . . . . . 198,163 36,198
-------- --------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . 16,959 5,206
Depreciation, depletion and amortization . 53,521 19,149
General and administrative . . . . . . . . 43,596 7,452
Taxes other than income taxes . . . . . . . 9,748 2,764
Litigation settlement . . . . . . . . . . . (96,000) --
-------- --------
Total costs and expenses . . . . . . . 27,824 34,571
-------- --------
Operating income . . . . . . . . . . . 170,339 1,627
-------- --------
Other income (expenses):
Interest income . . . . . . . . . . . . . . 5,544 1,694
Interest expense, net . . . . . . . . . . . (72,639) (16,339)
-------- --------
Total other income (expense) . . . . . (67,095) (14,645)
-------- --------
Loss before income taxes . . . . . . . 103,244 (13,018)
Income taxes (benefit) . . . . . . . . . . . 36,135 (4,556)
-------- --------
Net income (loss) . . . . . . . . . . . $ 67,109 $ (8,462)
======== ========
</TABLE>
<TABLE>
<CAPTION>
April 30, 1997
--------------
(pro forma)
<S> <C>
BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $131,202
Net property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 458,889
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757,044
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595,631
Stockholders' deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60,826)
</TABLE>
9
<PAGE> 15
(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
1992 and 1993 is omitted because the Company's predecessor was not a
separate entity with its own capital structure.
(2) The Company's existing debt instruments contain 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 (excluding capitalized interest).
Consolidated fixed charges consist of interest expense (including
capitalized interest) on all indebtedness and a 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 year ended January 31, 1997 would have
been inadequate to cover consolidated fixed charges by $16.1 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, the year ended January 31, 1996, and the
three months ended April 30, 1997 were inadequate to cover
consolidated fixed charges by $15.2 million, $0.4 million, $8.6
million, $23.4 million and $27.0 million respectively.
(6) Earnings before consolidated fixed charges, income taxes,
depreciation, depletion and amortization. EBITDA for the Transition
Period and for the year ended January 31, 1996 includes a gain on a
litigation settlement of $18.3 million. EBITDA for the year ended
January 31, 1997 includes a gain on a litigation settlement of $96.0
million. EBITDA includes capitalized interest of $0.7 million and $0.9
million for the years ended July 31, 1994 and 1995, respectively, $7.4
million for the Transition Period, $8.3 million and $15.9 million for
the years ended January 31, 1996 and 1997, respectively, and $3.7
million and $4.7 million for the three months ended April 30, 1996 and
1997, respectively. EBITDA includes litigation accruals of $3.1
million, $10.0 million, $13.0 million and $7.0 million for the years
ended July 31, 1992, 1993, 1994 and 1995, respectively. EBITDA
includes litigation accruals of $7.0 million and $15.5 million for
the years ended January 31, 1996 and 1997, respectively, and $4.0
million for the three months ended April 30, 1997. EBITDA, as defined
herein and in the Indenture, is not presented in accordance with
generally accepted accounting principles ("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 year ended January 31, 1997 and for the three
months ended April 30, 1996 and 1997, include 32.0 Bcf, 5.9 Bcf and
7.2 Bcf, respectively, delivered pursuant to volumetric production
payments.
(10) Average price for the year ended January 31, 1997 includes amounts
delivered under volumetric production payments. The average gas price
for the Company's undedicated production for these periods was $2.39
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, 1992, 1993, 1994 and 1995 and February 1, 1996 and 1997,
as evaluated by Netherland, Sewell & Associates, Inc. See "Risk
Factors -- Reliance on Estimates of Proved Reserves."
10
<PAGE> 16
(12) As of February 1, 1997, the sales price used for purposes of
estimating the Company's proved reserves and the future net revenues
from those reserves was $3.17 per Mcf of natural gas and $23.99 per
Bbl of condensate.
(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 at July
31, 1995 and $46.0 million at January 31, 1996 and 1997, and April 30,
1996 and 1997, of cash restricted pursuant to the indenture governing
the TransTexas Senior Secured Notes.
(14) For the year ended January 31, 1997, cash flow from operating
activities includes $96 million relating to a litigation settlement
and $58.6 million from volumetric production payments.
11
<PAGE> 17
RISK FACTORS
In addition to the other information set forth elsewhere in this
Prospectus, the following factors relating to the Company and this Exchange
Offer should be considered by prospective investors when evaluating an
investment in the Exchange Notes offered hereby.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for Outstanding Notes
pursuant to the Exchange Offer will be made only after a timely receipt by the
Company of such Outstanding Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents. Therefore, holders of
the Outstanding Notes desiring to tender such Outstanding Notes in exchange for
Exchange Notes should allow sufficient time to ensure timely delivery. The
Company is under no duty to give notification of defects or irregularities with
respect to the tenders of Outstanding Notes for exchange. Outstanding Notes
that are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof. Upon consummation of the Exchange Offer,
the registration rights under the Registration Rights Agreement will terminate
except that if any holder of an Outstanding Note notifies the Company on or
prior to the Exchange Date that (i) due to a change in law or policy it is not
entitled to participate in the Exchange Offer, (ii) due to a change in law or
policy it may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and this prospectus is not
appropriate or available for such resales by such holder or (iii) it is a
broker-dealer that owns Outstanding Notes acquired directly from the Company or
an affiliate of the Company, then the Company has agreed to file and maintain
for a period of two years the Shelf Registration Statement. In addition, any
holder of Outstanding Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Outstanding Notes, where
such Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution." To the extent that Outstanding Notes are tendered
and accepted in the Exchange Offer, the trading market for untendered and
tendered but unaccepted Outstanding Notes could be adversely affected. See
"The Exchange Offer."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Outstanding Notes are currently owned by a relatively small number
of beneficial owners. The Outstanding Notes have not been registered under the
Securities Act and are subject to significant restrictions on resale. The
Exchange Notes will constitute a new issue of securities with no established
trading market. The Company does not intend to list the Outstanding Notes or
the Exchange Notes on any national securities exchange or to seek the admission
thereof to trading in The Nasdaq Stock Market. Accordingly no assurance can be
given that an active public or other market will develop for the Exchange Notes
or if such market develops, that it will not be sporadic and volatile.
Furthermore, no assurance can be given as to the liquidity of the Exchange
Notes.
SUBORDINATION
The payment of principal of, premium, if any, and interest on, the
Exchange Notes will be subordinated in right of payment to the prior payment in
full of all Senior Debt of the Company, whether outstanding at the date of the
Indenture or later incurred. In the event of any default in the payment of the
principal or interest with respect to any Senior Debt, no payment with respect
to the principal of, premium, if any, or interest on, the Exchange Notes will
be made by the Company unless and until such default has been cured or waived.
In addition, upon the occurrence of any other event of default entitling the
holders of Senior Debt to accelerate the maturity thereof and receipt by the
Trustee
12
<PAGE> 18
of written notice of such occurrence, the holders of Senior Debt will be able
to block payment on the Exchange Notes for specified periods of time.
Upon any payment or distribution of the Company's assets to creditors
upon any dissolution, winding up, liquidation, reorganization, bankruptcy,
insolvency, receivership or other proceedings relating to the Company, whether
voluntary or involuntary, the holders of Senior Debt will be entitled first to
receive payment in full of all amounts due thereon before the holders of the
Exchange Notes will be entitled to receive any payment upon the principal of,
or premium, if any, or interest on, the Exchange Notes. By reason of such
subordination, in the event of the insolvency of the Company, holders of the
Exchange Notes may recover less, ratably, than holders of Senior Debt and other
creditors of the Company or may recover nothing. The terms and conditions of
the subordination provisions pertinent to the Exchange Notes are described in
more detail in "Description of the Exchange Notes -- Subordination."
REPURCHASE OF EXCHANGE NOTES UPON A CHANGE OF CONTROL OR CERTAIN ASSET SALES
Upon the occurrence of a Change of Control, the Company may be
required to offer to purchase (a "Change of Control Offer") all Exchange Notes
then outstanding at a purchase price equal to 101% of the principal amount
thereof, plus accrued interest to the date of purchase. Additionally, in the
event of certain asset dispositions, the Company will be required under certain
circumstances to use the Accumulated Amount (as defined) to offer to purchase
the Exchange Notes at 100% of the principal amount thereof, plus accrued
interest to the date of purchase (an "Offer to Purchase"). See "Description of
the Exchange Notes -- Certain Covenants."
Prior to commencing such a Change of Control Offer or an Offer to
Purchase, the Company may be required to (i) repay in full all Senior Debt or
other indebtedness of the Company that would prohibit the repurchase of the
Exchange Notes or (ii) obtain any requisite consent to permit the repurchase.
If the Company is unable to repay all of such indebtedness or is unable to
obtain the necessary consents, then the Company will be unable to offer to
purchase the Exchange Notes and such failure will constitute an Event of
Default under the Indenture. There can be no assurance that the Company will
have sufficient funds available at the time of any Change of Control Offer or
Offer to Purchase to repay Senior Debt or repurchase the Exchange Notes.
The events that require a Change of Control Offer or Offer to Purchase
under the Indenture may also constitute events of default under the Senior Debt
of the Company. Such events may permit the lenders under such debt instruments
to accelerate the debt and, if the debt is not paid, to commence litigation
that could ultimately result in a sale of substantially all the assets of the
Company to satisfy the debt, thereby limiting the Company's ability to raise
cash to repurchase the Exchange Notes and reducing the practical benefit of the
offer to purchase provisions to the holders of the Exchange Notes.
INDENTURE RESTRICTIONS
The Indenture limits the Company's ability to incur additional
indebtedness, transfer or sell assets, transfer assets to 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.
SIGNIFICANT LEVERAGE
At June 30, 1997, the Company's long-term debt, including the
TransTexas Intercompany Loan, the Outstanding Notes, the BNY Facility (defined
below) and certain equipment financing was approximately $594 million. 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
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consequences could adversely affect the Company's ability to meet its
obligations, including obligations under the TransTexas Intercompany Loan and
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 December 2001 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
TransTexas makes substantial capital expenditures for the
exploration, development and production of its natural gas reserves. TransTexas
anticipates that its capital expenditures and cash interest expense will be
approximately $220 million and $70 million, respectively, in fiscal 1998.
Historically, TransTexas has financed capital expenditures and serviced its
debt with cash from operations, public and private offerings of debt and equity
securities, the sale of production payments, asset sales and other financings.
TransTexas intends to use cash flow from operations, together with cash on hand
to fund its cash requirements in fiscal 1998. If capital expenditures are
higher than anticipated, cash flow from operations is lower than anticipated or
certain contingent obligations of TransTexas become fixed, TransTexas may not
have sufficient funds for capital expenditures necessary to replace its
reserves, to maintain production at current levels or to attain increased
production levels, after giving effect to the Lobo Sale, and, as a result,
production from operations may decrease over time. No assurance can be given
that TransTexas' cash flow from operating activities will be sufficient to meet
actual capital expenditures, contingent liabilities and debt service in the
future.
POTENTIAL TAX LIABILITIES
Based upon independent legal advice, including an opinion from a
nationally recognized law firm, TransTexas has determined that it will not
report any significant federal income tax liability as a result of the Lobo
Sale. There are, however, significant uncertainties regarding TransTexas' tax
position and no assurance can be given that TransTexas' position will be
sustained if challenged by the Internal Revenue Service (the "IRS"). TransTexas
is part of an affiliated group for tax purposes (the "TNGC Consolidated
Group"), which includes TNGC Holdings Corporation, the sole stockholder of
TransAmerican ("TNGC"), TransAmerican, TEC, TransTexas, TARC and TTXD. No
letter ruling has been or will be obtained from the IRS regarding the Lobo Sale
by any member of the TNGC Consolidated Group. If the IRS were to successfully
challenge TransTexas' position, each member of the TNGC Consolidated Group would
be severally liable under the consolidated tax return regulations for the
resulting taxes, in the estimated amount of up to $230 million (assuming the use
of the existing tax attributes of the TNGC Consolidated Group), possible
penalties equal to 20% of the amount of the tax, and interest at the statutory
rate (currently 9%) on the tax and penalties (if any). An agreement among
members of the TNGC Consolidated Group (the "Tax Allocation Agreement") requires
TransAmerican to fund the entire tax deficiency (if any) resulting from the Lobo
Sale. There can be no assurance that TransAmerican would be able to fund any
such payment at the time due and the other members of the TNGC Consolidated
Group, thus, may be required to pay the tax. TransTexas intends to reserve $75
million with respect to this potential tax liability for financial reporting
purposes to reflect a portion of the potential tax liability that TransAmerican
might not be able to pay. If TransTexas were required to pay this tax
deficiency, it is likely that it would be required to sell significant assets or
raise additional debt or equity capital to fund the payment.
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 (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this
transaction, however, and TransAmerican has not obtained a ruling from the IRS
regarding this transaction. TransTexas
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believes that there is substantial legal authority to support the position that
the COD Exclusion applies to the cancellation of TransAmerican's indebtedness.
However, due to factual and legal uncertainties, there can be no assurance that
the IRS will not challenge this position, or that any such challenge would not
be upheld. Under the Tax Allocation Agreement, TransTexas 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. Any such tax
would be offset in future years by alternative minimum tax credits and retained
loss and credit carryforwards to the extent recoverable from TransAmerican. As
a member of the TNGC Consolidated Group, each of TEC, TransTexas and TARC will
be severally liable for any tax liability resulting from the above-described
transactions. The IRS has commenced an audit of the consolidated federal income
tax returns of the TNGC Consolidated Group for its taxable years ended July 31,
1994 and July 31, 1995. Because the audit is in its initial stages, it is not
possible to predict the scope of the IRS' review or whether any tax
deficiencies will be proposed by the IRS as a result of its review.
DECONSOLIDATION FOR FEDERAL INCOME TAX PURPOSES
Under certain circumstances, TransAmerican, TEC or TARC may sell or
otherwise dispose of shares of common stock of TransTexas. If, as a result of
any sale or other disposition of TransTexas common stock or otherwise, the
aggregate ownership of TransTexas by members of the TNGC Consolidated Group
(excluding TransTexas) is less than 80% (measured by voting power and value),
TransTexas will no longer be a member of the TNGC Consolidated Group for
federal income tax purposes ("Deconsolidation") and, with certain exceptions,
will no longer be obligated under the terms and conditions of, or entitled to
the benefits of, the Tax Allocation Agreement. 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 TNGC Consolidated Group,
which, when aggregated with the outstanding TARC Warrants, represent more than
20% of the voting power or equity value of TARC, then a Deconsolidation of TARC
would occur. A Deconsolidation of TARC would result in a Deconsolidation of
TransTexas if the TNGC Consolidated Group members, excluding TARC, did not then
own at least 80% of the voting power and equity value of TransTexas. Upon a
Deconsolidation of TransTexas, members of the TNGC Consolidated Group that own
TransTexas common stock could incur a substantial amount of federal income tax
liability. If such Deconsolidation occurred during the fiscal year ending
January 31, 1998, the aggregate amount of this tax liability is estimated to be
between $175 million and $200 million, assuming no reduction for tax attributes
of the TNGC Consolidated Group. However, such tax liability generally would be
substantially reduced or eliminated in the event that the IRS successfully
challenged TransTexas' position on the Lobo Sale. Each member of a consolidated
group filing a consolidated federal income tax return is severally liable to
the IRS for the consolidated federal income tax liability of the consolidated
group. There can be no assurance that each TNGC Consolidated Group member will
have the ability to satisfy any tax obligation attributable to the
above-described transactions at the time due and, therefore, other members of
the group, including TransTexas, may be required to pay the tax.
Generally, under the Tax Allocation Agreement, if net operating losses
of TransTexas are used by other members of the TNGC Consolidated Group, then
TransTexas is entitled to the benefit (through reduced current taxes payable)
of such losses in later years to the extent TransTexas has taxable income and
remains a member of the TNGC Consolidated Group and the other group members
have the ability to pay such taxes. If TARC, TransAmerican or TEC transfers
shares of common stock of TransTexas (or transfers options or other rights to
acquire such shares) and, as a result of such transfer, Deconsolidation occurs,
TransTexas would not thereafter receive any benefit pursuant to the Tax
Allocation Agreement for net operating losses of TransTexas used by other
members of the TNGC Consolidated Group prior to Deconsolidation.
LIMITED OPERATING HISTORY IN CONTINUING OPERATIONS
Prior to the Lobo Sale, TransTexas derived a substantial amount of
its revenues from gas produced from its Lobo Trend producing properties.
TransTexas' experience in the drilling and operation of wells in areas outside
of the Lobo Trend is limited, its completion rate in such areas is
substantially lower and its average lifting costs in such areas are higher.
Accordingly, results of operations from the Continuing Operations or from
properties acquired in the future might differ materially from those in the
Lobo Trend.
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ABILITY TO REPLACE SHORT-LIVED RESERVES
TransTexas' principal producing properties are characterized by high
initial production followed by a steep decline in production rates, with wells
typically having a half-life of less than two years and an economic life of
approximately ten years. As a result, TransTexas must find and develop or
acquire new natural gas reserves to replace those being depleted by production.
Without successful drilling and exploration or acquisition activities,
TransTexas' reserves and production will decline rapidly. TransTexas' 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.
NATURAL GAS PRICE FLUCTUATIONS AND MARKETS
TransTexas' results of operations and the value of its gas and oil
properties are highly dependent upon the prices TransTexas receives for its
natural gas. Substantially all of TransTexas' 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 TransTexas for its natural gas production are dependent upon numerous
factors beyond the control of TransTexas, 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. During the quarter ended April 30, 1997, the
average gas price for the Continuing Operations was $1.90 per Mcf.
Any significant decline in current prices for natural gas could have a
material adverse effect on TransTexas' 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, TransTexas
has entered into and may continue to enter into commodity price swap agreements
to reduce its exposure to price risk in the spot market for natural gas. See
"Business of TransTexas -- Hedging." However, a substantial majority of
TransTexas' current production remains subject to natural gas price
fluctuations. Based on an assumed average daily net production level of 230
MMcfd (after giving effect to the Lobo Sale), certain hedge agreements and
historical pricing differentials between delivery points, TransTexas estimates
that a $0.10 per MMBtu change in average gas prices received would change
annual operating income by approximately $6.4 million.
COMPETITION
TransTexas competes in the highly competitive areas of natural gas
exploration, development and production. Many of TransTexas' competitors have
substantially larger financial resources, staffs and facilities than
TransTexas.
DRILLING RISK
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 TransTexas
will be productive or that TransTexas will recover all or any portion of its
investment. The cost of drilling, completing and operating wells is often
uncertain. TransTexas' drilling operations may be curtailed, delayed or
canceled as a result of numerous factors, many of which are beyond TransTexas'
control, including title problems, weather conditions, compliance with
governmental requirements and shortages or delays in the delivery of equipment
and services.
TRANSPORTATION
As a result of the Lobo Sale, TransTexas no longer owns the pipeline
assets held by TTC, which assets are used to transport natural gas from the
Continuing Operations. Although TransTexas has entered into a transportation
agreement to provide it access to such pipeline, there can be no assurance that
this agreement will provide sufficient access or capacity or that the terms
thereof will remain competitive with market rates.
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RISKS RELATED TO LOBO SALE
The Lobo Sale Agreement contains representations and warranties by
TransTexas typical for the sale of an oil and gas exploration, production and
transmission company, including representations and warranties relating to the
following: the accuracy of financial information; liabilities under employee
benefit plans; payment of taxes; existence of litigation or other claims;
compliance with laws, including environmental laws; condition of personal
property; existence of contracts, commitments and contingent liabilities; and
title to properties. TransTexas has indemnified the buyer for certain
liabilities related to the assets of TTC, including judgment liens, costs to
remediate conditions that may result in environmental liability and liabilities
and costs related to inaccuracies in representations and warranties (without
regard to TransTexas' knowledge of such inaccuracy) with respect to which no
purchase price adjustment was made at the closing or as part of the post-closing
reconciliation. TransTexas does not anticipate that it will be responsible for
any material amount of post-closing indemnity obligations under the Lobo Sale
Agreement, but there can be no assurance that such liabilities will not
significantly reduce the benefits obtained by TransTexas from the Lobo Sale.
OPERATING HAZARDS AND UNINSURED RISKS
TransTexas' 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 TransTexas and others. TransTexas' 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. TransTexas believes
that its insurance is adequate and customary for companies of a similar size
engaged in operations similar to those of TransTexas, but losses can occur for
uninsurable or uninsured risks or in amounts in excess of existing insurance
coverage.
GOVERNMENT REGULATIONS
TransTexas' 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, TransTexas is unable to predict the
ultimate cost of compliance with these requirements or their effect on its
operations.
MATERIAL PROCEEDINGS AND CONTINGENT LIABILITIES
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.
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SUBSTANTIVE CONSOLIDATION; BANKRUPTCY
An investment in the Exchange Notes involves certain insolvency and
bankruptcy considerations including substantive consolidation and fraudulent
transfer issues. A financial failure by Mr. Stanley, TNGC, TransAmerican,
TransAmerican Exploration Corporation ("TEXC") or TARC could have adverse
consequences for holders of the Exchange Notes 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 with
Mr. Stanley, TNGC, TransAmerican, TEXC, TEC or TARC, the assets of each entity
so consolidated 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.
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 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 holders of the Exchange
Notes. 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.
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.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were issued by the Company in June 1997 pursuant
to the June Exchange Offer in exchange for the December 1996 Notes, which were
sold by the Company on December 13, 1996. As a condition of the June Exchange
Offer, the Company entered into the Registration Rights Agreement with the
persons to whom the Outstanding Notes were originally issued, which requires,
among other things, that the Company file with the Commission a registration
statement under the Securities Act with respect to an offer by the Company to
the holders of the Outstanding Notes to issue and deliver to such holders, in
exchange for Outstanding Notes, a like principal amount of Exchange Notes. The
Company is required to use its best efforts to cause the Registration Statement
relating to the Exchange Offer to be declared effective by the Commission under
the Securities Act and commence the Exchange Offer. The Exchange Notes are to
be issued without a restrictive legend and may be reoffered and resold by the
holder without restrictions or limitations under the Securities Act (other than
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act). A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The term "Holder" with respect to the Exchange
Offer means any person in whose name the Outstanding Notes are registered on
the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and
all Outstanding Notes validly tendered and not withdrawn prior to 5:00 p.m.,
New York City time, on the Expiration Date. The Company has the right, at any
time or from time to time, to extend the Exchange Offer at its discretion, in
which event the term "Expiration Date" shall mean the latest date to which the
Exchange Offer is extended. On the Exchange Date, the Company will issue
$1,000 principal amount of Exchange Notes in exchange for each $1,000 principal
amount of Outstanding Notes accepted in the Exchange Offer. Holders may tender
some or all of their Outstanding Notes pursuant to the Exchange Offer.
However, Outstanding Notes may be tendered only in integral multiples of
$1,000.
The forms and terms of the Exchange Notes are the same as the form and
terms of the Outstanding Notes except that (i) the Exchange Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (ii) the holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement. The
Exchange Notes will evidence the same debt as the Outstanding Notes and will be
entitled to the benefits of the Indenture.
As of the date of this Prospectus, $115,815,000 aggregate principal
amount of the Outstanding Notes was outstanding. The Company has fixed the
close of business on , 1997 as the record date for the Exchange
Offer for purposes of determining the persons to whom this Prospectus and the
Letter of Transmittal will be mailed initially.
Holders of Outstanding Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission thereunder, including Rule
14e-1 thereunder.
The Company will be deemed to have accepted validly tendered
Outstanding Notes when, as and if the Company has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering Holders for the purpose of receiving the Exchange Notes from the
Company.
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If any tendered Outstanding Notes are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, the certificates for any such unaccepted Outstanding Notes
will be returned, without expense, to the tendering Holder thereof as promptly
as practicable after the Expiration Date.
Holders who tender outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "-- Fees and Expenses."
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from the date of issuance of the
Exchange Notes. Interest on the Outstanding Notes that are tendered in
exchange for the Exchange Notes that has accrued from June 30, 1997, through
the Exchange Date will be payable on or before December 31, 1997. Interest on
the Exchange Notes will be payable semiannually on each June 30 and December 31
commencing December 31, 1997.
PROCEDURES FOR TENDERING
Only a Holder of Outstanding Notes may tender such Outstanding Notes
in the Exchange Offer. To tender in the Exchange Offer, a Holder must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal and
mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Outstanding Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
The Company is not asking any Holder for a proxy, and no Holder is requested to
send the Company a proxy. To be tendered effectively, the Outstanding Notes,
Letter of Transmittal and other required documents must be received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date.
By executing the Letter of Transmittal, each Holder will make to the
Company the representations set forth below in the second paragraph under the
heading "-- Resale of Exchange Notes" and will confirm its obligations under
the Registration Rights Agreement.
The tender by a Holder and the acceptance thereof by the Company will
constitute agreement between such Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING
NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE
ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Outstanding Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered holder promptly and instruct
such registered Holder to tender on such beneficial owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as
the case may be, must be by an Eligible Institution (as defined below) unless
the Outstanding Notes tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter
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of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by a properly completed bond power,
signed by such registered Holder as such registered Holder's name appears on
such Outstanding Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Outstanding Notes or bond powers
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Outstanding Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Outstanding Notes not properly tendered or any Outstanding Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Outstanding Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Company shall determine. Although the Company intends to notify Holders of
defects or irregularities with respect to tenders of Outstanding Notes, neither
the Company, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Outstanding Notes will not
be deemed to have been made until such defects or irregularities have been
cured or waived. Any Outstanding Notes received by the Exchange Agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the Exchange Agent to the tendering
Holders, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available or (ii) who cannot deliver
their outstanding Notes, the Letter of Transmittal or any other required
documents to the Exchange Agent prior to the Expiration Date, may effect a
tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent
receives from the Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name
and address of the Holder, the certificate number(s) of such
Outstanding Note(s) tendered, stating that the tender is being
made thereby and guaranteeing that, within [five] trading days
after the Expiration Date, the Letter of Transmittal (or
facsimile thereof), together with the certificate(s)
representing the Outstanding Notes and any other documents
required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of
Transmittal (or facsimile thereof), as well as the
certificate(s) representing all tendered Outstanding Notes in
proper form for transfer and all other documents required by
the Letter of Transmittal, are received by the Exchange Agent
within [five] trading days after the Expiration Date.
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<PAGE> 27
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to Holders who wish to tender their Outstanding Notes according to
the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may
be withdrawn at any time prior to 5:00 P.M., New York City time, on the
Expiration Date.
To withdraw a tender of Outstanding Notes in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Outstanding Notes to be
withdrawn (the "Depositor"), (ii) identify the Outstanding Notes to be
withdrawn (including the certificate number(s) and principal amount of such
Outstanding Notes), (iii) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Outstanding Notes
were tendered (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to have the Trustee with respect to the
Outstanding Notes register the transfer of such Outstanding Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any
such Outstanding Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Outstanding Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Outstanding Notes so withdrawn are validly retendered. Any
Outstanding Notes which have been tendered but which are not accepted for
exchange, will be returned to the Holder thereof without cost to such Holder as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by
following one of the procedures described above under "Procedures for
Tendering" at any time prior to the Expiration Date.
EXCHANGE AGENT
Bank One, NA has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies
of this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Mail or Hand: By Facsimile:
Bank One, NA Bank One, NA-0H1-0184 Bank One, NA
P.O. Box 70184 100 East Broad Street Attn: Corporate Trust Department
Columbus, Ohio 43271-0184 Columbus, Ohio 43215 Facsimile No. (614) 248-5088
Attn: Lora Marsch Attn: Lora Marsch Confirm by Telephone No.
(614) 248-4856
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will
be borne by the Company. The principal solicitation is being made by mail;
however, additional solicitation may be made by telegraph, telephone, facsimile
or in person by officers and regular employees of the Company and its
affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or others soliciting
acceptances of the Exchange Offer. The Company, however, will pay the Exchange
Agent reasonable and customary fees for its services and registration expenses,
including fees and expenses of the Trustee, filing fees, blue sky fees and
printing and distribution expenses.
22
<PAGE> 28
The Company will pay all transfer taxes, if any, applicable to the
exchange of the Outstanding Notes pursuant to the Exchange Offer. If, however,
certificates representing the Exchange Notes or the Outstanding Notes for the
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be issued in the name of, any person other than the person signing
the Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of the Outstanding Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered Holder
or any other person) will be payable by the tendering Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes as reflected in the Company's accounting records on the date
of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the term
of the Exchange Notes.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes
may be offered for resale, resold and otherwise transferred by any holder of
such Exchange Notes (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any holder who tenders in the Exchange
Offer with the intention to participate, or for the purpose of participating,
in a distribution of the Exchange Notes may not rely on the position of the
staff of the Commission enunciated in Exxon Capital Holdings Corporation
(available April 13, 1989) and Morgan Stanley & Co., Incorporated (June 5,
1991), or similar no-action letters, but rather must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, any such resale
transaction should be covered by an effective registration statement containing
the selling security holders information required by Item 507 of Regulation S-K
of the Securities Act. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Outstanding Notes, where such Outstanding Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution."
By tendering in the Exchange Offer, each Holder will represent to the
Company that, among other things, (i) the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is a Holder,
(ii) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and (iii) the Holder and such other person acknowledge that if
they participate in the distribution of the Exchange Notes (a) they must, in
the absence of an exemption therefrom, comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on the no-action letters
referenced above and (b) failure to comply with such requirements in such
instance could result in such Holder incurring liability under the Securities
Act for which such Holder is not indemnified by the Company. Further, by
tendering in the Exchange Offer, each Holder that may be deemed an "affiliate"
(as defined under Rule 405 of the Securities Act) of the Company will represent
to the Company that such Holder understands and acknowledges that the Exchange
Notes may not be offered for resale, resold or otherwise transferred by that
Holder without registration under the Securities Act or an exemption therefrom.
As set forth above, affiliates of the Company are not entitled to rely
on the foregoing interpretations of the staff of the Commission with respect to
resales of the Exchange Notes without compliance with the registration and
prospectus delivery requirements of the Securities Act.
SHELF REGISTRATION STATEMENT
23
<PAGE> 29
If the Company is not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by any applicable law or applicable
interpretation of the Commission or the staff of the Commission, the Company
has agreed file with the Commission, use its best efforts to have declared
effective and maintain for up to two years a registration statement that would
allow resales of outstanding Notes owned by such holders.
OTHER
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. Holders of the Outstanding Notes are
urged to consult their financial and tax advisors in making their own decision
on what action to take.
The Company may in the future seek to acquire untendered Outstanding
Notes in open market or privately negotiated transactions through subsequent
exchange offers or otherwise. The Company has no present plans to acquire any
Outstanding Notes that are not tendered in the Exchange Offer or to file a
registration statement to permit resales of any untendered Outstanding Notes.
24
<PAGE> 30
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes offered
hereby. In consideration for issuing the Exchange Notes contemplated in this
prospectus, the Company will receive Outstanding Notes in like principal
amount, the form and terms of which are substantially similar to the form and
terms of the Exchange Notes, except as otherwise described herein. The
Outstanding Notes surrendered in exchange for Exchange Notes will be retired
and canceled and cannot be reissued. Accordingly, issuance of the Exchange
Notes will not result in any increase or decrease in the indebtedness of the
Company.
25
<PAGE> 31
THE COMPANY
GENERAL
TransTexas is engaged in the exploration for and development and
production of natural gas, primarily in South Texas. Since 1973, TransTexas has
drilled over 1,400 wells and discovered over 3.5 Tcfe of natural gas.
TransTexas' business strategy is to utilize its extensive experience gained
from over 20 years of drilling and operating wells in South Texas, to continue
to find, develop and produce reserves at a low cost. TransTexas has
traditionally performed most of its own well site preparation, drilling,
workover, completion, pipeline and production services.
In 1994, as part of its strategy to expand its productive reserves
beyond the Lobo Trend, TransTexas began evaluating prospects that exhibited the
potential to add proved reserves of at least 50 Bcfe of natural gas per
development area. Since that time, TransTexas has evaluated over 300 potential
areas and its development of certain of these areas has resulted in substantial
additions to its reserves and production. Since July 31, 1994, TransTexas has
added 812 Bcfe of net proved reserves to its asset base, at an average finding
cost of $0.65 per Mcfe, and, as of April 30, 1997, had acquired leasehold
interests in approximately 484,000 gross acres. Management believes that
TransTexas' combination of exploration and development expertise, financial
resources and ability to quickly evaluate and execute acreage acquisition
transactions provides it with a significant competitive advantage over other
oil and gas companies in acquiring prospective acreage in its areas of
operations.
On May 29, 1997, TransTexas consummated the sale of TTC, its
subsidiary that owned substantially all of TransTexas' Lobo Trend producing
properties and related pipeline transmission system, for a sales price in
excess of $1 billion. As of February 1, 1997, the Lobo Trend producing
properties divested by the sale of the stock of TTC had proved reserves of
approximately 550 Bcfe. As of April 30, 1997, after giving effect to the Lobo
Sale, TransTexas would have owned over 577,000 gross (418,700 net) acres of
mineral interests, with net daily production of approximately 186 MMcfd of
natural gas and 2,397 BPD of condensate and crude oil. As of February 1, 1997,
TransTexas' proved reserves as estimated by Netherland, Sewell & Associates,
Inc., for the Continuing Operations were 404 Bcfe.
TransTexas' average net daily natural gas production for the twelve
months ended January 31, 1997, was approximately 420 MMcfd, for a total net
production of 153.3 Bcf of natural gas. TransTexas' average net daily
production of natural gas and crude and condensate for the quarter ended April
30, 1997 was approximately 186 MMcfd and 2,397 BPD, respectively. During the
three months ended April 30, 1997, TransTexas completed approximately 72% of
the 29 wells it drilled in the period.
OPERATING AREAS
TransTexas' primary areas of operations are discussed below:
BOB WEST NORTH. In late 1994, TransTexas made a natural gas discovery
in the Bob West North area of southern Zapata County, Texas. Since the
discovery, TransTexas has drilled 50 wells and completed 45 wells in the area.
TransTexas' mineral interests in Bob West North consist of a 98% working
interest in 17,000 gross (14,800 net) acres and a 90% net profits interest in
660 gross acres. The Bob West North area surpassed the Lobo Trend in net daily
natural gas production to TransTexas by the end of fiscal 1997. On April 30,
1997, TransTexas was drilling four wells in Bob West North, was in the process
of completing two wells and had daily gross natural gas production of 180 MMcfd
(129 net MMcfd). For the twelve months ended January 31, 1997, TransTexas
produced 45.7 Bcf (32.6 net Bcf) from the Bob West North area. Recent drilling
results indicate the potential for a new productive fault block of the
structure that previously had not been drilled. For the three months ended
April 30, 1997, TransTexas produced 18.6 Bcf (13.4 net Bcf) from the Bob West
North area.
26
<PAGE> 32
FANDANGO SOUTH. TransTexas is developing an additional natural gas
discovery located in the Lower Wilcox sands in Jim Hogg County, Texas known as
the Fandango South area. As of April 30, 1997, TransTexas had drilled and
completed one well in Fandango South, which was producing at a gross rate of 12
MMcfd (9.3 net MMcfd), was drilling two additional wells in the area that it
intends to complete, and was completing one additional well. As of April 30,
1997, TransTexas held a 100% working interest in approximately 5,600 gross
(5,600 net) acres in Fandango South. TransTexas believes that its interests in
the area hold the potential for a total of approximately 20 well sites.
WHARTON COUNTY. In 1995, TransTexas entered into an agreement with a
privately held concern to jointly develop the mineral rights in Frio and
Miocene sands in Wharton County, Texas. TransTexas is not the operator of this
shallow play but interprets data from a dedicated 3-D seismic program to select
drilling locations in which prior production has not depleted the shallow
reservoirs. As of April 30, 1997, 48 wells had been drilled in shallow
formations in the area, 21 of which had been completed and were producing at a
combined gross rate of 11.9 MMcfd (7.3 net MMcfd). The operator was also in
the process of completing an additional well. Based on correlation of 3-D
seismic analyses and extensive subsurface geology, TransTexas believes that its
acreage interests covering the area's shallow reservoirs contain the potential
for as many as 12 additional wells.
TransTexas also acquired mineral rights covering deep prospective
production of the Wilcox formation in Wharton County. As of April 30, 1997,
TransTexas had drilled a well testing the potential of the deeper formation and
was drilling a second well. Preliminary electric log interpretation indicated
40 feet of potential pay in the Middle Wilcox formation in the first well.
Based upon this preliminary analysis, TransTexas has negotiated with a
transmission company to transport natural gas from the area and intends to
drill two additional development wells in the area. Recently, offset operators
have announced several major discoveries in adjacent areas. As of April 30,
1997, TransTexas held a 75% working interest in the shallow mineral rights in
approximately 43,100 gross (34,500 net) acres in Wharton County and a 100%
working interest in the deep mineral rights in approximately 2,200 gross (1,800
net) acres. Based on correlation of 3-D seismic analysis and extensive
subsurface geology, TransTexas believes that it may be able to drill as many as
12 such deep wells in the area.
LODGEPOLE, NORTH DAKOTA. TransTexas is participating in the
exploration and development of the Lodgepole area of Stark and Dunn counties in
North Dakota. In late 1996, TransTexas announced the discovery of a Lodgepole
carbonate reef oil field in Dickinson, North Dakota with the Heart River #1-4,
which flow tested at a daily rate of 6,836 BPD. TransTexas has conducted or
participated in a series of 3-D seismic surveys covering more than 270 square
miles in order to develop its drilling locations and evaluate acreage holdings.
Based upon such 3-D seismic information, TransTexas has selected additional
drilling locations in the producing reef and further seismic anomalies.
TransTexas holds an average working interest of 80% in approximately 198,800
gross (98,400 net) acres in the Lodgepole. As of April 30, 1997, TransTexas had
drilled a total of 10 wells in the Lodgepole, three of which had been completed
and were producing at a combined gross daily production rate of 2,753 BPD.
Effective June 1997, all producing wells in the field are restricted to a
State-mandated allowable daily rate of approximately 500 BPD per well.
AUSTIN CHALK. With the advent of more sophisticated geophysical data
interpretation techniques and improved drilling technologies, horizontal
drilling has proven to be very successful in the economic development of
thinner gas bearing formations. The Austin Chalk formation is particularly well
suited to the drilling of horizontal wells for the primary production of
natural gas. In 1996, TransTexas began the implementation of a strategy
consisting of the evaluation of electric logs and production characteristics of
previously drilled vertical wells. TransTexas then selects areas where the
thickness and resistivity of prospective pay is sufficient to economically
justify the acquisition of mineral lease acreage and the drilling of horizontal
development wells. As of April 30, 1997, TransTexas had drilled and completed
one such horizontal well, in Walker County, Texas, that had flow tested at a
gross rate of 5.7 MMcfd (4.6 net MMcfd). Based on this success, TransTexas was
drilling a second such well as of April 30, 1997. A pipeline connection is
currently under construction to allow the marketing of natural gas. TransTexas
embarked upon a program of selected mineral lease acreage acquisition in late
1996, and as of April 30, 1997, held a 100% working interest in approximately
42,800 gross (40,800 net) acres in the Austin Chalk.
27
<PAGE> 33
OTHER AREAS. TransTexas has also made discoveries of natural gas and
oil in other prospects that, as of April 30, 1997, some of which have undergone
less development drilling, but which management believes could add material
reserves and production.
In March 1997, TransTexas began drilling of an exploration well in
Galveston Bay, Texas, the State Tract 331 #1. TransTexas owns a 75% working
interest in approximately 5,600 gross (5,100 net) acres in the area.
Management believes that this area covers four separate structures along trend
from the Chocolate Bayou and Treasure Island fields in Galveston Bay and
adjacent coastal areas. In early May and again in early July, TransTexas
encountered surface pressure of 9,600 p.s.i from a depth of approximately
15,400 feet in the Vicksburg formation that necessitated suspending drilling
operations to control pressure. Subsequently, TransTexas has resumed drilling
and intends to conduct electric logging and testing of the potentially
productive zones. A second well, the State Tract 88A #1, was commenced in June
1997 on a separate structure within the same acreage.
TransTexas owns a 75% working interest in approximately 7,000 gross
(3,100 net) acres in a development area in Wayne County, Mississippi, in which
it has drilled and completed an initial well. As of April 30, 1997, TransTexas
had drilled and was in the process of completing two additional wells. The
discovery well, The Foote Estate #1, has flow tested at a daily gross
production rate of 12.4 MMcfd (7.0 net MMcfd) and 440 BPD (247 net BPD) of
condensate and is being recompleted. TransTexas is participating in a 3-D
seismic survey covering 14,000 acres that it intends to use to select
additional drilling sites.
TransTexas holds an 89% working interest in approximately 36,000 gross
(32,900 net) acres in the Cuba Libre area of Webb County, Texas. As of April
30, 1997, TransTexas had daily gross natural gas production of 4.6 MMcfd (2.9
net MMcfd) from a total of 19 wells drilled in Cuba Libre, of which 9 wells had
been completed by TransTexas. As of April 30, 1997, TransTexas was drilling a
well, based upon the interpretation of its 3-D seismic program, which it
anticipated completing.
TransTexas holds a working interest in excess of 80% in approximately
103,000 gross (81,900 net) acres in the La Grulla area of Starr County, Texas.
As of April 30, 1997, TransTexas had combined daily gross natural gas production
of 10.5 MMcfd (6.7 net MMcfd) from a total of 30 wells drilled in La Grulla, of
which 15 wells had been completed.
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<PAGE> 34
DESCRIPTION OF CERTAIN INDEBTEDNESS
INTERCOMPANY LOAN
With the proceeds of the TEC Offering, TEC made intercompany loans to
TransTexas and TARC. The TransTexas Intercompany Loan, in the principal amount
of $450 million, (i) bears interest at a rate of 10 7/8% per annum, payable
semi-annually in cash in arrears and (ii) is secured initially by a security
interest in substantially all of the assets of TransTexas, but excluding
inventory, receivables and equipment. The TARC Intercompany Loan, in the
original amount of $676 million, (i) accretes principal at 16% per annum,
compounded semi-annually, until June 15, 1999, to a final accreted value of
$920 million, and thereafter pays interest semi-annually in cash in arrears on
the accreted value thereof, at a rate of 16% per annum, and (ii) is secured
initially by a security interest in substantially all of TARC's assets other
than inventory, receivables and equipment. The Intercompany Loans will mature
on June 1, 2002. The Intercompany Loan Agreements contain certain restrictive
covenants, including, among others, limitations on incurring additional debt,
asset sales, dividends and transactions with affiliates. Upon the occurrence
of a Change of Control (as defined), TEC will be required to make an offer to
purchase all of the outstanding TEC Notes at a price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any,
or, in the case of any such offer to purchase the TEC Senior Secured Discount
Notes prior to June 15, 1999, at a price equal to 101% of the accreted value
thereof, in each case, to and including the date of purchase. Pursuant to the
terms of the Intercompany Loans, TEC may require TransTexas and TARC to pay a
pro rata share of the purchase price paid by TEC.
RECEIVABLES FACILITY
The Company and BNY Financial Corporation are parties to an Amended
and Restated Accounts Receivable Management and Security Agreement (the "BNY
Facility"), dated as of October 31, 1995 and amended in December 1996. In
connection with the transactions described under "Prospectus Summary -- Recent
Events," the Company and BNY entered into a waiver of the BNY Facility,
pursuant to which advances under the BNY Facility are made at the sole
discretion of the lender and the lender may require repayment of principal and
interest at any time. As of June 30, 1997, outstanding advances under the BNY
Facility totaled approximately $3.6 million. Interest accrues on advances at
the higher of the prime rate of The Bank of New York and the Federal Funds Rate
plus 1/2 of 1%.
Obligations under the BNY Facility are secured by liens on the
Company's receivables and inventory. The Notes will be subordinate and junior
in right of payment to the Company's obligations under the BNY Facility in the
event of liquidation.
The Company is currently negotiating an amendment and restatement of
the BNY Facility.
EQUIPMENT FINANCING
As of June 30, 1997, the Company had approximately $24.9 million in
notes payable collateralized by certain of the Company's operating equipment.
These notes payable bear interest at rates ranging from approximately 9.25% to
12.9% per annum and mature at various dates through 2000.
29
<PAGE> 35
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued as a separate series of notes under
an indenture (the "Indenture") dated as of June 13, 1997 between the Company
and BankOne, NA, as trustee (the "Trustee"). The Exchange Notes will be senior
unsecured obligations of the Company and are substantially identical (including
principal amount, interest rate, maturity and redemption rights) to the
Outstanding Notes for which they may be exchanged pursuant to this offer,
except for certain transfer restrictions and registration rights relating the
Outstanding Notes and except for certain interest provisions relating to such
rights. Under the terms of the Indenture, the covenants and events of default
will apply equally to the Exchange Notes and the Outstanding Notes, and the
Exchange Notes and the Outstanding Notes will be treated as one class for all
actions to be taken by the holders thereof and for determining their respective
rights under the Indenture. References to the Notes include the Exchange Notes
and the Outstanding Notes unless the context otherwise requires. The
Outstanding Notes were issued under the Indenture in an aggregate principal
amount of $115,815,000. The Indenture is subject to and governed by the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summaries of certain provisions of the Indenture and the Registration Rights
Agreement do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all of the provisions of the Indenture and
the Registration Rights Agreement, including the definition of certain terms
contained therein and those terms that are made a part of the Indenture by
reference to the Trust Indenture Act. Copies of the Indenture and Registration
Rights Agreement have been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. Capitalized terms not otherwise defined below
or elsewhere in this Prospectus have the meanings given to them in the
Indenture. The definition of certain capitalized terms used in the summary are
set forth below under "--Certain Definitions."
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be unsecured senior subordinated general
obligations of the Company, will mature on December 31, 2001, and will be
limited in aggregate principal amount (as shown on the face thereof) to
$117,573,000. The Exchange Notes will be issued in denominations of $1,000 and
integral multiples thereof in fully registered form.
The Exchange Notes will accrue interest at the rate of 13 3/4% per
annum from the date of issuance, or from the most recent interest payment date
to which interest has been paid or duly provided for, and accrued and unpaid
interest will be payable semi-annually on June 30 and December 31 of each year,
commencing December 31, 1997. Interest will be paid to the person in whose
name the Exchange Note is registered at the close of business on the June 15 or
December 15, as applicable, immediately preceding such interest payment date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Exchange Notes will be payable both as to principal and interest
at the office or agency of the Company maintained for such purpose within the
City and State of New York. In addition, interest may be paid, at the option
of the Company, by check mailed to the holders of the Exchange Notes
("Holders") at their respective addresses set forth in the register of Holders.
Until otherwise designated by the Company, the Company's office or agency in
New York will be the office of the Trustee maintained for such purpose. Any
Outstanding Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer will be treated as a single class of securities under the Indenture.
OPTIONAL REDEMPTION
The Notes are not redeemable prior to June 30, 2000, except that,
prior to June 30, 1999, the Company may redeem, at its option, up to $35
million of the principal amount thereof at a price equal to 113.250% of the
principal amount 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.
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<PAGE> 36
The Notes 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 prices (expressed as a percentage of principal amount) set forth
below in each case, together with accrued but unpaid interest, if any, to the
date of redemption, if redeemed during the periods shown below:
<TABLE>
<S> <C>
Period Redemption Price
------ ----------------
On or after June 30, 2000, but before June 30, 2001 106.00%
On or after June 30, 2001 100.00%
</TABLE>
Any such redemptions will comply with Article III of the Indenture.
In the event of a redemption of less than all of the Notes, the Notes
will be selected for redemption by the Trustee pro rata, by lot or by any other
method that the Trustee considers fair and appropriate and, if the Exchange
Notes are listed on any securities exchange, by a method that complies with the
requirements of such exchange. Notice of redemption will be mailed at least 15
days but not more than 60 days before the redemption date to each Holder of
Exchange Notes to be redeemed at such Holder's registered address. On and
after the redemption date, interest will cease to accrue on Exchange Notes or
portions thereof called for redemption (unless the Company shall default in the
payment of the redemption price or accrued interest).
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
Notes is subordinated in right of payment as set forth in the Indenture to the
prior payment in full of all Senior Debt, whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed or guaranteed.
No payment may be made by the Company on or behalf of the Company on
account of principal of or interest on the Notes or to acquire or repurchase
any of the Notes or on account of the redemption provisions of the Notes (i)
upon the maturity of any Senior Debt by lapse of time, acceleration or
otherwise, unless and until all such Senior Debt is first paid in full or (ii)
upon the happening of any default in payment of any principal of or interest on
any Senior Debt when the same becomes due and payable (a "Payment Default"),
unless and until such Payment Default shall have been cured or waived or shall
have ceased to exist.
Upon the happening of a default (other than a Payment Default) with
respect to any Senior Debt, as such default or event of default is defined
therein or in the instrument or agreement under which it is outstanding, and
upon written notice thereof given to the Company and the Trustee by any holders
of such Senior Debt or their representative (a "Payment Notice"), then, unless
and until such default or event of default shall have been cured or waived or
shall have ceased to exist or the representative gives its written approval, no
payment shall be made by or on behalf of the Company on account of principal of
or interest on the Notes or to acquire or repurchase any of the Notes or on
account of the redemption provisions of the Notes; provided, however, that
these provisions will not prevent the making of any payment for more than 179
days after the due date of the first principal or interest payment on the Notes
after a Payment Notice shall have been given. Notwithstanding the foregoing,
not more than one Payment Notice shall be given within a period of 360
consecutive days.
Upon any distribution of the assets of the Company or payment on the
Notes on behalf of the Company in the event of any insolvency or liquidation
proceeding with respect to the Company, the holders of Senior Debt will be
entitled to receive payment in full of such Senior Debt before the Holders are
entitled to receive any payment on account of the principal amount or interest
due with respect to the Notes.
Because of these subordination provisions, creditors of the Company
who are also holders of Senior Debt may recover more, ratably, than the Holders
of the Notes.
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The subordination provisions described above will cease to be
applicable to the Notes upon any legal defeasance or covenant defeasance of the
Notes as described under "--Legal Defeasance or Covenant Defeasance of
Indenture."
As of June 30, 1997, the Company had outstanding Senior Debt of
approximately $478 million. The foregoing amounts include only liabilities on
the Company's consolidated balance sheet under GAAP; the Company and its
subsidiaries have other liabilities, including contingent liabilities, which
may be significant. Although the Indenture will contain limitations on the
amount of additional Debt that the Company and its Subsidiaries may incur, the
amounts of such Debt could be substantial and, in any case, such Debt may be
Senior Debt or Debt of Unrestricted Subsidiaries (to which the Notes will be
structurally subordinated). See "Certain Covenants--Limitation on Incurrence
of Additional Debt and Issuances of Disqualified Capital Stock."
CERTAIN DEFINITIONS
"Adjusted 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 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, (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.
"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 in a Reserve Report dated as of a date no earlier than the
Company's most recent fiscal year end (or, if such Reserve Report is
unavailable, or if the date of determination is after the end of the first
fiscal quarter of the most recent 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 (which are deemed to include leasehold mineral
interests), 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), 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, (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, and (4) the
TTXD Spin-off, if the TTXD Spin-off has occurred. For purposes of calculating
the ratio of the Company's Adjusted Consolidated Tangible Assets to total
consolidated principal amount of Debt of the
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Company and its Subsidiaries, Debt of a Subsidiary that is not a Wholly Owned
Subsidiary of the 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 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.
"Asset Sale" means any direct or indirect conveyance, sale, transfer
or other disposition, 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 (a) any disposition of
Receivables, Inventory or Equipment, (b) 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 the creation of a Permitted Lien in connection with (i) a
Dollar-Denominated Production Payment that the Company or any of its
Subsidiaries does not elect to treat as Debt, (ii) a Volumetric Production
Payment or (iii) a Presale of Gas, which in each case shall be treated as an
Asset Sale hereunder, provided, however, that neither the contribution of a
Dollar-Denominated Production Payment to a Hedging Subsidiary nor the mortgage
or other encumbrance of such Dollar-Denominated Production Payment by such
Hedging Subsidiary as contemplated by clause (e) of the definition of
"Permitted Liens" shall constitute an Asset Sale), or (c) conveyances, sales,
transfers or other dispositions in connection with a Drilling Program.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP
or, in the event that such rate of interest is not reasonably determinable,
discounted at the rate of 13 3/4% per annum) of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
Sale and Leaseback Transaction (including any period for which such lease has
been extended or may, at the option of the lessor, be extended).
"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 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.
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"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.
"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 one year from the date of acquisition, (c) certificates of deposit
with maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year, 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 or S&P, respectively, and in each case maturing within one year
after the date of acquisition, (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) preceding, (g)
demand and time deposits and certificates of deposit with any commercial bank
organized in the United States not meeting the qualifications specified in
clause (c) preceding, provided that such deposits and certificates support
bonds, letters of credit and other similar types of obligations incurred in the
ordinary course of business, (h) deposits with any Eligible Institution, (i)
demand or fully insured time deposits used in the ordinary course of business
with commercial banks insured by the Federal Deposit Insurance Corporation.
"Change of Control" means (i) the liquidation or dissolution of, or
the adoption of a plan of liquidation by, the Company, or (ii) 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 (or his heirs, his estate, or
any trust in which he or his immediate family members have, directly or
indirectly, a beneficial interest in excess of 50%) and his Subsidiaries or the
TEC Indenture Trustee, 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), directly or indirectly, of more than 50%, on a fully diluted
basis, 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) or (ii), the Notes have a current rating issued by a Rating Agency;
provided, however, that if, at any time within the period commencing on the
date that is immediately prior to the date of the first public announcement of
such event and ending on, but not including, the date that is 90 days after
occurrence of such event (which period shall be deemed to be extended so long
as prior to the end of such 90-day period and continuing thereafter the rating
of the Notes is under publicly announced consideration for possible downgrade
by either Rating Agency) either (a) the Notes are downgraded by either Rating
Agency to a rating at least one gradation (including a change within rating
categories, e.g., a decline in rating from BB+ to BB, or from B to B-) below
that which existed on the date immediately prior to the date of the first
public announcement of such an event, or (b) either Rating Agency withdraws its
rating of the Notes, then, in either case, such event shall be a "Change of
Control."
"Common Stock" means the common stock, $0.01 par value per share, of
the Company, now or hereafter issued, or any reclassification thereof.
"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 for 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 the
amounts attributable to operations and
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businesses discontinued or disposed of, on a pro forma basis as if such
operations and businesses were discontinued or disposed of on the first day of
the Reference Period) for the Reference Period to (ii) the aggregate
Consolidated Fixed Charges of such Person (exclusive of amounts attributable to
discontinued operations and businesses on a pro forma basis as if such
operations and businesses were discontinued or disposed of on the first day of
the Reference Period, 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 (and the application of the proceeds therefrom) or the retirement
of any Debt or Disqualified Capital Stock during the Reference Period or
subsequent thereto and on or prior to the Transaction Date shall be assumed to
have occurred on the first day of such Reference Period, (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 Consolidated Subsidiaries is a party to a 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, and (d) Consolidated EBITDA and Consolidated Fixed Charges of any Person
shall be calculated by giving pro forma effect to the TTXD Spin-off as if such
transaction had occurred on the first day of the Reference Period, but only if
such transaction occurred during the Reference Period.
"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
Consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to Preferred
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 Consolidated
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 Swap Obligations, in each case to the extent attributable
to such period, but excluding any interest accrued on intercompany payables for
taxes to the extent the liability for such taxes has been assumed by
TransAmerican pursuant to the Tax Allocation Agreement) 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 an
interest rate reasonably determined 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 Consolidated Subsidiary of
such Person other than with respect to Debt of such Person or a Consolidated
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
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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
Consolidated 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
Consolidated 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.
"Continuing Operations" means the aggregate of the operations of the
TransTexas Entities after giving effect to the sale by the Company of the stock
of TTC.
"Debt" means, with respect to any Person, without duplication, (i) all
liabilities, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, or similar instruments or letters of credit, (c) representing the
deferred and unpaid balance of the purchase price of any property acquired by
such Person or services received by such Person, other than long-term service
contracts or supply contracts which require minimum periodic payments and other
than any such balance that represents an account payable or other monetary
obligation to a trade creditor created, incurred, assumed or guaranteed by such
Person in the ordinary course of business of such Person in connection with
obtaining goods, materials or services due within twelve months (or such longer
period for payment as is customarily extended by such trade creditor) of the
Incurrence thereof, which account is not overdue by more than 150 days, unless
such account payable is being contested in good faith or has been extended, (d)
evidenced by bankers' acceptances or similar instruments issued or accepted by
banks or Swap Obligations, (e) for the payment of money relating to a
Capitalized Lease Obligation, (f) the Attributable Debt associated with any
Sale and Leaseback Transaction, or (g) Dollar-Denominated Production Payments
that the Company or any of its Subsidiaries elect to treat as Debt (excluding
all other Permitted Production Payment Obligations); (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), but excluding
liabilities arising by reason of endorsements, with recourse, of negotiable and
similar instruments for purposes of deposit or collection in the ordinary
course of business; (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
and are obligations of such Person) 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.
"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
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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.
"Dollar-Denominated Production Payment" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
obligations and undertakings in connection therewith.
"Drilling Agreement" means a drilling and services agreement between
the Company and TTXD relating to the provision of such services at market rates
by TTXD to the Company upon the terms approved by the Board of Directors of
each of TTXD and the Company, as in effect on the Issue Date and as amended
from time to time, provided that any such amendment is not materially adverse
to the Holders of the Notes.
"Drilling Program" means any arrangement between the Company or any
Subsidiary of the Company and another Person pursuant to which (i) such Person
agrees (a) 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
(b) to pay all or a portion of the costs incurred in connection with of
drilling, completing or performing such other operations (or to reimburse the
Company or such Subsidiary for payment of such costs within six months of the
incurrence thereof) 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 million and that is
rated "A" (or higher) according to Moody's or S&P 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, well site 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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Assets" means assets 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 acquired assets include
proved reserves with a value that, together with the cash or Cash Equivalents
therefor 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 or such Subsidiary in connection with such Asset Sale; except, that
during any fiscal year the Company or any of its Subsidiaries can collectively
acquire assets (other than proved reserves, cash or Cash Equivalents) with a
fair market value of up to $40 million in exchange for assets of the Company or
such Subsidiaries with proved reserves, and such assets acquired by the Company
or such Subsidiaries shall constitute "Exchange Assets" hereunder.
"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 annual report on Form 10-K for the year ended January
31, 1997.
"Gas Purchase Agreement" means the Interruptible Gas Sales Terms and
Conditions between TARC and the Company, as in effect on the Issue Date and as
amended from time to time, provided that any such amendment is not adverse to
the Holders of the Notes in any material respect.
"Hedging Subsidiary" means a Subsidiary of the Company engaged solely
in the business of facilitating Permitted Hedging Transactions for the benefit
of the Company or any of its Subsidiaries.
"Hydrocarbons" means oil, natural gas, condensate, and natural gas
liquids.
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"Independent Director" means an individual that is not and has not
been affiliated (other than as a director of TransAmerican or any of its past
or present Subsidiaries) with, and is not and has not been a Related Person
(other than solely as a director of TransAmerican or one of its past or present
Subsidiaries) with respect to, John R. Stanley, TransAmerican or the Company or
its Subsidiaries.
"Intercompany Loan Redemption" means a redemption by the Company of
all or a portion of the principal of the TransTexas Intercompany Loan, together
with payment of accrued and unpaid interest, if any, to and including the date
of such redemption.
"Interest Rate or Currency Agreement" of any Person means any forward
contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars, puts and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates.
"Inventory" means and includes, as to any Person, all of such Person's
now owned or hereafter acquired 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.
"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, 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, loaned
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; (d) the entering into of any Swap Obligation with such other
Person; or (e) the making of any capital contribution by such Person to such
other Person.
"Investment Grade Rating" means, with respect to any Person or 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 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
the Indenture.
"Junior Debt" means Debt of the Company or any Subsidiary of the
Company that 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.
"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).
"Material Change" means an increase or decrease of more than 10% since
the then most recent Reserve Report 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 since the then most
recent Reserve Report of oil and gas reserves that have been estimated by
independent petroleum engineers and on which a report or reports have been
prepared by such independent petroleum engineers within twelve months of the
acquisition, (ii) any reserves added since the then most recent Reserve Report
attributable to the drilling
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or recompletion of wells not included in previous reserve estimates, and (iii)
any disposition of properties existing on the date of the then most recent
Reserve Report that have been disposed of.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Proceeds" means (a) 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, and (b) in the case of any exchange,
exercise, conversion or surrender of any outstanding securities or Debt of the
Company for or into shares of Qualified Capital Stock of the Company, the net
book value of such outstanding securities as adjusted on the books of the
Company or Debt of the Company to the extent recorded in accordance with GAAP,
in each case, on the date of such exchange, exercise, conversion or surrender
(plus any additional amount required to be paid by the holder of such Debt or
securities to the Company upon such exchange, exercise, conversion or surrender
and less (i) any and all payments made to the holders of such Debt or
securities and (ii) all other expenses incurred by the Company in connection
therewith; in each case insofar as such payments or expenses are incident to
such exchange, exercise, conversion or surrender).
"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, each item to be determined in conformity with GAAP.
"Net Worth" of any Person means, at any date of determination,
stockholders' equity as set forth in the most recently available quarterly or
annual consolidated balance sheet of such Person and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from stockholders' equity),
and the principal amount of any promissory notes receivable from the sale of
the Capital Stock of such Person or any of its Subsidiaries, each item to be
determined in conformity with GAAP.
"New Property" means real or personal property acquired by the Company
or any of its Subsidiaries after the Issue Date.
"NNM" means the Nasdaq National Market.
"Obligor" means the Company.
"Office Leases" means the existing leases of office space at 1300
North Sam Houston Parkway East, Houston, Texas 77032-2949.
"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 the normal business operations of the TransTexas
Entities as a risk-management strategy or hedge against adverse changes in
prices of oil, natural gas, or natural gas liquids; provided, that such
transactions do not, on a monthly basis, relate to more than 90% of the
TransTexas Entities' average net natural gas production per month from
Continuing Operations for the most recent three-month period measured at the
time of such incurrence; 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 that 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, or secured by a letter of
credit issued 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.
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<PAGE> 45
"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 Cash Equivalents; (iii) Investments by
the Company or its Wholly Owned Subsidiaries in Wholly Owned Subsidiaries of
the Company that are engaged in Related Businesses; (iv) Swap Obligations; (v)
the receipt of Capital Stock in lieu of cash in connection with the settlement
of litigation or a claim in a bankruptcy or insolvency proceeding; (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 Capital Stock
resulting from an Asset Sale described in subparagraph (viii) of the second
paragraph under the caption " -- Certain Covenants -- Limitation on Asset
Sales"; (ix) an Investment in one or more Unrestricted Subsidiaries of the
Company in an aggregate amount not in excess of $25,000,000 (net of returns on
investment) less the amount of any Unrestricted Non-Recourse Debt outstanding
of TransTexas or any of its Subsidiaries; (x) Investments and expenditures made
in the ordinary course of business by the Company or its Subsidiaries, and of a
nature that is or shall have become customary in, the oil and gas business as
means of actively exploiting, exploring for, acquiring, developing, processing,
gathering, marketing or transporting oil or gas through agreements,
transactions, interests or arrangements which permit a Person to share risks or
costs, comply with regulatory requirements regarding local ownership or satisfy
objectives customarily achieved through the conduct of the oil and gas business
jointly with third parties, including, without limitation, (a) ownership
interests in oil and gas properties or gathering systems and (b) Investments
and expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling agreements,
joint bidding agreements, service contracts, joint venture agreements,
partnership agreements (whether general or limited), subscription agreements,
stock purchase agreements and other similar agreements with third parties
(including Unrestricted Subsidiaries), provided that in the case of any joint
venture engaged in processing, gathering, marketing or transporting oil or gas
(1) all Debt of such joint venture (other than a joint venture that is an
Unrestricted Subsidiary) which would not otherwise constitute Debt of one of
the TransTexas Entities shall be deemed Debt of the Company in proportion to
its direct or indirect ownership interest in such joint venture and (2) such
joint venture shall be reasonably calculated to enhance the value of the
reserves of the TransTexas Entities or the marketability of production from
such reserves; (xi) a guaranty by any Subsidiary of the Company permitted under
clause (f) of the covenant described under the caption " -- Certain Covenants
- -- Limitation on Incurrence of Additional Debt and Issuances of Disqualified
Capital Stock"; (xii) deposits permitted by of the definition of "Permitted
Liens" or any extension, renewal, or replacement of any of them; (xiii) capital
contributions by the Company to TTXD or to a joint venture, a partnership, a
limited liability company or a similar entity of the Company's drilling and
energy services business and pipeline services business and related assets;
(xiv) the TTXD Equity Investment (in addition to any contribution by the
Company pursuant to clause (xiii) preceding); (xv) [intentionally omitted];
(xvi) guarantees by the Company of Debt of TTXD to the extent that such Debt
relates to assets contributed to TTXD pursuant to clause (xiii) hereof; (xvii)
other Investments, not in excess of $5,000,000 at any time outstanding; (xviii)
a capital contribution by TTXD of any or all of its assets to a joint venture,
a partnership, a limited liability company or a similar entity; or (xix) loans
made (a) to officers, directors and employees of the Company or any of its
Subsidiaries approved by the applicable Board of Directors (or by an authorized
officer), the proceeds of which are used solely to purchase stock or to
exercise stock options received pursuant to an employee stock option plan or
other incentive plan, in a principal amount not to exceed the purchase price of
such stock or the exercise price of such stock options, as applicable, and (b)
to refinance loans, together with accrued interest thereon, made pursuant to
this clause (xix), in the case of each of (a) and (b) of this clause (xix) not
in excess of $3,000,000 in aggregate principal amount outstanding at any one
time.
"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 90 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) pledges of assets or deposits
of cash or Cash Equivalents to secure the performance of bids, trade contracts
(other than borrowed money), leases, statutory obligations, surety bonds,
appeal bonds, supersedeas bonds,
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<PAGE> 46
performance bonds, and other obligations of a like nature incurred in the
ordinary course of business (or to secure reimbursement obligations or letters
of credit in support of such bonds); (d) Liens encumbering customary initial
deposits and margin deposits securing Swap Obligations or Permitted Hedging
Transactions; (e) pledges of assets, including, without limitation, any
mortgage or other encumbrance of a production payment by a Hedging Subsidiary,
to secure margin obligations, reimbursement obligations or letters of credit in
connection with Permitted Hedging Transactions, provided that, at the time such
pledge is made (or, if such pledge secures future Permitted Hedging
Transactions, at the time any such Permitted Hedging Transaction is entered
into), the maximum aggregate exposure under such Permitted Hedging Transactions
does not exceed the greater of (i) $25,000,000 or (ii) 10% of the SEC PV10
indicated on the Company's then 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 materially 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 securing Debt or other obligations not in
excess of $3,000,000 and Liens existing on the Issue Date that were Permitted
Liens under the Series A/B 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,
property insurance and liability insurance; (j) Liens granted on Equipment,
Inventory or Receivables; (k) Liens granted in connection with the Presale of
Gas; (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)
such obligations are limited to a percentage of production from such wells,
(ii) 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 (iii) 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 (m) or (o) through (u) 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)
do not secure any additional Debt or encumber any additional property; (o)
Liens securing (i) Royalty Payment Obligations and (ii) Permitted Production
Payment Obligations; (p) Liens on any of the assets of any of the Subsidiaries
of the Company in favor of another TransTexas Entity; (q) Liens that secure
Unrestricted Non-Recourse Debt; provided, however, that at the time of
incurrence the aggregate fair market value of the assets securing such
Unrestricted Non-Recourse Debt (exclusive of the stock of the applicable
Unrestricted Subsidiary) shall not exceed the amount of Unrestricted
Non-Recourse Debt at the time permitted hereunder; (r) Liens on the proceeds of
any property subject to a Permitted Lien or on deposit accounts containing any
such proceeds; (s) Liens (including renewals and extensions thereof) on New
Property, provided, however, that (i) such Lien is created solely for the
purpose of securing Debt Incurred to finance the cost (including the cost of
improvements or construction) of New Property subject thereto and such Lien is
created at the time of, or within six months after the later of the
acquisition, the completion of construction, or the commencement of full
operation of such New Property, (ii) the principal amount of the Debt secured
by such Lien does not exceed 100% of such cost, including costs and fees
related to the financing thereof, (iii) any such Lien shall not extend to or
cover any property or assets other than such item of New Property and any
improvements on such New Property; (t) Liens that secure Senior Debt, whether
in whole or part thereof; and (u) Liens securing Debt on any one or more of the
following properties: (i) the land and improvements now or hereafter located at
1300 North Sam Houston Parkway East, Houston, Texas, (ii) the land and
improvements, now known as "TransTexas Gas Corporation," now or hereafter
located on U.S. Highway 359 in Webb County, Texas, and (iii) the land and
improvements, now known as "TransTexas Gas Corporation," now or hereafter
located approximately two miles west of Zapata, Texas, on Farm-to-Market Road
496 in Zapata County, Texas.
"Permitted Production Payment Obligations" means Volumetric Production
Payments and Dollar-Denominated Production Payments, each as permitted to be
made hereunder, and similar burdens on the property of
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the Company or any Subsidiary of the Company 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.
"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.
"Post-Commencement Amounts" means all interest and fees accrued or
accruing after the commencement of any proceeding initiated under any
Bankruptcy Law in accordance with and at the contract rate (including, without
limitation, any non-usurious rate applicable upon default) and all premiums,
expenses (including costs of collection), indemnities and other amounts that
would have accrued or been incurred after the commencement of any such
proceeding in any case as specified in any agreement or instrument creating,
evidencing, or governing any Senior Debt, whether or not, pursuant to
applicable law or otherwise, the claim for such interest, fees, premiums,
expenses, indemnities or other amounts is allowed and non-avoidable as a claim
in such proceeding.
"Preferred Stock" means, with respect to any corporation, any class or
classes (however designated) of Capital Stock of such Person that is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation over
shares of Capital Stock of any other class of such corporation.
"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 Asset Sale involving Hydrocarbon reserves.
"principal" of any Debt (including the Securities) means the principal
of such Debt plus, without duplication, any applicable premium, if any, on such
Debt.
"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.
"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.
"Qualified Capital Stock" means any Capital Stock of the Company that
is not Disqualified Capital Stock.
"Rating Agency" means each of Moody's and S&P or, if Moody's or S&P
shall have ceased to be a "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act) or shall have
ceased to make publicly available a rating on any outstanding securities of any
company engaged primarily in the oil and gas business, such other organization
or organizations, as the case may be, then making publicly available a rating
on the Notes as is selected by the Company.
"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,
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.
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"Record Date" means a Record Date specified in the Securities
regardless of whether such Record Date is a Business Day.
"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.
"Registration Rights Agreement" means the registration rights
agreement of even date herewith between the Company and the original purchasers
of the Series C Notes.
"Reimbursement and Credit Facility" means the Reimbursement and Credit
Agreement dated January 25, 1996, pursuant to which a third party caused a $20
million letter of credit to be issued to collateralize a supersedeas bond on
behalf of the Company, as in effect on the Issue Date and as amended from time
to time, provided that any such amendment is not materially adverse to the
Holders of the Notes.
"Related Business" means (i) the exploration for, acquisition of,
development of, production, transportation, gathering, and processing (in
connection with natural gas and natural gas liquids only) 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 and natural gas liquids, (ii) the
drilling and energy services business and pipeline services business or (iii)
owning and operating a Hedging Subsidiary.
"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
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 TTXD Business" means the drilling and energy services
business and pipeline services business.
"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, (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, 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 Junior Debt of such
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<PAGE> 49
Person payable solely in shares of Qualified Capital Stock of such Person, (iv)
any payments or distributions made pursuant to and in accordance with the
Transfer Agreement, the Drilling Agreement, the Gas Purchase Agreement, the TEC
Registration Rights Agreement, the Services Agreement, the Office Leases or the
Tax Allocation Agreement, (v) any Investment by the Company in, or distribution
by the Company on, its Capital Stock pursuant to share repurchases or dividends
on its Capital Stock as described in the Offering Circular dated June 5, 1997,
relating to the offer by TransAmerican Energy Corporation of its 11 1/2% Senior
Secured Notes due 2002 and of its 13% Senior Secured Discount Notes due 2002 in
an aggregate amount not to exceed $400 million, (vi) the redemption, purchase,
retirement or other acquisition of any Junior Debt with the proceeds of any
refinancing Debt permitted to be incurred pursuant to clause (j) of the
covenant described under the caption " -- Certain Covenants -- Limitation on
Incurrence of Additional Debt and Issuances of Disqualified Capital Stock";
(vii) any transfer, dividend or other distribution by the Company of assets,
including, without limitation, shares of Capital Stock of TTXD, in connection
with the TTXD Spin-off, (viii) the purchase by the Company of shares of Capital
Stock of TARC, the Company or TTXD in connection with the Company's employee
benefit plans, including without limitation any employee stock ownership plans
or any employee stock option plans, in an aggregate amount not to exceed seven
percent of the aggregate market value of the voting stock held by non-
affiliates of the issuer measured from the date of the first such purchase; and
(ix) any redemption, defeasance, repurchase or other retirement for value of
the Senior Notes by the Company.
"Royalty Payment Obligations" means (i) royalties, overriding
royalties, revenue interests, net revenue interests, net profit interests, and
reversionary interests, (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, pooling, unitization 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.
"S&P" means Standard & Poor's Corporation, Inc. and its successors.
"Sale and Leaseback Transaction" means an arrangement relating to
property owned on the Issue Date or thereafter acquired whereby the Company or
a Subsidiary of the Company transfers such property to a Person and leases it
back from such Person.
"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.
"Securities" means the Notes.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securityholder" means the Person in whose name a Note is registered
on the Registrar's book.
"Senior Debt" means all Debt of the Company, including, without
limitation, the TransTexas Intercompany Loan, now or hereafter created,
incurred, assumed or guaranteed by the Company (and all renewals, extensions or
refundings thereof or of any part thereof) (including the principal of,
interest on and fees, premiums, expenses (including costs of collection),
indemnities and other amounts payable in connection with such Indebtedness, and
including Post- Commencement Amounts), unless the instrument governing such
Debt expressly provides that such Debt is not senior or superior in right of
payment to the Notes. Notwithstanding the foregoing, Senior Debt of the
Company shall not include (i) Debt evidenced by the Notes, (ii) Debt of the
Company to any Subsidiary of the
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Company or to any Unrestricted Subsidiary of the Company, or (iii) any amounts
payable or other Debt to trade creditors created, incurred, assumed or
guaranteed by the Company or any Subsidiary of the Company in the ordinary
course of business in connection with obtaining goods or services.
"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.
"Series A/B Indenture" means the indenture, dated as of December 13,
1996, as amended or supplemented from time to time in accordance with the terms
thereof, by and between the Company and the Trustee, as trustee, relating to
the Series A/B Notes.
"Series A/B 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 of
the Company.
"Series C Notes" and "Series D Notes" mean the 13 3/4% Series C Senior
Subordinated Notes due 2001 and the 13 3/4% Series D Senior Subordinated Notes
due 2001 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 and as amended from time to time, provided that any such amendment is not
materially adverse to the Holders of the Notes.
"Stated Maturity," when used with respect to any Note, means December
31, 2001.
"Subordinated Debt" means Debt of any Person that (i) requires no
payment of principal prior to or on the date on which all principal of and
interest on the TransTexas Intercompany Loan is paid in full and (ii) is
subordinate and junior in right of payment to the TransTexas Intercompany Loan
in the event of liquidation.
"Subsidiary," with respect to any Person, means (i) a corporation with
respect to which such Person or its Subsidiaries owns, directly or indirectly,
at least fifty percent of such corporation's Capital Stock with voting power,
under ordinary circumstances, to elect directors, or (ii) a partnership in
which such Person or a subsidiary of such Person is, at the time, a general
partner of such partnership and has more than 50% of the total voting power of
partnership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of managers thereof, 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 other
Person; provided, however, that "Subsidiary" shall not include any Unrestricted
Subsidiary of such Person, except for purposes of the covenant described under
" -- Certain Covenants -- Limitation on Transactions with Related Persons."
"Swap Obligation" of any Person means any Interest Rate or Currency
Agreement entered into with one or more financial institutions or one or more
futures exchanges in the ordinary course of business and not for purposes of
speculation that is designed to protect such Person against fluctuations in (x)
interest rates with respect to Debt Incurred and which shall have a notional
amount no greater than 105% of the principal amount of the Debt being hedged
thereby, or (y) currency exchange rate fluctuations.
"TARC" means TransAmerican Refining Corporation, a Texas corporation.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated
as of August 24, 1993, among TNGC Holdings Corporation, the Company, and other
subsidiaries, as in effect on the Issue Date and as amended from time to time,
provided that any such amendment is not materially adverse to the Holders of
the Notes.
"TEC" means TransAmerican Energy Corporation, a Delaware corporation.
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"TEC Indenture" means the indenture, dated as of June 13, 1997, by and
between TEC and Firstar Bank of Minnesota, N.A., as trustee, relating to the
TEC Notes.
"TEC Indenture Trustee" means the trustee under the TEC Indenture.
"TEC Notes" means TEC's 11 1/2% Senior Secured Notes due 2002 and 13%
Senior Secured Discount Notes due 2002, issued pursuant to the TEC Indenture.
"TEC Registration Rights Agreements" means the agreements in
connection with the registration under federal securities laws of (i) the TEC
Notes and (ii) the capital stock of TARC, the Company and TTXD pledged or to be
pledged to the TEC Indenture Trustee, in each case between TEC and the TEC
Indenture Trustee, as in effect on the Issue Date and as amended from time to
time, provided that any such amendment is not materially adverse to the Holders
of the Notes.
"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 John R. Stanley, as in
effect on the Issue Date and as amended from time to time, provided that any
such amendment is not materially adverse to the Holders of the Notes.
"TransTexas Borrowing Base" means, as of any date, an amount equal to
the sum of (a) 85% of the book value of all accounts receivable owned by the
Company and its Subsidiaries (excluding any accounts receivable that are more
than 90 days past due, less, without duplication, the allowance for doubtful
accounts attributable to such current accounts receivable) calculated on a
consolidated basis and in accordance with GAAP and (b) 70% of the current
market value of all inventory owned by the Company and its Subsidiaries as of
such date. To the extent that information is not available as to the amount of
accounts receivable as of a specific date, the Company may utilize, to the
extent reasonable, the most recent available information for purposes of
calculating the TransTexas Borrowing Base.
"TransTexas Entities" means the Company and each of its Subsidiaries.
"TransTexas Intercompany Loan" means the senior secured promissory
note from the Company to TARC in the principal amount of $450 million together
with any renewals or extensions thereof.
"TransTexas Security Documents" means, collectively, (i) any and each
mortgage, deed of trust, assignment, assignment of production, security
agreement, pledge agreement, financing statement and each other agreement
relating to the pledge of assets at any time securing all or any part of the
TransTexas Intercompany Loan (and/or all or any portion of the obligations of a
guarantor of all or any part of the TransTexas Intercompany Loan under any
guarantee described in the following clause (ii)), and (ii) any and each
guarantee, now existing or hereafter executed, of all or any part of the
obligations of the Company under the TransTexas Intercompany Loan.
"TTC" means TransTexas Transmission Corporation, a Delaware
corporation.
"TTXD" means TransTexas Drilling Services, Inc., a Delaware
corporation, which on the Issue Date is a Subsidiary of the Company, or a newly
formed corporation that is initially a Wholly Owned Subsidiary of TransTexas,
formed for the purpose of receiving the Investments described under clauses
(xiii) or (xiv) of the definition of "Permitted Investment."
"TTXD Entities" means TTXD and each of its Subsidiaries.
"TTXD Equity Investment" means an equity Investment by the Company in
TTXD in an aggregate amount not in excess of $75 million.
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"TTXD Spin-off" means (i) the transfer of all or a portion of the
drilling and integrated services business and pipeline services business and
related assets from the Company to TTXD and (ii) a dividend of shares of common
stock of TTXD to holders of the Company's common stock or any other transaction
that in either case would result in the Company being the beneficial owner of
less than 50% of the common stock of TTXD.
"Unrestricted Non-Recourse Debt" of the Company or any of its
Subsidiaries means (i) Debt of such Person that is secured solely (other than
with respect to the following clause (ii)) by a Lien upon the stock of an
Unrestricted Subsidiary of such Person and as to which there is no recourse
(other than with respect to the following clause (ii)) against such Person or
any of its assets other than against such stock (and the dollar amount of any
Debt of such Person as described in this clause (i) shall be deemed to be zero
for purposes of all other provisions of this Indenture) and (ii) guarantees of
the Debt of Unrestricted Subsidiaries of such Person; provided, that the
aggregate of all Debt of the Company or any of its Subsidiaries Incurred and
outstanding pursuant to clause (ii) of this definition, together with all
Permitted Investments (net of any return on such Investment) in Unrestricted
Subsidiaries of such Person, does not exceed $25 million plus in the case of
clause (ii) preceding, Restricted Payments permitted to be made pursuant to
Section 4.3.
"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) if the Unrestricted Subsidiary has any Debt outstanding or is
otherwise liable for any Debt or has a negative Net Worth, then immediately
after giving pro forma effect to such designation, such Person could incur at
least $1.00 of additional Debt pursuant to the provisions of the second
paragraph of the covenant described under the caption " -- Certain Covenants --
Limitation on Incurrences of Additional Debt and Issuances of Disqualified
Capital Stock" (assuming, for purposes of this calculation, that each dollar of
negative Net Worth is equal to one dollar of Debt), (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 the 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 (other than the Company or any Subsidiary of the
Company) 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.
"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.
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"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.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertaking and obligations in connection therewith.
"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 numbers 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.
"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) is at the time owned directly or indirectly
by such Person.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Repurchase of Notes at the Option of the Holder Upon a Change of
Control. In the event that a Change of Control occurs, each Holder of Notes
will have the right, at such Holder's option, subject to the terms and
conditions of the Indenture, to require the Company to repurchase all or any
part of such Holder's Notes (provided that the principal amount of such Notes
must be $1,000 or an integral multiple thereof) on a date that is no later than
60 Business Days after the occurrence of such 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 equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any (the "Change of
Control Purchase Price"), to and including the Change of Control Payment Date.
The Company will notify the Trustee within five Business Days after
each date upon which the Company knows, or reasonably should know, of the
occurrence of a Change of Control. Within 20 Business Days after the Company
knows, or reasonably should know, of the occurrence of each Change of Control,
the Company will make an irrevocable, unconditional offer (a "Change of Control
Offer") to the Holders of Notes to purchase all of the Notes at the Change of
Control Purchase Price by sending written notice of a Change of Control Offer,
by first class mail, to each Holder at its registered address, with a copy to
the Trustee. The notice to Holders will contain all instructions and materials
required by applicable law and will contain or make available to Holders other
information material to such Holders' decision to tender Notes pursuant to the
Change of Control Offer.
On or before the Change of Control Payment Date, the Company will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer prior to the close of the third Business Day prior to
the Change of Control Payment 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 Notes so tendered, and (iii) deliver or
cause to be delivered to the Trustee Notes so accepted together with an
Officers' Certificate listing the Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to the Holders of Notes so
accepted payment in an amount equal to the Change of Control Purchase Price
(including accrued and unpaid interest), and the Trustee will 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 will be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Purchase
Date.
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To the extent applicable and if required by law, the Company will
comply with Section 14 of the Exchange Act and the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act and other securities
laws, rules, and regulations which may then be applicable to any offer by the
Company to purchase the Notes at the option of Holders upon a Change of Control
and, if such laws, rules and 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.
Limitation on Restricted Payments. The Company will not make,
directly or indirectly, any dividend or other distribution on shares of Capital
Stock 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 any of its Subsidiaries) unless such dividends,
distributions or payments are made in cash or Qualified Capital Stock or a
combination thereof, except in connection with the TTXD Spin-off. In addition,
the Company will not 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 2 to 1, (b) the
Company's Adjusted Consolidated Net Tangible Assets are not equal to or greater
than 125% of the total consolidated principal amount or accreted value, as the
case may be, of Debt of the Company and its Subsidiaries (excluding, for
purposes of the calculation of Debt, any Swap Obligations), (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 and all payments that may be made pursuant to
the next paragraph (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) 50% of
Consolidated Net Income of the Company accrued on a cumulative basis 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 Adjusted 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 Proceeds received by the
Company from the issuance or sale (other than to or 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, plus (iv) $10,000,000.
Nothing in the foregoing provision will prohibit the payment of any
dividend 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.
Limitation on Status as Investment Company or Public Utility Company.
The Company will not, and will 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.
Limitation on Transactions with Related Persons. The Company will
not, and will 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 (excluding any Related Person that is a
form of entity customarily used in the oil and gas business as a means of
exploiting, exploring for, acquiring, developing, processing, gathering,
marketing, or transporting oil or gas and is a Related Person solely because
the party engaging in such transaction has the ability to control the Related
Person under the definition of "control" contained within the definition of
"Related Person" contained herein) (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 properties, assets or
securities from such Related Person, (iii) an Investment in such Related Person
(excluding Investments permitted to be made pursuant to clauses (iii), (vi),
(ix), (xi), (xiii), (xiv), (xvi) or (xix) of the definition of "Permitted
Investment" contained herein), 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, including
for this purpose the transactions excluded from the definition of Restricted
Payments by the proviso contained in the definition of
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"Restricted Payments" contained herein, (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) are 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 TransTexas
Intercompany Loan and any other loan from TEC to the Company permitted to be
Incurred pursuant to Section 4.11 (including, without limitation, Intercompany
Loan Redemptions and all other payments made thereon or with respect thereto),
any one or more of the TransTexas Security Documents, the Drilling Agreement,
the Gas Purchase Agreement, the TEC Registration Rights 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 in the aggregate $2,000,000 per year, (F) any
Sale and Leaseback Transaction or other transfer to a corporate Affiliate of
the Company of the Company's headquarters building located at 1300 North Sam
Houston Parkway East, Houston, Texas, (G) 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, and (H)
the Company and its Subsidiaries may pay an advisory fee to TransAmerican in
an amount not to exceed $2,500,000 per year.
(b) Without limiting the foregoing, with respect to any Related
Person Transaction or series of Related Person Transactions (other than any
Related Person Transaction described in clause (A), (C), (D), (F) or (G) of
Section 4.10(a)) with an aggregate value in excess of $5,000,000, such
transaction must first be approved by a majority of the Board of Directors of
the Company or its Subsidiary which is the transacting party and a majority of
the directors of such entity 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 (b) with respect to any Related Person Transaction or
series of Related Person Transactions (other than any Related Person
Transaction described in clause (A), (C), (D), (F) or (G) of Section 4.10(a))
with an aggregate value in excess of $10,000,000, 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 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.
Limitation on Incurrences of Additional Debt and Issuances of
Disqualified Capital Stock. The Company will not, and will not permit any of
its Subsidiaries (other than any of the TTXD Entities after the TTXD Spin-off)
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, (b)
Debt existing on the Issue Date that was allowed to be Incurred under the
Series A/B Indenture, (c) Debt evidenced, guaranteed or secured by the
TransTexas Intercompany Loan or any of the TransTexas Security Documents, and
any other Debt at any time owing by any of the TransTexas Entities to TEC in
aggregate outstanding principal amount, when added to the then outstanding
principal amount of the TransTexas Intercompany Loan, of $500 million; (d)
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; (e) if either (i) the
Phase I Completion Date (as defined in the TEC Indenture) has occurred or (ii)
the Notes have a rating of BB- or better by S&P or B1 or better by Moody's,
Subordinated Debt of the Company with initial net proceeds to the Company not
in excess of $125 million in the aggregate; (f) any guaranty of Debt permitted
by clauses (c), (e), (j), (k), (l) or (p) of Section 4.11, which guaranty shall
not be included in the determination of the amount of Debt which may be
Incurred pursuant to clauses (c), (e), (j), (k), (l) or (p) of Section 4.11;
(g) Debt evidenced by the Series A/B
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Notes; (h) Debt of the Company secured by a Permitted Lien that meets the
requirements of clause (c), (d), (e), (g), (h), (i), (l), (m), (o) or (r) of
the definition of "Permitted Liens" contained herein, to the extent that such
Liens would give rise to Debt under clauses (i), (ii), or (iii) of the
definition of "Debt" contained herein; (i) Unrestricted Non-Recourse Debt of
the Company; (j) Debt outstanding under a working capital credit facility in
aggregate principal amount not to exceed at any one time the greater of $30
million or the TransTexas Borrowing Base; (k) Debt in an aggregate principal
amount outstanding not to exceed at any one time $35 million; (l) the Company
may Incur Debt as an extension, renewal, replacement, or refunding of any of
the Debt permitted to be Incurred under any clause of this covenant, including
this clause (l) (such Debt is collectively referred to as "Refinancing Debt"),
provided, that (1) the maximum principal amount of Refinancing Debt (or, if
such Refinancing Debt is issued with original issue discount, the original
issue price of such Refinancing Debt) permitted under this clause (l) may not
exceed the lesser of (x) the principal amount of the Debt being extended,
renewed, replaced, or refunded plus premium, if any, reasonable financing fees
and other associated reasonable out-of-pocket expenses including consent
payments, premium, if any, and related fees, in each case 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; (m) 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 90 days (or,
if overdue for a period of more than 90 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, provided
that Debt at any time permitted under this clause (m) shall not be deemed to
have been Incurred until the date on which the same ceases to be permitted
under this clause (m); (n) Presales of Gas; (o) Debt evidenced by the Senior
Notes; (p) if either (i) the Phase I Completion Date (as defined in the TEC
Indenture) has occurred or (ii) the Notes have a rating of BB- or better by S&P
or B1 or better by Moody's, Debt which is secured by Liens permitted pursuant
to clause (s) of the definition of "Permitted Liens" contained herein, the
outstanding principal amount of which at any time does not exceed $35,000,000
in the aggregate; (q) the Attributable Debt Incurred in connection with Sale
and Leaseback Transactions; (r) Debt relating to the Reimbursement and Credit
Facility; (s) if either (i) the Phase I Completion Date (as defined in the
Indenture) has occurred or (ii) the Notes have a rating of BB- or better by S&P
or B1 or better by Moody's, Dollar-Denominated Production Payment Obligations
that the Company elects to treat as Debt not to exceed $40,000,000 in the
aggregate at any one time outstanding; (t) Swap Obligations of the Company; (u)
letter of credit and reimbursement obligations to the extent collateralized by
cash or Cash Equivalents; and (v) guarantees of Debt of TTXD to the extent that
such Debt was Debt of TransTexas on the Issue Date and relates to assets
contributed to TTXD pursuant to clause (xiii) of the definition of "Permitted
Investment" contained herein. For purposes of determining the amount of
outstanding Debt that has been Incurred pursuant to this covenant, 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 (l) of
this covenant so as to refinance or refund such Debt Incurred pursuant to
clause (l) of this covenant and any subsequent refinancings or refundings
thereof.
Notwithstanding the foregoing provisions, the Company may Incur Debt
and may issue Disqualified Capital Stock if, at the time such Senior Debt is
Incurred or such Disqualified Capital Stock is issued, (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 Fixed Charges in respect of such 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 2 to 1, and (iii)
the Company's Adjusted Consolidated Tangible Assets are equal to or greater
than 125% of the total consolidated principal amount of Debt of the Company and
its Subsidiaries (excluding, for purposes of this calculation, the negative Net
Worth of any Subsidiary of the Company which was formerly designated as an
Unrestricted Subsidiary).
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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 will 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 will not be
required to include the amount and type of such Debt in more than one of such
categories and may elect to apportion such item of Debt between or among any
two or more of such categories otherwise applicable, 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.
For purposes of determining any particular amount of Debt Incurred
under this covenant, any Debt Incurred by the Company or any Subsidiary of the
Company incurred for, or related to, a Person other than another Subsidiary of
the Company or the Company, as applicable, will be deemed to be in an amount
equal to the greater of (i) the lesser of (A) the full amount of the Debt of
such other Person or (B) the fair market value of the assets and properties of
the Company or such Subsidiary of the Company as to which the holder or holders
of such Debt are expressly limiting the obligations of the Company or such
Subsidiary of the Company, the value of which assets and properties of the
Company or such Subsidiary of the Company will be as determined in good faith
by the Board of Directors of the Company or such Subsidiary of the Company, as
applicable (which determinations shall be evidenced by a Board Resolution of
the applicable Person), and (ii) the amount of the Debt of such other Person as
has been expressly contractually assumed or guaranteed by the Company or such
Subsidiary of the Company.
Limitations on Restricting Subsidiary Dividends. The Company will
not, and will 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 or by reason
of customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Company or any Subsidiary of the Company,
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,
customary provisions restricting transfers of property securing purchase money
obligations incurred in the ordinary course of business in connection with the
acquisition of such property, the Notes, the Series A/B Notes, Debt existing
pursuant to a written agreement in effect on the date of the Indenture, or Debt
incurred to refinance, refund, extend or renew any of the foregoing Debt,
provided such restrictions therein contained are not materially more
restrictive than those provided for in the Debt being refinanced, refunded,
extended or renewed.
Limitation on Liens. The Company will not, and will 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
Permitted Liens. For the purpose of determining compliance with this covenant,
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, may elect to apportion
such Lien between or among any two or more categories of Permitted Lien
otherwise applicable, and shall not be required to include such Lien in more
than one of such categories.
Limitation on Asset Sales. The Company will not, and will not permit
any of its Subsidiaries to, consummate an Asset Sale, unless (A) an amount
equal to the Net Cash Proceeds (defined below) therefrom is applied as follows:
(1) to the mandatory or optional payment or prepayment of all or a portion of
the principal
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amount of and/or accrued interest on Senior Debt, and (2) all Net Cash Proceeds
not applied in accordance with clause (A)(1) of this paragraph shall be used
(x) to repurchase, ratably, (i) Notes pursuant to an Offer to Purchase under
this covenant and (ii) Series A/B Notes pursuant to an offer to purchase under
this covenant of the Series A/B Indenture, (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
$25,000,000 (without duplication of amounts used to acquire any Capital Assets
in accordance with clause (z) of this sentence), or (z) with respect to an
Asset Sale by the Company or any of its Subsidiaries (aa) that includes proved
reserve assets, used for Capital Expenditures in a Related Business within 180
days after the date of such Asset Sale, provided that the Company's most recent
Reserve Report indicates that the Company and its Subsidiaries, after giving
effect to the Asset Sale and to the addition of proved reserves associated with
any assets acquired in connection with such Asset Sale, have proved reserves at
least equal to (AA) if such Asset Sale occurs during the fiscal year ending
1998, 450 Bcfe of natural gas as indicated on the most recent Reserve Report
for such fiscal year, (BB) if such Asset Sale occurs during the fiscal year
ending 1999, 500 Bcfe of natural gas or with an SEC PV10 of at least $600
million as indicated on the most recent Reserve Report for such fiscal year and
(CC) if such Asset Sale occurs during the fiscal year ending 2000 or
thereafter, 600 Bcfe of natural gas or with an SEC PV10 of at least $700
million as indicated on the most recent Reserve Report for such fiscal year, or
(bb) involving assets that do not include proved reserves, used for Capital
Expenditures 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, Cash Equivalents or
Exchange Assets or any combination thereof.
Notwithstanding the provisions of the foregoing paragraph that limit
Asset Sales or restrict the use of Net Cash Proceeds therefrom:
(i) the Company or 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
to a Wholly Owned Subsidiary of the Company;
(ii) the Company and its Subsidiaries may engage in Asset
Sales in the ordinary course of business;
(iii) the Company may engage in Asset Sales pursuant to and
in accordance with the provisions of Article V;
(iv) 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;
(v) the Company and its Subsidiaries may engage in Asset
Sales (a) the Net Cash Proceeds of which are used for payment of cash
interest on Senior Debt, the Series A/B Notes, the Notes and/or the
TransTexas Intercompany Loan, (b) in connection with the settlement of
litigation or the payment of judgments, or (c) the Net Cash Proceeds
of which are used in connection with the settlement of litigation or
for the payment of judgments; provided, that the aggregate value of
the assets transferred pursuant to clauses (b) and (c) of this clause
(v) from and after the Issue Date does not exceed not exceed
$25,000,000;
(vi) the Company may sell, convey, contribute or otherwise
transfer the assets comprising the Related TTXD Business to TTXD;
(vii) the Company and its Subsidiaries may convey, sell,
transfer or otherwise dispose of Hydrocarbons in the ordinary course
of business;
(viii) prior to the TTXD Spin-off, the Company may sell,
transfer, contribute or otherwise dispose of the Capital Stock of TTXD
or the assets comprising the drilling and energy services business
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and the pipeline services business of the Company, provided, that (a)
in the case of a transfer, contribution or other disposition to a
company that has a class of equity securities publicly traded on a
national securities exchange or on the NNM, at least 50% of the value
of the consideration for such Asset Sale consists of cash and up to
50% of the value of the consideration for such Asset Sale may consist
of Capital Stock and (b) in the case of a transfer, contribution, or
other disposition to a joint venture, partnership, limited liability
company or similar entity newly formed for the purpose of this
transfer, up to 100% of the value of the consideration for such Asset
Sale may consist of Capital Stock or other equity interests in such
entity; provided, further, that in the case of either clause (a) or
clause (b) of this subparagraph (viii), the Net Cash Proceeds from
such Asset Sale are applied pursuant to the first paragraph of this
covenant; and
(ix) the Company and its Subsidiaries may engage in Asset
Sales not otherwise permitted in clause (i), (ii), (iii), (iv), (v),
(vi), (vii), or (viii) preceding, provided that the aggregate proceeds
from all such Asset Sales do not exceed $5,000,000 in any twelve-month
period.
Unless otherwise required by the immediately preceding paragraph, the
proceeds of any Asset Sale permitted by such paragraph may be used by the
Company or its Subsidiaries for any one or more purposes not otherwise
prohibited by the Indenture.
For purposes of the foregoing, "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 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
above and within the time provided above shall be referred to as the
"Accumulated Amount."
For the purposes hereof, "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 covenant 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.
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 the 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), (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
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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.
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 this covenant of
the Indenture, 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.
Limitation on Ranking of Future Debt. The Company will 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.
Restriction on Sale and Issuance of Subsidiary Stock. The Company
will not sell, and will 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 unless an
amount equal to the net proceeds of such sale is used by the Company within 180
days after the date of such sale for one or more of the purposes specified in
the first paragraph of " -- Limitation on Asset Sales."
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 and such
other business activities as are reasonably related thereto.
TTXD Spinoff. If the TTXD Spinoff is effected through a pro rata
distribution or dividend to stockholders of the Company or if the Company
completes an Asset Sale described in subparagraph (viii) of the second
paragraph of " -- Limitation on Asset Sales" in which less than 50% of the
value of the consideration received consists of cash, then
(a) from the date of such distribution or dividend or Asset Sale,
in addition to the interest set forth in paragraph 1 of the Notes, interest
will accrue on the outstanding Notes and the additional Notes issued pursuant
to paragraph (b) of this covenant at the rate of 3/8% 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 herein, as nearly as may be, as though the interest rate provided
in paragraph 1 of the Notes had been increased by 3/8% per annum from the date
of such distribution or dividend or Asset Sale; and
(b) promptly following such distribution or dividend or Asset
Sale, the Company will issue to each Holder of record on the date of such
distribution or dividend or Asset Sale additional Notes bearing interest from
the date of such distribution or dividend or Asset Sale, in principal amount
equal to 1 1/2% of the aggregate principal amount of the Notes then held by
such Holder; provided that, additional Notes will be issued only in integral
multiples of $1,000 and any Holder entitled to receive additional Notes in a
principal amount other than an integral multiple of $1,000 will receive a
payment in cash in lieu of such fractional amount.
MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The Indenture provides that the Company will 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
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series of Related transactions, unless: (i) 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 supplemental indenture, 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 the Indenture; (ii) on a pro forma consolidated basis,
immediately after giving effect to such transaction and the assumption of the
obligations contemplated by clause (i), above, and the incurrence or
anticipated incurrence of any Debt or Disqualified Capital Stock to be incurred
or issued in connection therewith, the (x)Net Worth of the Surviving Person is
at least equal to the Net Worth 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 the covenant described in "
- -- Certain Covenants -- Limitation on Incurrence of Additional Debt and
Issuances of Disqualified Capital Stock"; (iii) 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; and (iv) at the time or
within 45 days after such transaction, the Notes have not been or are not
downgraded by S & P, Moody's, 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 the first paragraph above, 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.
Upon any consolidation or merger, or any transfer of assets in
accordance with the foregoing, 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.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the
Company to pay installments of interest on the Notes as and when the same
become due and payable and the continuance of any such failure for 30 days,
(ii) the failure by the Company to pay all or any part of the principal or
premium, if any, on the Notes when and as the same become due and payable at
maturity, redemption, by acceleration, or otherwise, including payment of the
Offer Price or Change of Control Purchase Price, (iii) the failure by the
Company to observe or perform any other covenant, agreement, or warranty
contained in the Notes or the Indenture and, subject to certain exceptions, the
continuance of such failure for a period of 30 days after written notice is
given to the Company by the Indenture Trustee or the Company and the Indenture
Trustee by the Holders of at least 25% in aggregate principal amount of the
Notes outstanding, (iv) certain events of bankruptcy, insolvency, or
reorganization in respect of the Company or
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any of its Subsidiaries, (v) 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 aggregating in excess of $20 million or
a failure to pay such Debt at its stated maturity if either (a) such default
results from the failure to pay principal of, premium, if any, or interest on
any such Debt when due and continuance of such default beyond any applicable
cure, forbearance or notice period, provided that a waiver by the lenders of
such debt of such default shall constitute a waiver hereunder for the same
period, or (b) as a result of such default, the maturity of such Debt has been
accelerated prior to its scheduled maturity, and such default and acceleration
continues without having been rescinded or annulled for a period of 10 days,
(vi) final judgments not covered by insurance aggregating at least $25 million
at any one time rendered against the Company or any of its Subsidiaries and not
stayed or discharged within 60 days, (vii) Independent Directors not
constituting a majority of the board of directors of the Company or any
Guarantor for a period of 90 days in the aggregate in any twelve-month period,
or (viii) there having occurred any amendment to the Certificate of
Incorporation or Bylaws of the Company or any of its Subsidiaries that pertains
to the directors and would have an adverse effect on the holders of the Notes
or any other amendment that would materially adversely affect the interests of
the Noteholders 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 Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in aggregate principal amount of the Notes
outstanding. The Indenture provides that if a default occurs and is continuing
and if it is known to the Indenture Trustee, the Indenture Trustee must, within
90 days after the occurrence of such default, give to the Holders notice of
such default; provided, that, except in the case of default in payment of
principal of, premium, if any, or interest on the Notes, including a default in
the payment of the Offer Price or Change of Control Purchase Price as required
by the Indenture, the Trustee will be protected in withholding such notice if
it in good faith determines that the withholding of such notice is in the
interest of the Noteholders.
If an Event of Default occurs and is continuing (other than an Event
of Default specified in clause (iv), above, relating to the Company or its
Subsidiaries), then in every such case, unless the principal of all of the
Notes shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Notes then outstanding, by
notice in writing to the Company (and to the Indenture Trustee if given by
Holders) (an "Acceleration Notice"), may declare all principal of the Notes,
determined as set forth below, and accrued interest thereon or, as appropriate,
the Change of Control Purchase Price, to be due and payable immediately. If an
Event of Default specified in clause (iv), above, relating to the Company or
its Subsidiaries occurs, all principal and accrued interest thereon will be
immediately due and payable on all outstanding Notes without any declaration or
other act on the part of the Indenture Trustee or the Holders. The Holders of
no less than a majority in aggregate principal amount of Notes generally are
authorized to rescind such acceleration if all existing Events of Default,
other than the non- payment of the principal of, premium, if any, and interest
on the Notes which have become due solely by such acceleration, have been cured
or waived.
Prior to the declaration of acceleration of the majority of the Notes,
the Holders of a majority in aggregate principal amount of the Notes at the
time outstanding may waive on behalf of all the Holders any default, except a
default in the payment of principal of, premium, if any, or interest on any
Note not yet cured, or a default with respect to any covenant or provision
which cannot be modified or amended without the consent of the Holder of each
outstanding Note affected. Subject to the provisions of the Indenture relating
to the duties of the Indenture Trustee, the Indenture Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order, or direction of any of the Holders, unless such Holders have
offered to the Indenture Trustee reasonable security or indemnity. Subject to
all provisions of the Indenture and applicable law, the Holders of a majority
in aggregate principal amount of the Notes at the time outstanding have the
right to direct the time, method, and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Indenture Trustee.
COVENANT DEFEASANCE; SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture ceases to be of further effect as to all outstanding
Notes (except as to (i) rights of registration of transfer, substitution, and
exchange of Notes and the Company's right of optional redemption, (ii) rights
of Holders to receive payments of principal of, premium, if any, and interest
on the Notes (but not the Change of Control
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Purchase Price or the Offer Price of the Notes) and any other rights of the
Holders with respect to such amounts, (iii) the rights, obligations, and
immunities of the Trustee under the Indenture, and (iv) certain other specified
provisions in the Indenture (the foregoing exceptions (i) through (iv) are
collectively referred to as the "Reserved Rights")) on the 91st day (or one day
after such other greater period of time in which any such deposit of trust
funds may remain subject to bankruptcy or insolvency laws, e.g., one year after
any such deposit) after the irrevocable deposit by the Company with the
Trustee, in trust for the benefit of the Holders, of (i) money in an amount,
(ii) U.S. Government Obligations which through the payment of interest and
principal will provide, not later than one day before the due date of payment
in respect of the Notes, money in an amount, or (iii) a combination thereof,
sufficient to pay and discharge the principal of, premium, if any, and interest
on the Notes then outstanding on the dates on which any such payments are due
and payable in accordance with the terms of the Indenture and of the Notes.
Such a trust may be established only if certain conditions are satisfied,
including delivery by the Company to the Trustee of an opinion of outside
counsel acceptable to the Trustee (who may be outside counsel to the Company)
to the effect that (i) the defeasance and discharge will not be deemed, or
result in, a taxable event for Federal income tax purposes, with respect to the
Holders, (ii) the Company's deposit will not result in the Company, the Trust,
or the Trustee being subject to regulation under the Investment Company Act of
1940, and (iii) after the passage of 90 days (or any greater period of time in
which any such deposit of trust funds may remain subject to bankruptcy or
insolvency laws insofar as those laws apply to the Company) following the
deposit of the trust funds, such funds will not be subject to set aside or
avoidance under any bankruptcy, insolvency, or other similar laws affecting
creditors' rights generally. The Indenture will not be discharged if, among
other things, a Default or an Event of Default shall have occurred and be
continuing on the date of such deposit. The Company will be deemed to have paid
and discharged the entire indebtedness on all of the outstanding Notes when (i)
all outstanding Notes have been delivered to the Trustee for cancellation, or
(ii) the Company has paid or caused to be paid the principal of and interest on
the Notes.
REPORTS
The Company is required to furnish to the Trustee, within 60 days
after the end of each fiscal quarter, or 105 days after the end of a fiscal
quarter that is also the end of a fiscal year, with an officers' certificate to
the effect that such officers have conducted or supervised a review of the
activities of the Company and its Subsidiaries and of performance under the
Indenture and that, to the best of such officers' knowledge, based on their
review, the Company has fulfilled all of its obligations under the Indenture
or, if there has been a default, specifying each default known to them, its
nature and its status. The Company is also required to notify the Indenture
Trustee of 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 Company and each Guarantor shall deliver to the Trustee and to
each Holder, within 15 days after it files them with the Commission, copies of
all reports and information that the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Company and
each Guarantor agree to continue to be subject to 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.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the
Trustee to enter into a supplemental indenture or amend the Security Documents
for certain limited purposes without the consent of the Holders. With the
consent of the Holders of not less than a majority in aggregate principal
amount of the Notes at the time outstanding, the Company and the Indenture
Trustee are permitted to amend or supplement the Indenture or any supplemental
indenture or modify the rights of the Holders; provided, that no such
modification may, without the consent of each Holder affected thereby; (i)
change the Stated Maturity of the principal of, or any installment of principal
of, or any
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installment of interest on, any Note, or reduce the principal amount thereof or
the rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption, on or after the
redemption date), or reduce the Change of Control Purchase Price or alter the
provisions of the "Repurchase of Notes at the Option of the Holder Upon a
Change of Control" covenant in a manner adverse to the Holders, or (ii) reduce
the percentage in principal amount of the Outstanding Notes, the consent of
whose Holders is required for any such amendment, supplemental indenture, or
waiver provided for in the Indenture, or (iii) modify any of the waiver
provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Note affected thereby.
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 that makes any changes in the terms
or provisions of the "Limitation on Asset Sales" covenant (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 that makes any changes in the "Repurchase of Notes at the
Option of the Holder Upon a Change of Control" covenant.
GOVERNING LAW
The Indenture provides that it is governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee need perform only those duties that are specifically
set forth (or incorporated by reference) in the Indenture and no others.
During the existence of an Event of Default, the Trustee will exercise such
rights and powers vested in it by the Indenture, and use the same degree of
care and skill in such exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs.
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payments of
claims in certain cases or to realize on certain property received in respect
of any such claims as security or otherwise.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS
No stockholder, officer, or director, as such, past, present, or
future of the Company or any successor corporation shall have any personal
liability in respect of the obligations of the Company under the Indenture or
the Notes by reason of his or its status as such stockholder, officer, or
director.
REGISTRATION RIGHTS AGREEMENT; PENALTY INTEREST
If the Company reasonably determines in good faith and after
conferring with counsel that (i) the Exchange Notes would not, upon receipt in
the Exchange Offer by any holder of Outstanding Notes, other than affiliates or
broker dealers or affiliates thereof who are Original Holders of the
Outstanding Notes ("Restricted Persons"), be tradeable by each holder thereof
without restriction under the Securities Act and the Exchange Act and without
material instruction under applicable blue sky or state securities laws, (ii)
the Exchange Offer may not be made in compliance with applicable laws, (iii)
the Exchange Notes would not, upon consummation of any resale thereof by a
Restricted Person to anyone 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 (iv) the Commission is unlikely to permit the
registration statement covering the Exchange
59
<PAGE> 65
Offer to become effective prior to October 11, 1997, solely because such
registration statement covers resale of the Exchange Notes by Restricted
Persons, then the Company will promptly deliver notice thereof to the Trustee
and the affected holders of Outstanding Notes, and the Company shall use its
best efforts to file with the Commission pursuant to Rule 415 a shelf
registration statement (the "Shelf Registration Statement") relating to all
Registrable Notes (the "Shelf Registration") the holders of which have provided
the information required by the Registration Rights Agreement, and to have the
Shelf Registration Statement declared effective by the Commission on or prior
to October 11, 1997. In such circumstances, the Company shall use its best
efforts to keep the Shelf Registration Statement continuously effective under
the Securities Act, for a period of two years (subject to extension under
certain circumstances) or such shorter period ending when all Registrable Notes
covered by the Shelf Registration Statement have been sold pursuant thereto
(the "Effectiveness Period"); provided, however, that the Effectiveness Period
shall be extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 under the Securities
Act in the Registration Rights Agreement.
No holder of Notes may include any of its Notes in any Shelf
Registration Statement pursuant to this Agreement unless and until such holder
furnishes to the Company in writing, such information as the Company may
reasonably request for use in connection with any Shelf Registration Statement
or prospectus or preliminary prospectus included therein. Each holder of Notes
as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such
holder not materially misleading. In addition each holder of Notes covered by
a registration statement agrees (i), subject to exceptions specified in the
Registration Rights Agreement, not to effect any public sale or distribution of
Notes, including pursuant to Rule 144, during the period beginning 10 days
prior to date of any underwritten offering made pursuant to the registration
statement and (ii) to indemnify the Company and its controlling persons for any
liability arising out of material misstatements or omissions in the information
relating to such holder furnished in writing for inclusion in a registration
statement, including the registration statement of which this Prospectus is a
part.
If (i) the applicable Registration Statement has not been declared
effective by the Commission on or prior to the Effectiveness Date, (ii) the
Exchange Offer is required to be consummated under the Registration Rights
Agreement, the Company has not exchanged Exchange Notes for all Notes validly
tendered and not validly withdrawn in accordance with the terms of the Exchange
Offer by the Consummation Date, (iii) the Registration Statement pursuant to
which this Exchange Offer is made ceases to be effective before 30 days after
the date is declared effective by the Commission, or (iv) the applicable
Registration Statement is filed and declared effective but shall thereafter
cease to be effective without being succeeded immediately by any additional
Registration Statement covering the Notes which has been filed and declared
effective (each such event referred to in clauses (i) through (iv), an
"Illiquidity Event"), then the interest rate on Transfer Restricted Securities
will increase ("Additional Interest") by 1.00% per annum until all Illiquidity
Events have been cured. Following the cure of an Illiquidity Event, the
accrual of Additional Interest with respect to such Illiquidity Event will
cease and upon the cure of all Illiquidity Events the interest rate will revert
to the original rate.
The Company shall notify the Trustee and paying agent under the
Indenture promptly upon the happening of each and every Illiquidity Event. The
Additional Interest due shall be payable on each interest payment date
specified by the Indenture (or such other indenture) to the record holder
entitled to receive the interest payment to be made on such date. Each
obligation to pay Additional Interest shall be deemed to accrue from and
including the date of the applicable Illiquidity Event.
60
<PAGE> 66
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the IRS will not take a contrary view, and no ruling from the
IRS has been or will be sought. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to Holders. Certain Holders of the Outstanding Notes (including
insurance companies, tax exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. Each Holder of an Outstanding Note should consult his, her or its own
tax advisor as to the particular tax consequences of exchanging such Holder's
Outstanding Notes for Exchange Notes, including the applicability and effect of
any state, local or foreign tax laws.
The issuance of the Exchange Notes to Holders of the Outstanding Notes
pursuant to the terms set forth in this Prospectus should not constitute a
recognition event for federal income tax purposes. Consequently, no gain or
loss should be recognized by Holders of the Outstanding Notes upon receipt of
the Exchange Notes. For purposes of determining gain or loss upon the
subsequent sale or exchange of the Exchange Notes, a Holder's basis in the
Exchange Notes should be the same as such Holder's basis in the Outstanding
Notes exchanged therefor. Holders should be considered to have held the
Exchange Notes from the time of their original acquisition of the Outstanding
Notes.
Treasury regulations relating to the tax treatment of debt instruments
with original discount contain provisions for determining the yield and
maturity of debt instruments having one or more contingencies that could result
in the acceleration or deferral of amounts due under the debt (including
optional redemption). The Company will follow the general rule of these
provisions, which is to ignore contingencies, as it is more likely than not
that payments will be made under the Exchange Notes under the stated payment
schedule, and thus plans to accrue and report interest on the Exchange Notes
under the stated payment schedule.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
Prospectus in connection with any resale of such Exchange Notes. The
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired as a
result of market-making activities or other trading activities. The Company
has agreed that for a period of 180 days after the date the registration
statement, of which this Prospectus forms a part, is declared effective, it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sales of the
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchase or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells the Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act, and
any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal for the
Exchange Offer states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
61
<PAGE> 67
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay certain expenses
incident to the Exchange Offer, other than commissions or concession of any
brokers or dealers, and will indemnify the holders of the Securities (including
any broker-dealers) against certain liabilities, including liabilities under
the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer agrees that,
upon receipt of notice from the Company of the happening of any event which
makes any statement in the Prospectus untrue in any material respect or which
request the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemental Prospectus to such broker-dealer. If the Company shall give
any such notice to suspend the use of the Prospectus, it shall extend the
90-day period referred to above by the number of days during the period from
and including the date of the giving of such notice to and including when
broker-dealers shall have received copies of the supplemented or amended
Prospectus necessary to permit resales of the Exchange Notes.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Gardere &
Wynne, L.L.P., Dallas, Texas.
INDEPENDENT ACCOUNTANTS
The consolidated balance sheets as of January 31, 1997 and 1996 and
the related consolidated statements of operations, stockholders' deficit and
cash flows for the year ended January 31, 1997, the six months ended January
31, 1996, and for each of the two years in the period ended July 31, 1995 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 period ended April 30, 1997 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 report included in the
Company's quarterly report on Form 10-Q for the quarter ended April 30, 1997,
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.
EXPERTS
The reserve estimates of the Company included in the Company's Form
10-K for the year ended January 31, 1997 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.
62
<PAGE> 68
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF
TRANSTEXAS GAS CORPORATION
The following unaudited pro forma condensed consolidated financial
information of TransTexas Gas Corporation (the "Company") as of and for the
three months ended April 30, 1997 and for the year ended January 31, 1997,
illustrate the effect of the sale of the Company's wholly owned subsidiary,
TransTexas Transmission Corporation ("Lobo Sale"), and the following
transactions (the "Transactions") related to a private offering of debt
securities by TransAmerican Energy Corporation (the "TEC Notes Offering"): (i)
the TransTexas Intercompany Loan; (ii) the tender offer for the TransTexas
Senior Secured Notes; (iii) the June Exchange Offer; and (iv) the Stock
Repurchase Program. The unaudited pro forma condensed consolidated balance
sheet has been prepared assuming that the Lobo Sale, the TEC Notes Offering and
the Transactions were consummated on April 30, 1997. The unaudited pro forma
condensed consolidated statements of operations for the three months ended April
30, 1997 and for the year ended January 31, 1997 have been prepared assuming
that the Lobo Sale, the TEC Notes Offering and the Transactions were consummated
on February 1, 1997 and 1996, respectively.
The unaudited pro forma adjustments and the resulting unaudited pro
forma condensed consolidated financial information are based on the assumptions
noted in the footnotes thereto. The unaudited pro forma condensed consolidated
financial information does not purport to represent what the Company's financial
position or results of operations would have been had the Lobo Sale, the TEC
Notes Offering and the Transactions actually occurred on the dates indicated or
the financial position or results of operations for any future date or period.
The unaudited pro forma condensed consolidated financial information
and notes thereto should be read in conjunction with the Company's historical
consolidated financial statements and the notes thereto included in the
Company's quarterly report on Form 10-Q for the period ended April 30, 1997 and
its annual report on Form 10-K for the period ended January 31, 1997.
PF-1
<PAGE> 69
TRANSTEXAS GAS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 11,667 $ 1,073,42 (a) $ 197,669
450,000 (b)
65,000 (c)
(1,448,422)(d)
46,000 (f)
Cash restricted for interest . . . . . . . . . 46,000 (46,000)(f) --
Accounts receivable . . . . . . . . . . . . . 30,327 -- 30,327
Receivable from affiliates . . . . . . . . . . 70,436 (65,000)(c) 5,436
Inventories . . . . . . . . . . . . . . . . . 15,164 -- 15,164
Other current assets . . . . . . . . . . . . . 13,749 -- 13,749
------------ ----------- ----------
Total current assets . . . . . . . . . . . 187,343 75,002 262,345
Net property and equipment . . . . . . . . . . . 909,481 (450,592)(a) 458,889
Other assets . . . . . . . . . . . . . . . . . . 17,436 10,000 (d) 13,823
(13,613)(g)
Deferred tax asset . . . . . . . . . . . . . . . -- 21,987 (h) 21,987
------------ ----------- ----------
$ 1,114,260 $ (357,216) $ 757,044
============ =========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt . . . . . $ 8,406 $ -- $ 8,406
Revolving credit agreement . . . . . . . . . . 8,386 -- 8,386
Accounts payable . . . . . . . . . . . . . . . 60,377 -- 60,377
Accrued liabilities . . . . . . . . . . . . . 102,609 (13,879)(d) 53,974
(34,756)(d)
------------ ----------- ----------
Total current liabilities . . . . . . . . . 179,778 (48,635) 131,143
------------ ----------- ----------
Long-term debt, less current maturities . . . . . 13,024 -- 13,024
Intercompany loan . . . . . . . . . . . . . . . . -- 450,000 (b) 450,000
Production payments, less current portion . . . . 25,362 (7,212)(d) 18,150
Senior secured notes . . . . . . . . . . . . . . 800,000 (800,000)(d) --
Subordinated notes . . . . . . . . . . . . . . . 104,386 11,429 (e) 115,815
Deferred revenue . . . . . . . . . . . . . . . . 46,176 (46,176)(d) --
Deferred income taxes . . . . . . . . . . . . . . 35,542 (57,529)(h) --
21,987 (h)
Payable to affiliates . . . . . . . . . . . . . . 7,618 205,000 (h) 82,618
(130,000)(i)
Other liabilities . . . . . . . . . . . . . . . . 8,429 (1,309)(d) 7,120
Stockholders' deficit:
Common stock . . . . . . . . . . . . . . . . . 740 (250)(d) 490
Paid-in capital (deficit) . . . . . . . . . . (123,524) 130,000 (i) 6,476
Retained earnings (accumulated deficit) . . . 16,729 (399,034)(d) (67,792)
314,513 (j)
------------ ----------- ----------
Total stockholders' deficit . . . . . . . . (106,055) 45,229 (60,826)
------------ ----------- ----------
$ 1,114,260 $ (357,216) $ 757,044
============ =========== ==========
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
PF-2
<PAGE> 70
TRANSTEXAS GAS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) To record the Lobo Sale for an adjusted purchase price of $1,073.4 million:
<TABLE>
<S> <C>
Cash proceeds . . . . . . . . . . . . . . . . . $ 1,073,424
Carrying value of stock sold . . . . . . . . . . (450,592)
-----------
Pretax gain on Lobo Sale . . . . . . . . $ 622,832 (j)
===========
</TABLE>
Purchase price adjustments were made for, among other things: the
value of certain NGLs and stored hydrocarbons; the value of gas in TTC's
pipeline; prepaid expenses relating to post-effective date operations;
post- closing expenses related to pre-closing operations; the value of oil
and gas produced and sold between the effective date of the Lobo Sale and
closing (approximately $44 million); property defects; and estimated costs
associated with liabilities incurred before closing. Purchase price
adjustments made at the closing of the Lobo Sale are subject to a review,
reconciliation and resolution process, which is expected to be completed
within 105 days following the closing.
(b) To record the borrowing by the Company of $450 million pursuant to the
TransTexas Intercompany Loan.
(c) To record the collection of amounts due from affiliates.
(d) To record the application of a portion of the proceeds from (a) through (c)
above:
<TABLE>
<S> <C>
Repurchase of Senior Secured Notes . . . . . . . $ 800,000
Premium of 11.5% for Senior Secured Notes . . . 92,000(j)
Accrued interest on Senior Secured Notes . . . . 34,756
Lobo Sale production repayment . . . . . . . . . 43,806(j)
Repayment of volumetric production payments
(deferred revenue), dollar-denominated
production payments and other debt . . . . . 68,576
Stock Repurchase Program . . . . . . . . . . . . 399,284
Debt issue costs . . . . . . . . . . . . . . . . 10,000
------------
$ 1,448,422
============
</TABLE>
Pending completion of the Stock Repurchase Program, up to $400 million
of proceeds from the TEC Notes Offering and the Transactions will be held
by the Company in a restricted cash account. Such proceeds will be
disbursed from such account (i) for purposes of the Stock Repurchase
Program or (ii) upon completion of Phase II of TARC's Capital Improvement
Program for general corporate purposes.
In addition to the above, proceeds of approximately $11 million were
used to pay accrued interest on the Senior Secured Notes for the period
from May 1, 1997 through June 13, 1997.
During the months of April and May 1997, the Company obtained
additional financing in the aggregate amount of $49.5 million, of which
approximately $29.2 million remained outstanding at June 30, 1997.
(e) To record the premium attributable to the Subordinated Notes Exchange
Offer. See (j).
(f) To release cash restricted pursuant to the Senior Secured Notes Indenture.
PF-3
<PAGE> 71
(g) To write off unamortized debt issue costs related to the Senior Secured
Notes and the Subordinated Notes. See (j).
(h) To record the income tax effects of the Lobo Sale and of expenses related
to the Senior Secured Notes Tender Offer and to reclassify $22.0 million of
deferred taxes to deferred tax assets.
<TABLE>
<S> <C>
Payable to TransAmerican pursuant to the Tax
Allocation Agreement . . . . . . . . . . . . $ 205,000
Deferred income taxes . . . . . . . . . . . . . (57,529)
-----------
$ 147,471
===========
</TABLE>
(i) To record the assumption of $130 million of estimated net tax liability by
TransAmerican in accordance with the Tax Allocation Agreement.
(j) To record the effects on retained earnings as a result of (a) through (i).
<TABLE>
<S> <C>
Pretax gain on Lobo Sale . . . . . . . . . . . . $ 622,832
Premium of 11.5% for Senior Secured Notes . . . (92,000)(1)
Lobo Sale production repayment . . . . . . . . . (43,806)
Premium attributable to the Subordinated
Notes Exchange Offer . . . . . . . . . . . . (11,429)(1)
Unamortized debt issue costs . . . . . . . . . . (13,613)(1)
Federal income taxes . . . . . . . . . . . . . . (147,471)
------------
$ 314,513
============
</TABLE>
_____________
(1) These amounts and the related income tax benefits, if any, will be
recorded as an extraordinary charge to income in the period that the
related debt is extinguished.
PF-4
<PAGE> 72
TRANSTEXAS GAS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids . . . $ 72,882 $ (36,862)(a) $ 36,020
Transportation . . . . . . . . . . . . . . . . 9,291 (9,291)(a) --
Other . . . . . . . . . . . . . . . . . . . . 178 -- 178 (d)
------------ ------------ ------------
Total revenues . . . . . . . . . . . . . . 82,351 (46,153) 36,198
------------ ------------ ------------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . 27,142 (21,936)(a) 5,206
Depreciation, depletion and amortization . . . 33,557 (14,408)(a) 19,149
General and administrative . . . . . . . . . . 15,140 (7,688)(a) 7,452
Taxes other than income taxes . . . . . . . . 5,214 (2,450)(a) 2,764
------------ ------------ ------------
Total costs and expenses . . . . . . . . . 81,053 (46,482) 34,571 (d)
------------ ------------ ------------
Operating income . . . . . . . . . . . . . 1,298 329 1,627
------------ ------------ ------------
Other income (expenses):
Interest income . . . . . . . . . . . . . . . 1,694 -- 1,694
Interest expense, net . . . . . . . . . . . . (25,358) 9,019 (b) (16,339)
------------ ------------ ------------
Total other income (expense) . . . . . . . (23,664) 9,019 (14,645)
------------ ------------ ------------
Loss before income taxes . . . . . . . . . (22,366) 9,348 (13,018)
Income taxes (benefit) . . . . . . . . . . . . . (7,828) 3,272 (c) (4,556)
------------ ------------ -------------
Net loss . . . . . . . . . . . . . . . . . $ (14,538) $ 6,076 $ (8,462)
============ ============ ============
Net loss per share . . . . . . . . . . . . . . . $ (0.20) $ (0.17)
============ ============
Weighted average number of
common shares outstanding . . . . . . . . . . 74,000,000 49,044,750 (e)
============ ============
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
PF-5
<PAGE> 73
TRANSTEXAS GAS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids . . . $ 363,459 $ (173,761)(a) $ 189,698
Transportation . . . . . . . . . . . . . . . . 34,423 (34,423)(a) --
Gain on the sale of assets . . . . . . . . . . 7,856 -- 7,856
Other . . . . . . . . . . . . . . . . . . . . 609 -- 609 (d)
------------ ------------ ------------
Total revenues . . . . . . . . . . . . . . 406,347 (208,184) 198,163
------------ ------------ ------------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . 114,453 (97,494)(a) 16,959
Depreciation, depletion and amortization . . . 132,453 (78,932)(a) 53,521
General and administrative . . . . . . . . . . 45,596 (2,000)(a) 43,596
Taxes other than income taxes . . . . . . . . 22,566 (12,818)(a) 9,748
Litigation settlement . . . . . . . . . . . . (96,000) -- (96,000)
------------ ------------ ------------
Total costs and expenses . . . . . . . . . 219,068 (191,244) 27,824 (d)
------------ ------------ ------------
Operating income . . . . . . . . . . . . . 187,279 (16,940) 170,339
------------ ------------ ------------
Other income (expenses):
Interest income . . . . . . . . . . . . . . . 5,544 -- 5,544
Interest expense, net . . . . . . . . . . . . (97,007) 24,368 (b) (72,639)
------------ ------------ ------------
Total other income (expense) . . . . . . . (91,463) 24,368 (67,095)
------------ ------------ ------------
Income before income taxes . . . . . . . . 95,816 7,428 103,244
Income taxes . . . . . . . . . . . . . . . . . . 12,491 23,644 (c) 36,135
------------ ------------ ------------
Net income . . . . . . . . . . . . . . . . $ 83,325 $ (16,216) $ 67,109
============ ============ ============
Net income per share . . . . . . . . . . . . . . $ 1.13 $ 1.37
============ ============
Weighted average number of
common shares outstanding . . . . . . . . . . 74,000,000 49,044,750 (e)
============ ============
</TABLE>
The accompany notes are an integral part of the pro forma financial
statements.
PF-6
<PAGE> 74
TRANSTEXAS GAS CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) To adjust revenues, including losses relating to risk management
activities, operating expenses, depreciation, depletion and amortization,
general and administrative and taxes other than income taxes as a result
of the Lobo Sale.
(b) To adjust interest expense as follows:
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
April 30, 1997 January 31, 1997
-------------- ----------------
<S> <C> <C>
Interest on the Intercompany Loan at a rate of 10.875% . . $ 12,234 $ 48,938
Interest on estimated federal income tax liability payable
to affiliate at an assumed rate of 9.0% . . . . . . . . 1,688 6,750
Historical interest on Subordinated Notes . . . . . . . . (3,294) (1,646)
Interest on Subordinated Exchange Notes at a rate of 13.75% 3,981 15,925
Historical interest expense on the Senior Secured Notes . (23,000) (92,000)
Historical interest expense on other debt . . . . . . . . (634) (2,500)
Amortization of estimated debt issuance costs . . . . . . 500 2,000
Amortization of historical debt issuance costs . . . . . . (606) (1,835)
Change in interest capitalized . . . . . . . . . . . . . . 112 --
----------- -----------
Total adjustment to interest expense . . . . . . . $ (9,019) $ (24,368)
=========== ===========
</TABLE>
(c) To adjust income tax expense for the effects of adjustments (a) and (b)
above based on the federal statutory rate of 35%.
(d) Does not include revenues and related expenses attributable to the
Agreement for Services between the Company and Conoco Inc.
(e) Assumes 24,955,250 common shares are purchased pursuant to the Stock
Repurchase Program at $16 per shares.
PF-7
<PAGE> 75
================================================================================
All tendered Outstanding Notes, executed Letters of Transmittal and other
related documents should be directed to the Exchange Agent. Questions and
requests for assistance and requests for additional copies of the Prospectus,
the Letter of Transmittal and other related documents should be addressed to
the Exchange Agent as follows:
By Registered or Certified Mail:
Bank One, NA
P.O. Box 70184
Columbus, Ohio 43271-0184
Attention: Lora Marsch
By Overnight Mail or Hand Delivery:
Bank One, NA-0H1-0184
100 East Broad Street
Columbus, Ohio 43215
Attention: Lora Marsch
By Facsimile:
Bank One, NA
Attention: Lora Marsch
(614) 248-5088
Confirm by Telephone: (614) 248-4856
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight delivery, or registered or certified mail.)
No person has been authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Prospectus and the accompanying Letter of Transmittal, and, if given or made,
such information or representations must not be relied upon as having been
authorized. Neither the Prospectus nor the accompanying Letter of Transmittal
nor both together constitute an offer to sell or the solicitation of an offer
to buy any securities other than the securities to which the Prospectus relates
or an offer to sell or the solicitation of an offer to buy such securities in
any circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus or the Letter of Transmittal or both together nor
any exchange made hereunder shall, under any circumstances, create any
implication that the information contained or incorporated by reference herein
is correct as of any time subsequent to the date herein or that there has been
no change in the affairs of the Company since such date.
================================================================================
================================================================================
$115,815,000
TRANSTEXAS GAS CORPORATION
13 3/4% Series D Senior Subordinated Notes
due 2001
PROSPECTUS
, 1997
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . iii
Information Incorporated by Reference . . . . . . . . iii
Special Note Regarding Forward-Looking Statements . . iii
Prospectus Summary . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . 12
The Exchange Offer . . . . . . . . . . . . . . . . . 19
Use of Proceeds . . . . . . . . . . . . . . . . . . . 25
The Company . . . . . . . . . . . . . . . . . . . . . 26
Description of Certain Indebtedness . . . . . . . . . 29
Description of the Exchange Notes . . . . . . . . . . 30
Certain Federal Income Tax Consequences . . . . . . . 61
Plan of Distribution . . . . . . . . . . . . . . . . 61
Legal Matters . . . . . . . . . . . . . . . . . . . . 62
Independent Accountants . . . . . . . . . . . . . . . 62
Experts . . . . . . . . . . . . . . . . . . . . . . . 62
Pro Forma Condensed Consolidated
Financial Information . . . . . . . . . . . . . . . PF-1
================================================================================
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
3.1 -- Articles of Incorporation (previously filed as an exhibit to the
Company's registration statement on Form S-1 (33-75050), and
incorporated herein by reference thereto).
4.1 -- Indenture governing Subordinated Exchange Notes dated June 13,
1997 between the Company, as issuer, and BankOne, N.A., as
trustee.
4.2 -- Registration Rights Agreement dated June 13, 1997 between the
Company and the holders of the Subordinated Exchange Notes.
4.3* -- Loan Agreement dated June 13, 1997 between the Company and TEC.
4.4* -- Security and Pledge Agreement dated June 13, 1997 by the Company
in favor of TEC.
4.5* -- Disbursement Agreement dated June 13, 1997 among the Company, TEC
and Firstar Bank of Minnesota, as disbursement agent and trustee.
4.6* -- Form of Mortgage dated June 13, 1997 between the Company and
Firstar Bank of Minnesota, as trustee.
5.1* -- Legal Opinion of Gardere & Wynne, L.L.P.
12.1 -- Statement regarding computation of ratio of earnings to
consolidated fixed charges.
II-1
<PAGE> 77
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* -- Consent of Netherland, Sewell & Associates, Inc.
24.1 -- Power of Attorney (set forth on page II-5 hereof).
25.1 -- Statement of Eligibility of Trustee (Form T-1).
99.1 -- Letter of Transmittal.
_____________
(*) To be filed by amendment.
ITEM 22. 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;
(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.
(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
II-2
<PAGE> 78
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, prior to any public reoffering of the
securities registered hereunder through use of a prospectus which is a part of
this registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) under the Act, the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the other Items of the applicable form.
(7) That every prospectus (i) that is filed pursuant to
paragraph (6) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415 under the Act, will be filed as a
part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes 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.
(8) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or
13 of this Form S-4, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the registration statement through the date of responding
to the request.
(9) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration statement
when it became effective.
II-3
<PAGE> 79
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-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas, on the 15th day of
August, 1997.
TRANSTEXAS GAS CORPORATION
By: /s/ Ed Donahue
---------------------------------
Ed Donahue, Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Each of the undersigned hereby appoints John R. Stanley and Edwin B.
Donahue, and each of them, as attorney and agent for the undersigned, with full
power of substitution, for and in the name, place and stead of the undersigned,
to sign and file with the Securities and Exchange Commission under the
Securities Act any and all amendments (including post-effective amendments) and
exhibits to this Registration Statement and any and all applications,
instruments, and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby,
with full power and authority to do and perform any and all acts and things
whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 15, 1997.
Name Title
/s/ John R. Stanley
- -------------------------------------------
John R. Stanley Director and Chief Executive Officer
(Principal Executive Officer)
/s/ Thomas B. McDade
- -------------------------------------------
Thomas B. McDade Director
/s/ Ed Donahue
- -------------------------------------------
Ed Donahue Vice President and Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
/s/ James R. Lesch
- -------------------------------------------
James R. Lesch Director
/s/ Robert L. May
- -------------------------------------------
Robert L. May Director
/s/ Donald D. Sykora
- -------------------------------------------
Donald D. Sykora Director
II-4
<PAGE> 80
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.1 -- Articles of Incorporation (previously filed as an exhibit to the
Company's registration statement on Form S-1 (33-75050), and
incorporated herein by reference thereto).
4.1 -- Indenture governing Subordinated Exchange Notes dated June 13,
1997 between the Company, as issuer, and BankOne, N.A., as
trustee.
4.2 -- Registration Rights Agreement dated June 13, 1997 between the
Company and the holders of the Subordinated Exchange Notes.
4.3* -- Loan Agreement dated June 13, 1997 between the Company and TEC.
4.4* -- Security and Pledge Agreement dated June 13, 1997 by the Company
in favor of TEC.
4.5* -- Disbursement Agreement dated June 13, 1997 among the Company, TEC
and Firstar Bank of Minnesota, as disbursement agent and trustee.
4.6* -- Form of Mortgage dated June 13, 1997 between the Company and
Firstar Bank of Minnesota, as trustee.
5.1* -- Legal Opinion of Gardere & Wynne, L.L.P.
12.1 -- Statement regarding computation of ratio of earnings to
consolidated 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* -- Consent of Netherland, Sewell & Associates, Inc.
24.1 -- Power of Attorney (set forth on page II-5 hereof).
25.1 -- Statement of Eligibility of Trustee (Form T-1).
99.1 -- Letter of Transmittal.
_____________
(*) To be filed by amendment.
<PAGE> 1
EXHIBIT 4.1
===============================================================================
$117,573,000
13 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2001
AND
13 3/4% SERIES D SENIOR SUBORDINATED NOTES DUE 2001
INDENTURE
BETWEEN
TRANSTEXAS GAS CORPORATION,
AS ISSUER
AND
BANK ONE, NA,
AS TRUSTEE
DATED AS OF JUNE 13, 1997
===============================================================================
<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> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
------------
Section 1.2 Incorporation by Reference of TIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------------------------------
Section 1.3 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------------------
ARTICLE II
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.1 Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
---------------
Section 2.2 Execution and Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-----------------------------
Section 2.3 Registrar and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------------------
Section 2.4 Paying Agent to Hold Assets in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------------------------
Section 2.5 Securityholder Lists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------------
Section 2.6 Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
---------------------
Section 2.7 Replacement Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
----------------------
Section 2.8 Outstanding Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
----------------------
Section 2.9 Treasury Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-------------------
Section 2.10 Temporary Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------------------
Section 2.11 Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
------------
Section 2.12 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------
Section 2.13 Computation of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-----------------------
ARTICLE III
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.1 Right of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------------------
Section 3.2 Notices to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
------------------
Section 3.3 Selection of Securities to Be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------------------------------
Section 3.4 Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------------
Section 3.5 Effect of Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
------------------------------
Section 3.6 Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------------------
Section 3.7 Securities Redeemed in Part. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------------------------
ARTICLE IV
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.1 Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------------------
Section 4.2 Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-------------------------------
Section 4.3 Limitation on Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
---------------------------------
Section 4.4 Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------------
Section 4.5 Payment of Taxes and Other Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
---------------------------------
Section 4.6 Maintenance of Properties and Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------------------------------------
Section 4.7 Compliance Certificate; Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . 30
-----------------------------------------
Section 4.8 SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-----------
Section 4.9 Limitation on Status as Investment Company or Public Utility Company. . . . . . . . . . . . 31
--------------------------------------------------------------------
Section 4.10 Limitation on Transactions with Related Persons. . . . . . . . . . . . . . . . . . . . . . 31
-----------------------------------------------
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 4.11 Limitation on Incurrences of Additional Debt and Issuances of Disqualified Capital
----------------------------------------------------------------------------------
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-----
Section 4.12 Limitations on Restricting Subsidiary Dividends . . . . . . . . . . . . . . . . . . . . . . 34
-----------------------------------------------
Section 4.13 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-------------------
Section 4.14 Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-------------------------
Section 4.15 Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 38
---------------------------------------
Section 4.16 Limitation on Ranking of Future Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
------------------------------------
Section 4.17 Restriction on Sale and Issuance of Subsidiary Stock. . . . . . . . . . . . . . . . . . . . 38
----------------------------------------------------
Section 4.18 Limitations on Line of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-------------------------------
Section 4.19 Separate Existence and Formalities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
----------------------------------
Section 4.20 Rating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
------
Section 4.21 TTXD Spinoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
------------
ARTICLE V
SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.1 When the Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-------------------------------
Section 5.2 Successor Corporation Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
---------------------------------
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . 41
Section 6.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
-----------------
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment. . . . . . . . . . . . . . . . . . 43
-------------------------------------------------------
Section 6.3 Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . 43
---------------------------------------------------------------
Section 6.4 Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--------------------------------
Section 6.5 Trustee May Enforce Claims Without Possession of Securities. . . . . . . . . . . . . . . . 44
-----------------------------------------------------------
Section 6.6 Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
----------
Section 6.7 Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
-------------------
Section 6.8 Unconditional Right of Holders to Receive Principal, Premium and Interest. . . . . . . . . 45
-------------------------------------------------------------------------
Section 6.9 Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
------------------------------
Section 6.10 Delay or Omission Not a Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
------------------------------
Section 6.11 Control by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
------------------
Section 6.12 Waiver of Past Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
----------------------
Section 6.13 Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
---------------------
Section 6.14 Restoration of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
----------------------------------
ARTICLE VII
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.1 Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
-----------------
Section 7.2 Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
-----------------
Section 7.3 Individual Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
----------------------------
Section 7.4 Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
--------------------
Section 7.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
-----------------
Section 7.6 Reports by Trustee to Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-----------------------------
Section 7.7 Compensation and Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
--------------------------
Section 7.8 Replacement of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
----------------------
Section 7.9 Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
--------------------------------
Section 7.10 Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-----------------------------
Section 7.11 Preferential Collection of Claims against Company. . . . . . . . . . . . . . . . . . . . . 50
-------------------------------------------------
Section 7.12 No Bond. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-------
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 7.13 Condition to Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-------------------
Section 7.14 Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
----------
ARTICLE VIII
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . 51
Section 8.1 Satisfaction, Discharge of the Indenture and Defeasance of the Securities. . . . . . . . . 51
-------------------------------------------------------------------------
Section 8.2 Termination of Obligations Upon Cancellation of the Securities. . . . . . . . . . . . . . . 52
--------------------------------------------------------------
Section 8.3 Survival of Certain Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
-------------------------------
Section 8.4 Acknowledgment of Discharge by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--------------------------------------
Section 8.5 Application of Trust Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
---------------------------
Section 8.6 Repayment to the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
------------------------
Section 8.7 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
-------------
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . 53
Section 9.1 Supplemental Indentures Without Consent of Holders. . . . . . . . . . . . . . . . . . . . . 53
--------------------------------------------------
Section 9.2 Amendments, Supplemental Indentures and Waivers with Consent of Holders. . . . . . . . . . 54
-----------------------------------------------------------------------
Section 9.3 Compliance with TIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
-------------------
Section 9.4 Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
---------------------------------
Section 9.5 Notation on or Exchange of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
-------------------------------------
Section 9.6 Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-------------------------------
ARTICLE X
MEETINGS OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . 56
Section 10.1 Purposes for Which Meetings May Be Called. . . . . . . . . . . . . . . . . . . . . . . . . 56
-----------------------------------------
Section 10.2 Manner of Calling Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
--------------------------
Section 10.3 Call of Meetings by Company or Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
--------------------------------------
Section 10.4 Who May Attend and Vote at Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-----------------------------------
Section 10.5 Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights;
--------------------------------------------------------------------------
Adjournment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-----------
Section 10.6 Voting at the Meeting and Record to Be Kept. . . . . . . . . . . . . . . . . . . . . . . . 57
-------------------------------------------
Section 10.7 Exercise of Rights of Trustee or Securityholders May Not Be Hindered or Delayed by
----------------------------------------------------------------------------------
Call of Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
---------------
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE . . . . . . . . . . . . . . . . . . . . . 58
Section 11.1 Repurchase of Securities at Option of the Holder Upon Change of Control . . . . . . . . . . 58
-----------------------------------------------------------------------
ARTICLE XII
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.1 Securities Subordinate to Senior Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
-------------------------------------
Section 12.2 Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . 59
----------------------------------------------
Section 12.3 No Payment When Senior Debt in Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
--------------------------------------
Section 12.4 Payment Permitted If No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
-------------------------------
Section 12.5 Subrogation to Rights of Holders of Senior Debt. . . . . . . . . . . . . . . . . . . . . . 61
-----------------------------------------------
Section 12.6 Provisions Solely to Define Relative Rights. . . . . . . . . . . . . . . . . . . . . . . . 62
-------------------------------------------
Section 12.7 Trustee to Effectuate Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-----------------------------------
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C> <C>
Section 12.8 No Waiver of Subordination Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------------------------------------
Section 12.9 Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-----------------
Section 12.10 Reliance on Judicial Order or Certificate of Liquidating Agent. . . . . . . . . . . . . . . 63
--------------------------------------------------------------
Section 12.11 Trustee Not Fiduciary for Holders of Senior Debt. . . . . . . . . . . . . . . . . . . . . 63
------------------------------------------------
Section 12.12 Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights. . . . . . . . 63
----------------------------------------------------------------------------
Section 12.13 Article Applicable to Paying Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
-----------------------------------
Section 12.14 Defeasance of this Article XII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
------------------------------
Section 12.15 Pari Passu with Series A/B Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
--------------------------------
ARTICLE XIII
[INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XIV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 14.1 TIA Controls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
------------
Section 14.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-------
Section 14.3 Communications by Holders with Other Holders. . . . . . . . . . . . . . . . . . . . . . . . 65
--------------------------------------------
Section 14.4 Certificate and Opinion as to Conditions Precedent. . . . . . . . . . . . . . . . . . . . . 65
--------------------------------------------------
Section 14.5 Statements Required in Certificate or Opinion. . . . . . . . . . . . . . . . . . . . . . . 65
---------------------------------------------
Section 14.6 Rules by Trustee, Paying Agent, Registrar. . . . . . . . . . . . . . . . . . . . . . . . . 65
-----------------------------------------
Section 14.7 Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
--------------
Section 14.8 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------------
Section 14.9 No Adverse Interpretation of Other Agreements. . . . . . . . . . . . . . . . . . . . . . . 66
---------------------------------------------
Section 14.10 No Recourse against Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------------------------
Section 14.11 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
----------
Section 14.12 Duplicate Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
-------------------
Section 14.13 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
------------
Section 14.14 Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------------------------------
</TABLE>
EXHIBITS
Exhibit A - Form of Note
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 June 13, 1997, between TRANSTEXAS GAS
CORPORATION, a Delaware corporation (the "Company"), and BANK ONE, 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
3/4% Series C Senior Subordinated Notes due 2001 and the Company's 13 3/4%
Series D Senior Subordinated Notes due 2001:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Accumulated Amount" shall have the meaning specified in Section
4.14(c).
"Adjusted 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 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, (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.
"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 in a Reserve Report dated as of a date no earlier than the
Company's most recent fiscal year end (or, if such Reserve Report is
unavailable, or if the date of determination is after the end of the first
fiscal quarter of the most recent 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 (which are deemed to include leasehold mineral
interests), 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), 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, (3) any sales or other dispositions
<PAGE> 8
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, and (4) the TTXD Spin-off, if the TTXD Spin-off has occurred. 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 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 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.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means any direct or indirect conveyance, sale, transfer
or other disposition, 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 (a) any disposition of
Receivables, Inventory or Equipment, (b) 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 the creation of a Permitted Lien in connection with (i) a
Dollar-Denominated Production Payment that the Company or any of its
Subsidiaries does not elect to treat as Debt, (ii) a Volumetric Production
Payment or (iii) a Presale of Gas, which in each case shall be treated as an
Asset Sale hereunder, provided, however, that neither the contribution of a
Dollar-Denominated Production Payment to a Hedging Subsidiary nor the mortgage
or other encumbrance of such Dollar-Denominated Production Payment by such
Hedging Subsidiary as contemplated by clause (e) of the definition of
"Restricted Liens" shall constitute an Asset Sale), or (c) conveyances, sales,
transfers or other dispositions in connection with a Drilling Program.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP
or, in the event that such rate of interest is not reasonably determinable,
discounted at the rate of 13 3/4% per annum) of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
Sale and Leaseback Transaction (including any period for which such lease has
been extended or may, at the option of the lessor, be extended).
"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 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
2
<PAGE> 9
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.
"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 one year from the date of acquisition, (c) certificates of deposit
with maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year, 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 or S&P, respectively, and in each case maturing within one year
after the date of acquisition, (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) preceding, (g)
demand and time deposits and certificates of deposit with any commercial bank
organized in the United States not meeting the qualifications specified in
clause (c) preceding, provided that such deposits and certificates support
bonds, letters of credit and other similar types of obligations incurred in the
ordinary course of business, (h) deposits with any Eligible Institution, (i)
demand or fully insured time deposits used in the ordinary course of business
with commercial banks insured by the Federal Deposit Insurance Corporation.
"Change of Control" means (i) the liquidation or dissolution of, or
the adoption of a plan of liquidation by, the Company, or (ii) 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 (or his heirs, his estate, or
any trust in which he or his immediate family members have, directly or
indirectly, a beneficial interest in excess of 50%) and his Subsidiaries or the
TEC Indenture Trustee, 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), directly or indirectly, of more than 50%, on a fully diluted
basis, 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) or (ii), the Notes have a current rating issued by a Rating Agency;
provided, however, that if, at any time within the period commencing on the
date that is immediately prior to the date of the first public announcement of
such event and ending on, but not including, the date that is 90 days after
occurrence of such event (which period shall be deemed to be extended so long
as prior to the end of such 90-day period and continuing thereafter the rating
of the Notes is under publicly announced consideration for possible downgrade
by either Rating Agency) either (a) the Notes are downgraded by either Rating
Agency to a rating at least one gradation (including a change within rating
categories, e.g., a decline in rating from BB+ to BB, or from B to B-) below
that which existed on the date immediately prior to the date of the first
public announcement of such an event, or (b) either Rating Agency withdraws its
rating of the Notes, then, in either case, such event shall be a "Change of
Control".
"Change of Control Offer" shall have the meaning specified in Section
11.1(b).
"Change of Control Payment Date" shall have the meaning specified in
Section 11.1(a).
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<PAGE> 10
"Change of Control Purchase Price" shall have the meaning specified in
Section 11.1(a).
"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.
"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 for 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 the
amounts attributable to operations and businesses discontinued or disposed of,
on a pro forma basis as if such operations and businesses were discontinued or
disposed of on the first day of the Reference Period) for the Reference Period
to (ii) the aggregate Consolidated Fixed Charges of such Person (exclusive of
amounts attributable to discontinued operations and businesses on a pro forma
basis as if such operations and businesses were discontinued or disposed of on
the first day of the Reference Period, 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 (and the application of the
proceeds therefrom) or the retirement of any Debt or Disqualified Capital Stock
during the Reference Period or subsequent thereto and on or prior to the
Transaction Date shall be assumed to have occurred on the first day of such
Reference Period, (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
Consolidated Subsidiaries is a party to a 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, and (d) Consolidated EBITDA and
Consolidated Fixed Charges of any Person shall be calculated by giving pro
forma effect to the TTXD Spin-off as if such transaction had occurred on the
first day of the Reference Period, but only if such transaction occurred during
the Reference Period.
"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
Consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to Preferred
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 Consolidated
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
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<PAGE> 11
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 Swap Obligations, in each case to the extent attributable
to such period, but excluding any interest accrued on intercompany payables for
taxes to the extent the liability for such taxes has been assumed by
TransAmerican pursuant to the Tax Allocation Agreement) 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 an
interest rate reasonably determined 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 Consolidated Subsidiary of
such Person other than with respect to Debt of such Person or a Consolidated
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 Consolidated 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 Consolidated 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.
"Continuing Operations" means the aggregate of the operations of the
TransTexas Entities after giving effect to the sale by the Company of the stock
of TTC.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt" means, with respect to any Person, without duplication, (i) all
liabilities, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, or similar instruments or letters of credit, (c) representing the
deferred and unpaid balance of the purchase price of any property acquired by
such Person or services received by such Person, other than long-term service
contracts or supply contracts which require minimum periodic payments and other
than any such balance that represents an account payable or other monetary
obligation to a trade creditor created, incurred, assumed or guaranteed by such
Person in the ordinary course of business of such Person in connection with
obtaining goods, materials or services due within twelve months (or such longer
period for payment as is customarily extended by such trade creditor) of the
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<PAGE> 12
Incurrence thereof, which account is not overdue by more than 150 days, unless
such account payable is being contested in good faith or has been extended, (d)
evidenced by bankers' acceptances or similar instruments issued or accepted by
banks or Swap Obligations, (e) for the payment of money relating to a
Capitalized Lease Obligation, (f) the Attributable Debt associated with any
Sale and Leaseback Transaction, or (g) Dollar-Denominated Production Payments
that the Company or any of its Subsidiaries elect to treat as Debt (excluding
all other Permitted Production Payment Obligations); (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), but excluding
liabilities arising by reason of endorsements, with recourse, of negotiable and
similar instruments for purposes of deposit or collection in the ordinary
course of business; (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
and are obligations of such Person) 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.
"Defaulted Interest" 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.
"Dollar-Denominated Production Payment" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
obligations and undertakings in connection therewith.
"Drilling Agreement" means a drilling and services agreement between
the Company and TTXD relating to the provision of such services at market rates
by TTXD to the Company upon the terms approved by the Board of Directors of
each of TTXD and the Company, as in effect on the Issue Date and as amended
from time to time, provided that any such amendment is not materially adverse
to the Holders of the Notes.
"Drilling Program" means any arrangement between the Company or any
Subsidiary of the Company and another Person pursuant to which (i) such Person
agrees (a) 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
(b) to pay all or a portion of the costs incurred in connection with of
drilling, completing or performing such other operations (or to reimburse the
Company or such Subsidiary for payment of such costs within six months of the
incurrence thereof) 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 million and that is
rated "A" (or higher) according to Moody's or S&P at the time as of which any
Investment or rollover therein is made.
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<PAGE> 13
"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, well site 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.
"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 assets 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 acquired assets include
proved reserves with a value that, together with the cash or Cash Equivalents
therefor 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 or such Subsidiary in connection with such Asset Sale; except, that
during any fiscal year the Company or any of its Subsidiaries can collectively
acquire assets (other than proved reserves, cash or Cash Equivalents) with a
fair market value of up to $40 million in exchange for assets of the Company or
such Subsidiaries with proved reserves, and such assets acquired by the Company
or such Subsidiaries shall constitute "Exchange Assets" hereunder.
"Final Change of Control Put Date" shall have the meaning specified in
Section 11.1(c)(5).
"Final Put Date" shall have the meaning specified in Section
4.14(d)(5).
"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 annual report on Form 10-K for the year ended January
31, 1997.
"Gas Purchase Agreement" means the Interruptible Gas Sales Terms and
Conditions between TARC and the Company, as in effect on the Issue Date and as
amended from time to time, provided that any such amendment is not adverse to
the Holders of the Notes in any material respect.
"Hedging Subsidiary" means a Subsidiary of the Company engaged solely
in the business of facilitating Permitted Hedging Transactions for the benefit
of the Company or any of its Subsidiaries.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"Hydrocarbons" means oil, natural 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 an individual that is not and has not
been affiliated (other than as a director of TransAmerican or any of its past
or present Subsidiaries) with, and is not and has not been a Related Person
(other than solely as a director of TransAmerican or one of its past or present
Subsidiaries) with respect to, John R. Stanley, TransAmerican or the Company or
its Subsidiaries.
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<PAGE> 14
"Intercompany Loan Redemption" means a redemption by the Company of
all or a portion of the principal of the TransTexas Intercompany Loan, together
with payment of accrued and unpaid interest, if any, to and including the date
of such redemption.
"Interest Payment Date" means each June 30 and December 31, commencing
December 31, 1997.
"Interest Rate or Currency Agreement" of any Person means any forward
contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars, puts and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates.
"Inventory" means and includes, as to any Person, all of such Person's
now owned or hereafter acquired 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.
"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, 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, loaned
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; (d) the entering into of any Swap Obligation with such other
Person; or (e) the making of any capital contribution by such Person to such
other Person.
"Investment Grade Rating" means, with respect to any Person or 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 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 or any Subsidiary of the
Company that 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).
"Material Change" means an increase or decrease of more than 10% since
the then most recent Reserve Report 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
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<PAGE> 15
since the then most recent Reserve Report of oil and gas reserves that have
been estimated by independent petroleum engineers and on which a report or
reports have been prepared by such independent petroleum engineers within
twelve months of the acquisition, (ii) any reserves added since the then most
recent Reserve Report attributable to the drilling or recompletion of wells not
included in previous reserve estimates, and (iii) any disposition of properties
existing on the date of the then most recent Reserve Report that have been
disposed of.
"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.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" shall have the meaning specified in Section
4.14(c).
"Net Proceeds" means (a) 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, and (b) in the case of any exchange,
exercise, conversion or surrender of any outstanding securities or Debt of the
Company for or into shares of Qualified Capital Stock of the Company, the net
book value of such outstanding securities as adjusted on the books of the
Company or Debt of the Company to the extent recorded in accordance with GAAP,
in each case, on the date of such exchange, exercise, conversion or surrender
(plus any additional amount required to be paid by the holder of such Debt or
securities to the Company upon such exchange, exercise, conversion or surrender
and less (i) any and all payments made to the holders of such Debt or
securities and (ii) all other expenses incurred by the Company in connection
therewith; in each case insofar as such payments or expenses are incident to
such exchange, exercise, conversion or surrender).
"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, each item to be determined in conformity with GAAP.
"Net Worth" of any Person means, at any date of determination,
stockholders' equity as set forth in the most recently available quarterly or
annual consolidated balance sheet of such Person and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from stockholders' equity),
and the principal amount of any promissory notes receivable from the sale of
the Capital Stock of such Person or any of its Subsidiaries, each item to be
determined in conformity with GAAP.
"New Property" means real or personal property acquired by the Company
or any of its Subsidiaries after the Issue Date.
"NNM" means the Nasdaq National Market.
"Notes" means the 13 3/4% Series C Senior Subordinated Notes due 2001
and the 13 3/4% Series D Senior Subordinated Notes due 2001, in each case as
supplemented from time to time in accordance with the terms hereof, issued
under this Indenture.
"NYSE" means the New York Stock Exchange.
"Obligor" means the Company.
"Offer Amount" shall have the meaning specified in Section 4.14(d).
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<PAGE> 16
"Offer Price" shall have the meaning specified in Section 4.14(d).
"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(d), otherwise, also referred to as a "Section
4.14 Offer".
"Office Leases" means the existing leases of office space at 1300
North Sam Houston Parkway East, Houston, Texas 77032-2949.
"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.
"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.
"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 the normal business operations of the TransTexas
Entities as a risk-management strategy or hedge against adverse changes in
prices of oil, natural gas, or natural gas liquids; provided, that such
transactions do not, on a monthly basis, relate to more than 90% of the
TransTexas Entities' average net natural gas production per month from
Continuing Operations for the most recent three-month period measured at the
time of such incurrence; 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 that 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, or secured by a letter of
credit issued 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 Cash Equivalents; (iii) Investments by
the Company or its Wholly Owned Subsidiaries in Wholly Owned Subsidiaries of
the Company that are engaged in Related Businesses; (iv) Swap Obligations; (v)
the receipt of Capital Stock in lieu of cash in connection with the settlement
of litigation or a claim in a bankruptcy or insolvency proceeding; (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 Capital Stock
resulting from an Asset Sale pursuant to Section 4.14(b)(viii); (ix) an
Investment in one or more Unrestricted Subsidiaries of the Company in an
aggregate amount not in excess of $25,000,000 (net of returns on investment)
less the amount of any Unrestricted Non-Recourse Debt outstanding of TransTexas
or any of its Subsidiaries; (x) Investments and expenditures made in the
ordinary course of business by the Company or its Subsidiaries, and of a nature
that is or shall have become customary in, the oil and gas business as means of
actively exploiting, exploring for, acquiring, developing, processing,
gathering, marketing or
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transporting oil or gas through agreements, transactions, interests or
arrangements which permit a Person to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy objectives
customarily achieved through the conduct of the oil and gas business jointly
with third parties, including, without limitation, (a) ownership interests in
oil and gas properties or gathering systems and (b) Investments and
expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling agreements,
joint bidding agreements, service contracts, joint venture agreements,
partnership agreements (whether general or limited), subscription agreements,
stock purchase agreements and other similar agreements with third parties
(including Unrestricted Subsidiaries), provided that in the case of any joint
venture engaged in processing, gathering, marketing or transporting oil or gas
(1) all Debt of such joint venture (other than a joint venture that is an
Unrestricted Subsidiary) which would not otherwise constitute Debt of one of
the TransTexas Entities shall be deemed Debt of the Company in proportion to
its direct or indirect ownership interest in such joint venture and (2) such
joint venture shall be reasonably calculated to enhance the value of the
reserves of the TransTexas Entities or the marketability of production from
such reserves; (xi) a guaranty by any Subsidiary of the Company permitted under
Section 4.11(f); (xii) deposits permitted by of the definition of "Permitted
Liens" or any extension, renewal, or replacement of any of them; (xiii) capital
contributions by the Company to TTXD or to a joint venture, a partnership, a
limited liability company or a similar entity of the Company's drilling and
energy services business and pipeline services business and related assets;
(xiv) the TTXD Equity Investment (in addition to any contribution by the
Company pursuant to clause (xiii) preceding); (xv) [intentionally omitted];
(xvi) guarantees by the Company of Debt of TTXD to the extent that such Debt
relates to assets contributed to TTXD pursuant to clause (xiii) hereof; (xvii)
other Investments, not in excess of $5,000,000 at any time outstanding; (xviii)
a capital contribution by TTXD of any or all of its assets to a joint venture,
a partnership, a limited liability company or a similar entity; or (xix) loans
made (a) to officers, directors and employees of the Company or any of its
Subsidiaries approved by the applicable Board of Directors (or by an authorized
officer), the proceeds of which are used solely to purchase stock or to
exercise stock options received pursuant to an employee stock option plan or
other incentive plan, in a principal amount not to exceed the purchase price of
such stock or the exercise price of such stock options, as applicable, and (b)
to refinance loans, together with accrued interest thereon, made pursuant to
this clause (xix), in the case of each of (a) and (b) of this clause (xix) not
in excess of $3,000,000 in aggregate principal amount outstanding at any one
time.
"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 90 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) pledges of assets or deposits
of cash or Cash Equivalents 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 a
like nature incurred in the ordinary course of business (or to secure
reimbursement obligations or letters of credit in support of such bonds); (d)
Liens encumbering customary initial deposits and margin deposits securing Swap
Obligations or Permitted Hedging Transactions; (e) pledges of assets,
including, without limitation, any mortgage or other encumbrance of a
production payment by a Hedging Subsidiary, to secure margin obligations,
reimbursement obligations or letters of credit in connection with Permitted
Hedging Transactions, provided that, at the time such pledge is made (or, if
such pledge secures future Permitted Hedging Transactions, at the time any such
Permitted Hedging Transaction is entered into), the maximum aggregate exposure
under such Permitted Hedging Transactions does not exceed the greater of (i)
$25,000,000 or (ii) 10% of the SEC PV10 indicated on the Company's then 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
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<PAGE> 18
Company or any of its Subsidiaries) or materially 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 securing Debt or other obligations not in excess of
$3,000,000 and Liens existing on the Issue Date that were Permitted Liens under
the Series A/B 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, property insurance and
liability insurance; (j) Liens granted on Equipment, Inventory or Receivables;
(k) Liens granted in connection with the Presale of Gas; (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) such obligations are
limited to a percentage of production from such wells, (ii) 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 (iii) 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 (m) or (o) through (u) 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)
do not secure any additional Debt or encumber any additional property; (o)
Liens securing (i) Royalty Payment Obligations and (ii) Permitted Production
Payment Obligations; (p) Liens on any of the assets of any of the Subsidiaries
of the Company in favor of another TransTexas Entity; (q) Liens that secure
Unrestricted Non-Recourse Debt; provided, however, that at the time of
incurrence the aggregate fair market value of the assets securing such
Non-Recourse Debt (exclusive of the stock of the applicable Unrestricted
Subsidiary) shall not exceed the amount of Unrestricted Non-Recourse Debt at
the time permitted hereunder; (r) Liens on the proceeds of any property subject
to a Permitted Lien or on deposit accounts containing any such proceeds; (s)
Liens (including renewals and extensions thereof) on New Property, provided,
however, that (i) such Lien is created solely for the purpose of securing Debt
Incurred to finance the cost (including the cost of improvements or
construction) of New Property subject thereto and such Lien is created at the
time of, or within six months after the later of the acquisition, the
completion of construction, or the commencement of full operation of such New
Property, (ii) the principal amount of the Debt secured by such Lien does not
exceed 100% of such cost, including costs and fees related to the financing
thereof, (iii) any such Lien shall not extend to or cover any property or
assets other than such item of New Property and any improvements on such New
Property; (t) Liens that secure Senior Debt, whether in whole or part thereof;
and (u) Liens securing Debt on any one or more of the following properties: (i)
the land and improvements now or hereafter located at 1300 North Sam Houston
Parkway East, Houston, Texas, (ii) the land and improvements, now known as
"TransTexas Gas Corporation," now or hereafter located on U.S. Highway 359 in
Webb County, Texas, and (iii) the land and improvements, now known as
"TransTexas Gas Corporation," now or hereafter located approximately two miles
west of Zapata, Texas, on Farm-to-Market Road 496 in Zapata County, Texas.
"Permitted Production Payment Obligations" means Volumetric Production
Payments and Dollar-Denominated Production Payments, each as permitted to be
made hereunder, and similar burdens on the property of the Company or any
Subsidiary of the Company 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.
"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.
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<PAGE> 19
"Post-Commencement Amounts" means all interest and fees accrued or
accruing after the commencement of any proceeding initiated under any
Bankruptcy Law in accordance with and at the contract rate (including, without
limitation, any non-usurious rate applicable upon default) and all premiums,
expenses (including costs of collection), indemnities and other amounts that
would have accrued or been incurred after the commencement of any such
proceeding in any case as specified in any agreement or instrument creating,
evidencing, or governing any Senior Debt, whether or not, pursuant to
applicable law or otherwise, the claim for such interest, fees, premiums,
expenses, indemnities or other amounts is allowed and non-avoidable as a claim
in such proceeding.
"Preferred Stock" means, with respect to any corporation, any class or
classes (however designated) of Capital Stock of such Person that is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation over
shares of Capital Stock of any other class of such corporation.
"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 Asset Sale involving Hydrocarbon reserves.
"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.
"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.
"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.
"Purchase Date" shall have the meaning specified in Section 4.14(d).
"Qualified Capital Stock" means any Capital Stock of the Company that
is not Disqualified Capital Stock.
"Rating Agency" means each of Moody's and S&P or, if Moody's or S&P
shall have ceased to be a "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act) or shall have
ceased to make publicly available a rating on any outstanding securities of any
company engaged primarily in the oil and gas business, such other organization
or organizations, as the case may be, then making publicly available a rating
on the Notes as is selected by the Company.
"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,
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.
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<PAGE> 20
"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 C Notes.
"Reimbursement and Credit Facility" means the Reimbursement and Credit
Agreement dated January 25, 1996, pursuant to which a third party caused a $20
million letter of credit to be issued to collateralize a supersedeas bond on
behalf of the Company, as in effect on the Issue Date and as amended from time
to time, provided that any such amendment is not materially adverse to the
Holders of the Notes.
"Related Business" means (i) the exploration for, acquisition of,
development of, production, transportation, gathering, and processing (in
connection with natural gas and natural gas liquids only) 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 and natural gas liquids, (ii) the
drilling and energy services business and pipeline services business or (iii)
owning and operating a Hedging Subsidiary.
"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
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.
"Related TTXD Business" means the drilling and energy services
business and pipeline services business.
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<PAGE> 21
"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, (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, 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 Junior Debt of such Person payable solely in
shares of Qualified Capital Stock of such Person, (iv) any payments or
distributions made pursuant to and in accordance with the Transfer Agreement,
the Drilling Agreement, the Gas Purchase Agreement, the TEC Registration Rights
Agreement, the Services Agreement, the Office Leases or the Tax Allocation
Agreement, (v) any Investment by the Company in, or distribution by the Company
on, its Capital Stock pursuant to share repurchases or dividends on its Capital
Stock as described in the Offering Circular dated June 5, 1997, relating to the
offer by TransAmerican Energy Corporation of its 11 1/2% Senior Secured Notes
due 2002 and of its 13% Senior Secured Discount Notes due 2002 in an aggregate
amount not to exceed $400 million, (vi) the redemption, purchase, retirement or
other acquisition of any Junior Debt with the proceeds of any refinancing Debt
permitted to be incurred pursuant to Section 4.11(j), (vii) any transfer,
dividend or other distribution by the Company of assets, including, without
limitation, shares of Capital Stock of TTXD, in connection with the TTXD
Spin-off, (viii) the purchase by the Company of shares of Capital Stock of
TARC, the Company or TTXD in connection with the Company's employee benefit
plans, including without limitation any employee stock ownership plans or any
employee stock option plans, in an aggregate amount not to exceed seven percent
of the aggregate market value of the voting stock held by non-affiliates of the
issuer measured from the date of the first such purchase; and (ix) any
redemption, defeasance, repurchase or other retirement for value of the Senior
Notes by the Company.
"Royalty Payment Obligations" means (i) royalties, overriding
royalties, revenue interests, net revenue interests, net profit interests, and
reversionary interests, (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, pooling, unitization 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.
"S&P" means Standard & Poor's Corporation, Inc. and its successors.
"Sale and Leaseback Transaction" means an arrangement relating to
property owned on the Issue Date or thereafter acquired whereby the Company or
a Subsidiary of the Company transfers such property to a Person and leases it
back from such Person.
"SEC" means the Securities and Exchange Commission.
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<PAGE> 22
"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(d).
"Securities" means the Notes.
"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 Debt of the Company, including, without
limitation, the TransTexas Intercompany Loan, now or hereafter created,
incurred, assumed or guaranteed by the Company (and all renewals, extensions or
refundings thereof or of any part thereof) (including the principal of,
interest on and fees, premiums, expenses (including costs of collection),
indemnities and other amounts payable in connection with such Indebtedness, and
including Post- Commencement Amounts), unless the instrument governing such
Debt expressly provides that such Debt is not senior or superior in right of
payment to the Notes. Notwithstanding the foregoing, Senior Debt of the
Company shall not include (i) Debt evidenced by the Notes, (ii) Debt of the
Company to any Subsidiary of the Company or to any Unrestricted Subsidiary of
the Company, or (iii) any amounts payable or other Debt to trade creditors
created, incurred, assumed or guaranteed by the Company or any Subsidiary of
the Company in the ordinary course of business in connection with obtaining
goods or services.
"Senior Nonmonetary Default" shall have the meaning specified in
Section 12.3.
"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/B Indenture" means the indenture, dated as of December 13,
1996, as amended or supplemented from time to time in accordance with the terms
thereof, by and between the Company and the Trustee, as trustee, relating to
the Series A/B Notes.
"Series A/B 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 of
the Company.
"Series C Notes" and "Series D Notes" mean the 13 3/4% Series C Senior
Subordinated Notes due 2001 and the 13 3/4% Series D Senior Subordinated Notes
due 2001 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 and as amended from time to time, provided that any such amendment is not
materially adverse to the Holders of the Notes.
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<PAGE> 23
"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
31, 2001.
"Subordinated Debt" means Debt of any Person that (i) requires no
payment of principal prior to or on the date on which all principal of and
interest on the TransTexas Intercompany Loan is paid in full and (ii) is
subordinate and junior in right of payment to the TransTexas Intercompany Loan
in the event of liquidation.
"Subsidiary," with respect to any Person, means (i) a corporation with
respect to which such Person or its Subsidiaries owns, directly or indirectly,
at least fifty percent of such corporation's Capital Stock with voting power,
under ordinary circumstances, to elect directors, or (ii) a partnership in
which such Person or a subsidiary of such Person is, at the time, a general
partner of such partnership and has more than 50% of the total voting power of
partnership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of managers thereof, 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 other
Person; provided, however, that "Subsidiary" shall not include any Unrestricted
Subsidiary of such Person, except for purposes of Section 4.10.
"Surviving Person" shall have the meaning specified in Section 5.1(a).
"Swap Obligation" of any Person means any Interest Rate or Currency
Agreement entered into with one or more financial institutions or one or more
futures exchanges in the ordinary course of business and not for purposes of
speculation that is designed to protect such Person against fluctuations in (x)
interest rates with respect to Debt Incurred and which shall have a notional
amount no greater than 105% of the principal amount of the Debt being hedged
thereby, or (y) currency exchange rate fluctuations.
"TARC" means TransAmerican Refining Corporation, a Texas corporation.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated
as of August 24, 1993, among TNGC Holdings Corporation, the Company, and other
subsidiaries, as in effect on the Issue Date and as amended from time to time,
provided that any such amendment is not materially adverse to the Holders of
the Notes.
"TEC" means TransAmerican Energy Corporation, a Delaware corporation.
"TEC Indenture" means the indenture, dated as of June 13, 1997, by and
between TEC and Firstar Bank of Minnesota, N.A., as trustee, relating to the
TEC Notes.
"TEC Indenture Trustee" means the trustee under the TEC Indenture.
"TEC Notes" means TEC's 11 1/2% Senior Secured Notes due 2002 and 13%
Senior Secured Discount Notes due 2002, issued pursuant to the TEC Indenture.
"TEC Registration Rights Agreements" means the agreements in
connection with the registration under federal securities laws of (i) the TEC
Notes and (ii) the capital stock of TARC, the Company and TTXD pledged or to be
pledged to the TEC Indenture Trustee, in each case between TEC and the TEC
Indenture Trustee, as in effect on the Issue Date and as amended from time to
time, provided that any such amendment is not materially adverse to the Holders
of the Notes.
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<PAGE> 24
"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 John R. Stanley, as in
effect on the Issue Date and as amended from time to time, provided that any
such amendment is not materially adverse to the Holders of the Notes.
"TransTexas Borrowing Base" means, as of any date, an amount equal to
the sum of (a) 85% of the book value of all accounts receivable owned by the
Company and its Subsidiaries (excluding any accounts receivable that are more
than 90 days past due, less, without duplication, the allowance for doubtful
accounts attributable to such current accounts receivable) calculated on a
consolidated basis and in accordance with GAAP and (b) 70% of the current
market value of all inventory owned by the Company and its Subsidiaries as of
such date. To the extent that information is not available as to the amount of
accounts receivable as of a specific date, the Company may utilize, to the
extent reasonable, the most recent available information for purposes of
calculating the TransTexas Borrowing Base.
"TransTexas Entities" means the Company and each of its Subsidiaries.
"TransTexas Intercompany Loan" means the senior secured promissory
note from the Company to TARC in the principal amount of $425 million together
with any renewals or extensions thereof.
"TransTexas Security Documents" means, collectively, (i) any and each
mortgage, deed of trust, assignment, assignment of production, security
agreement, pledge agreement, financing statement and each other agreement
relating to the pledge of assets at any time securing all or any part of the
TransTexas Intercompany Loan (and/or all or any portion of the obligations of a
guarantor of all or any part of the TransTexas Intercompany Loan under any
guarantee described in the following clause (ii)), and (ii) any and each
guarantee, now existing or hereafter executed, of all or any part of the
obligations of the Company under the TransTexas Intercompany Loan.
"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.
"TTXD" means TransTexas Drilling Services, Inc., a Delaware
corporation, which on the Issue Date is a Subsidiary of the Company, or a newly
formed corporation that is initially a Wholly Owned Subsidiary of TransTexas,
formed for the purpose of receiving the Investments described under clauses
(xiii) or (xiv) of the definition of "Permitted Investment."
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<PAGE> 25
"TTXD Entities" means TTXD and each of its Subsidiaries.
"TTXD Equity Investment" means an equity Investment by the Company in
TTXD in an aggregate amount not in excess of $75 million.
"TTXD Spin-off" means (i) the transfer of all or a portion of the
drilling and integrated services business and pipeline services business and
related assets from the Company to TTXD and (ii) a dividend of shares of common
stock of TTXD to holders of the Company's common stock or any other transaction
that in either case would result in the Company being the beneficial owner of
less than 50% of the common stock of TTXD.
"Unrestricted Non-Recourse Debt" of the Company or any of its
Subsidiaries means (i) Debt of such Person that is secured solely (other than
with respect to the following clause (ii)) by a Lien upon the stock of an
Unrestricted Subsidiary of such Person and as to which there is no recourse
(other than with respect to the following clause (ii)) against such Person or
any of its assets other than against such stock (and the dollar amount of any
Debt of such Person as described in this clause (i) shall be deemed to be zero
for purposes of all other provisions of this Indenture) and (ii) guarantees of
the Debt of Unrestricted Subsidiaries of such Person; provided, that the
aggregate of all Debt of the Company or any of its Subsidiaries Incurred and
outstanding pursuant to clause (ii) of this definition, together with all
Permitted Investments (net of any return on such Investment) in Unrestricted
Subsidiaries of such Person, does not exceed $25 million plus in the case of
clause (ii) preceding, Restricted Payments permitted to be made pursuant to
Section 4.3.
"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) if the Unrestricted Subsidiary has any Debt outstanding or is
otherwise liable for any Debt or has a negative Net Worth, then immediately
after giving pro forma effect to such designation, such Person could incur at
least $1.00 of additional Debt pursuant to the provisions of the second
paragraph of Section 4.11 (assuming, for purposes of this calculation, that
each dollar of negative Net Worth is equal to one dollar of Debt), (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 (other than the Company or any Subsidiary of the
Company) 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.
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"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 numbers 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.
"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) is at the time owned directly or indirectly
by such Person.
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:
(l) 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;
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(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.
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 C Notes and the
Series D Notes.
The Series C Notes are initially being issued pursuant to an exemption
from registration under the Securities Act. After the initial issuance date of
the Series C Notes, Series D Notes will be issued in exchange for an equal
principal amount of outstanding Series C 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 D Notes has been declared
effective, in which case the Series C Notes will be exchanged for Series D
Notes immediately prior to the resale of Series D Notes pursuant to the
registration statement, (iii) at the request of the Holder of the Series C
Notes, immediately prior to the disposition of such Notes pursuant to Rule 144
under the Securities Act, if the Holder of the Series C Notes delivers to the
Trustee an Opinion of Counsel stating that as a result of such disposition, the
Series C Notes being disposed of will no longer be restricted securities within
the meaning of Rule 144 or (iv) if the Holder of the Series C Notes delivers to
the Trustee an Opinion of Counsel stating that the Series C Notes are no longer
restricted securities within the meaning of Rule 144 under the Securities Act.
Upon any such exchange, the Series C 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.
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The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $115,836,000 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 $117,573,000 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 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.
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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 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 C 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 ONE YEAR FROM THE LATER OF JUNE 13, 1997, 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) 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 C Note (and all Series C 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 C Note for a
Series D Note, the Company
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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.
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.
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Section 2.12 Interest. 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.
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 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 June 30, 1999, the
Company may redeem, at its option, up to $35 million in principal amount of the
Securities at a price equal to 113.250% of the principal amount thereof at the
date of redemption, plus accrued and unpaid interest, if any, to the date of
redemption, with net proceeds of any Public Equity Offering. 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;
(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
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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;
(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; and
(10) any conditions, as determined by the Company in its
sole discretion, to be satisfied or waived as
conditions precedent to the Company's obligation to
effect such redemption.
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. The date fixed for redemption contained in any notice
of redemption and the obligation of the Company to redeem any Notes upon such
date may be subject to the satisfaction or waiver of such conditions as may be
determined by the Company in its sole discretion.
Upon compliance by the Company with the provisions of this Article
III, including but not limited to Section 3.6, and upon satisfaction or waiver
of any conditions precedent to the Company's obligation to effect such
redemption contained in the related notice of redemption, 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, and if the conditions contained in the related
notice of redemption are satisfied or waived, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, regardless of
whether such Securities are
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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.
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
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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 make, directly or indirectly, any dividend or other distribution on shares
of Capital Stock 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 any of its Subsidiaries) unless such dividends,
distributions or payments are made in cash or Qualified Capital Stock or a
combination thereof, except in connection with the TTXD Spin-off. In addition,
the Company shall not 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 2 to 1, (b) the
Company's Adjusted Consolidated Net Tangible Assets are not equal to or greater
than 125% of the total consolidated principal amount or accreted value, as the
case may be, of Debt of the Company and its Subsidiaries (excluding, for
purposes of the calculation of Debt, any Swap Obligations), (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 and all payments that may be made pursuant to
the next paragraph of this Section 4.3 (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)
50% of Consolidated Net Income of the Company accrued on a cumulative basis 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 Adjusted 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 Proceeds received by the
Company from the issuance or sale (other than to or 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, plus (iv) $10,000,000.
Nothing in this Section 4.3 shall prohibit the payment of any dividend
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.
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, 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
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, or charge 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.
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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.
(b) The Company will maintain, for itself and each of its
Subsidiaries, with reputable insurers or with the government of the United
States of America (or an agency or instrumentality thereof) insurance
(including appropriate self-insurance) against loss or damage of the kinds
that, in its reasonable, good faith opinion, are adequate and appropriate for
the conduct of its business and the businesses of such Subsidiaries in a
prudent manner, in such amounts, with such deductibles and by such methods as
are customary, in its reasonable, good faith opinion, and adequate and
appropriate for the conduct of its business and the businesses of its
Subsidiaries in a prudent manner for companies engaged in a similar business in
similar geographic areas.
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 105 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 105 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.
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 SEC pursuant to Section 13 or 15(d) of the
Exchange Act. The Company agrees to continue to be subject to
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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
(excluding any Related Person that is a form of entity customarily used in the
oil and gas business as a means of exploiting, exploring for, acquiring,
developing, processing, gathering, marketing, or transporting oil or gas and is
a Related Person solely because the party engaging in such transaction has the
ability to control the Related Person under the definition of "control"
contained within the definition of "Related Person" contained herein)
(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 properties, assets or securities from such Related
Person, (iii) an Investment in such Related Person (excluding Investments
permitted to be made pursuant to clauses (iii), (vi), (ix), (xi), (xiii),
(xiv), (xvi) or (xix) of the definition of "Permitted Investment" contained
herein), 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, including for this purpose the
transactions excluded from the definition of Restricted Payments by the proviso
contained in the definition of "Restricted Payments" contained herein, (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) are
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 TransTexas Intercompany Loan and any other loan
from TEC to the Company permitted to be Incurred pursuant to Section 4.11
(including, without limitation, Intercompany Loan Redemptions and all other
payments made thereon or with respect thereto), any one or more of the
TransTexas Security Documents, the Drilling Agreement, the Gas Purchase
Agreement, the TEC Registration Rights 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 in the aggregate $2,000,000 per year, (F) any Sale and
Leaseback Transaction or other transfer to a corporate Affiliate of the Company
of the Company's headquarters building located at 1300 North Sam Houston
Parkway East, Houston, Texas, (G) 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, and (H)
the Company and its Subsidiaries may pay a management fee to TransAmerican in
an amount not to exceed $2,500,000 per year.
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(b) Without limiting the foregoing, with respect to any Related
Person Transaction or series of Related Person Transactions (other than any
Related Person Transaction described in clause (A), (C), (D), (F) or (G) of
Section 4.10(a)) with an aggregate value in excess of $5,000,000, such
transaction must first be approved by a majority of the Board of Directors of
the Company or its Subsidiary which is the transacting party and a majority of
the directors of such entity 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 (b) with respect to any Related Person Transaction or
series of Related Person Transactions (other than any Related Person
Transaction described in clause (A), (C), (D), (F) or (G) of Section 4.10(a))
with an aggregate value in excess of $10,000,000, 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 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.
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 (other than any of the TTXD Entities after the
TTXD Spin-off) 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, (b) Debt existing on the Issue Date that was allowed to be Incurred
under the Series A/B Indenture, (c) Debt evidenced, guaranteed or secured by
the TransTexas Intercompany Loan or any of the TransTexas Security Documents,
and any other Debt at any time owing by any of the TransTexas Entities to TEC
in aggregate outstanding principal amount, when added to the then outstanding
principal amount of the TransTexas Intercompany Loan, of $500 million; (d)
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; (e) if either (i) the
Phase I Completion Date (as defined in the TEC Indenture) has occurred or (ii)
the Notes have a rating of BB- or better by S&P or B1 or better by Moody's,
Subordinated Debt of the Company with initial net proceeds to the Company not
in excess of $125 million in the aggregate; (f) any guaranty of Debt permitted
by clauses (c), (e), (j), (k), (l) or (p) of this Section 4.11, which guaranty
shall not be included in the determination of the amount of Debt which may be
Incurred pursuant to clauses (c), (e), (j), (k), (l) or (p) of this Section
4.11; (g) Debt evidenced by the Series A/B Notes; (h) Debt of the Company
secured by a Permitted Lien that meets the requirements of clause (c), (d),
(e), (g), (h), (i), (l), (m), (o) or (r) of the definition of "Permitted Liens"
contained herein, to the extent that such Liens would give rise to Debt under
clauses (i), (ii), or (iii) of the definition of "Debt" contained herein; (i)
Unrestricted Non-Recourse Debt of the Company; (j) Debt outstanding under a
working capital credit facility in aggregate principal amount not to exceed at
any one time the greater of $30 million or the TransTexas Borrowing Base; (k)
Debt in an aggregate principal amount outstanding not to exceed at any one time
$35 million; (l) the Company may Incur Debt as an extension, renewal,
replacement, or refunding of any of the Debt permitted to be Incurred under any
clause of this Section 4.11, including this clause (l) (such Debt is
collectively referred to as "Refinancing Debt"), provided, that (1) the maximum
principal amount of Refinancing Debt (or, if such Refinancing Debt is issued
with original issue discount, the original issue price of such Refinancing
Debt) permitted under this clause (l) may not exceed the lesser of (x) the
principal amount of the Debt being extended, renewed, replaced, or refunded
plus premium, if any, reasonable financing fees and other associated reasonable
out-of-pocket expenses including consent payments, premium, if any, and related
fees, in each case 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
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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; (m) 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 90 days (or, if overdue for a
period of more than 90 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, provided that Debt at any time
permitted under this clause (m) shall not be deemed to have been Incurred until
the date on which the same ceases to be permitted under this clause (m); (n)
Presales of Gas; (o) Debt evidenced by the Senior Notes; (p) if either (i) the
Phase I Completion Date (as defined in the TEC Indenture) has occurred or (ii)
the Notes have a rating of BB- or better by S&P or B1 or better by Moody's,
Debt which is secured by Liens permitted pursuant to clause (s) of the
definition of "Permitted Liens" contained herein, the outstanding principal
amount of which at any time does not exceed $35,000,000 in the aggregate; (q)
the Attributable Debt Incurred in connection with Sale and Leaseback
Transactions; (r) Debt relating to the Reimbursement and Credit Facility; (s)
if either (i) the Phase I Completion Date (as defined in the TEC Indenture) has
occurred or (ii) the Notes have a rating of BB- or better by S&P or B1 or
better by Moody's, Dollar-Denominated Production Payment Obligations that the
Company elects to treat as Debt not to exceed $40,000,000 in the aggregate at
any one time outstanding; (t) Swap Obligations of the Company; (u) letter of
credit and reimbursement obligations to the extent collateralized by cash or
Cash Equivalents; and (v) guarantees of Debt of TTXD to the extent that such
Debt was Debt of TransTexas on the Issue Date and relates to assets contributed
to TTXD pursuant to clause (xiii) of the definition of "Permitted Investment"
contained herein. For purposes of determining the amount of outstanding Debt
that has been Incurred pursuant to this Section 4.11, 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 (l) of this Section
4.11 so as to refinance or refund such Debt Incurred pursuant to clause (l) of
this Section 4.11 and any subsequent refinancings or refundings thereof.
Notwithstanding the foregoing provisions of this Section 4.11, the
Company may Incur Debt and may issue Disqualified Capital Stock if, at the time
such Senior Debt is Incurred or such Disqualified Capital Stock is issued, (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 Fixed Charges
in respect of such 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 2 to 1, and (iii) the Company's Adjusted Consolidated
Tangible Assets are equal to or greater than 125% of the total consolidated
principal amount of Debt of the Company and its Subsidiaries (excluding, for
purposes of this calculation, the negative Net Worth of any Subsidiary of the
Company which was formerly designated as an Unrestricted Subsidiary).
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 may elect to apportion such item of Debt between or among any
two or more of such categories otherwise applicable, 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.
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For purposes of determining any particular amount of Debt Incurred
under this Section 4.11, any Debt Incurred by the Company or any Subsidiary of
the Company incurred for, or related to, a Person other than another Subsidiary
of the Company or the Company, as applicable, shall be deemed to be in an
amount equal to the greater of (i) the lesser of (A) the full amount of the
Debt of such other Person or (B) the fair market value of the assets and
properties of the Company or such Subsidiary of the Company as to which the
holder or holders of such Debt are expressly limiting the obligations of the
Company or such Subsidiary of the Company, the value of which assets and
properties of the Company or such Subsidiary of the Company will be as
determined in good faith by the Board of Directors of the Company or such
Subsidiary of the Company, as applicable (which determinations shall be
evidenced by a Board Resolution of the applicable Person), and (ii) the amount
of the Debt of such other Person as has been expressly contractually assumed or
guaranteed by the Company or such Subsidiary of the Company.
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 or by reason
of customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Company or any Subsidiary of the Company,
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,
customary provisions restricting transfers of property securing purchase money
obligations incurred in the ordinary course of business in connection with the
acquisition of such property, the Notes, the Series A/B Notes, Debt existing
pursuant to a written agreement in effect on the date of the Indenture, or Debt
incurred to refinance, refund, extend or renew any of the foregoing Debt,
provided such restrictions therein contained are not materially more
restrictive than those provided for in the Debt being refinanced, refunded,
extended or renewed.
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 Permitted Liens. 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, may
elect to apportion such Lien between or among any two or more categories of
Permitted Lien otherwise applicable, 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) to the mandatory or
optional payment or prepayment of all or a portion of the principal amount of
and/or accrued interest on Senior Debt, and (2) all Net Cash Proceeds not
applied in accordance with clause (A)(1) of this Section 4.14(a) shall be used
(x) to repurchase, ratably, (i) Notes pursuant to an Offer to Purchase under
this Section 4.14 and (ii) Series A/B Notes pursuant to an offer to purchase
under Section 4.14 of the Series A/B Indenture, (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
$25,000,000 (without duplication of amounts used to acquire any Capital Assets
in accordance with clause (z) of this sentence), or (z) with respect to an
Asset Sale by the Company or any of its Subsidiaries (aa) that includes proved
reserve assets, used for Capital Expenditures in a Related Business within 180
days after the date of such Asset Sale, provided that the Company's most recent
Reserve Report indicates that the Company and its Subsidiaries, after giving
effect to the Asset Sale and to the addition of proved reserves associated with
any assets
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acquired in connection with such Asset Sale, have proved reserves at least
equal to (AA) if such Asset Sale occurs during the fiscal year ending 1998, 450
Bcfe of natural gas as indicated on the most recent Reserve Report for such
fiscal year, (BB) if such Asset Sale occurs during the fiscal year ending 1999,
500 Bcfe of natural gas or with an SEC PV10 of at least $600 million as
indicated on the most recent Reserve Report for such fiscal year and (CC) if
such Asset Sale occurs during the fiscal year ending 2000 or thereafter, 600
Bcfe of natural gas or with an SEC PV10 of at least $700 million as indicated
on the most recent Reserve Report for such fiscal year, or (bb) involving
assets that do not include proved reserves, used for Capital Expenditures 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, Cash Equivalents or Exchange Assets or any
combination thereof.
(b) Notwithstanding the provisions of Section 4.14(a) that limit
Asset Sales or restrict the use of Net Cash Proceeds therefrom:
(i) the Company or 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
to a Wholly Owned Subsidiary of the Company;
(ii) the Company and its Subsidiaries may engage in Asset
Sales in the ordinary course of business;
(iii) the Company may engage in Asset Sales pursuant to and
in accordance with the provisions of Article V;
(iv) 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;
(v) the Company and its Subsidiaries may engage in Asset
Sales (a) the Net Cash Proceeds of which are used for payment of cash
interest on Senior Debt, the Series A/B Notes, the Notes and/or the
TransTexas Intercompany Loan, (b) in connection with the settlement of
litigation or the payment of judgments, or (c) the Net Cash Proceeds
of which are used in connection with the settlement of litigation or
for the payment of judgments; provided, that the aggregate value of
the assets transferred pursuant to clauses (b) and (c) of this clause
(v) from and after the Issue Date does not exceed not exceed
$25,000,000;
(vi) the Company may sell, convey, contribute or otherwise
transfer the assets comprising the Related TTXD Business to TTXD;
(vii) the Company and its Subsidiaries may convey, sell,
transfer or otherwise dispose of Hydrocarbons in the ordinary course
of business;
(viii) prior to the TTXD Spin-off, the Company may sell,
transfer, contribute or otherwise dispose of the Capital Stock of TTXD
or the assets comprising the drilling and energy services business and
the pipeline services business of the Company, provided, that (a) in
the case of a transfer, contribution or other disposition to a company
that has a class of equity securities publicly traded on a national
securities exchange or on the NNM, at least 50% of the value of the
consideration for such Asset Sale consists of cash and up to 50% of
the value of the consideration for such Asset Sale may consist of
Capital Stock and (b) in the case of a transfer, contribution, or
other disposition to a joint venture, partnership, limited liability
company or similar entity newly formed for the purpose of this
transfer, up to 100% of the value of the consideration for such Asset
Sale may consist of Capital Stock or other equity interests in such
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entity; provided, further, that in the case of either clause (a) or
clause (b) of this Section 4.14(b)(viii), the Net Cash Proceeds from
such Asset Sale are applied pursuant to Section 4.14(a); and
(ix) the Company and its Subsidiaries may engage in Asset
Sales not otherwise permitted in clause (i), (ii), (iii), (iv), (v),
(vi), (vii), or (viii) preceding, provided that the aggregate proceeds
from all such Asset Sales do not exceed $5,000,000 in any twelve-month
period.
Unless otherwise required by this Section 4.14(b), the proceeds of any
Asset Sale permitted by this Section 4.14(b) may be used by the Company or its
Subsidiaries for any one or more purposes not otherwise prohibited by this
Indenture.
(c) 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 (ix) 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 to be paid, payable or accrued by the Company or any Subsidiary of the
Company (in each case as estimated in good faith by the Company or such
Subsidiary without giving effect to tax attributes unrelated to such Asset
Sale) in connection with such Asset Sale and (b) the aggregate amount of cash
so received 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
Section 4.14(a) and within the time provided by Section 4.14(a) shall be
referred to as the "Accumulated Amount".
(d) For the purposes of this Section 4.14, "Minimum Accumulation
Date" means each date on which the Accumulated Amount exceeds $20,000,000. Not
less 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 principal amount 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;
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(4) that, unless the Company defaults in depositing U.S.
Legal Tender with the Paying Agent in accordance with
the last paragraph of this Section 4.14(d) 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;
(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.
(e) 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
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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 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
unless an amount equal to the net proceeds of such sale is used by the Company
within 180 days after the date of such sale for one or more of the purposes
specified in Section 4.14(a).
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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 and such other business activities as are reasonably related
thereto.
Section 4.19 Separate Existence and Formalities. The Company
hereby covenants and agrees that:
(a) it will maintain procedures designed to prevent commingling of
the Company's funds and its Subsidiaries' funds 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 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;
(e) the Company and its Subsidiaries will not knowingly or
negligently mislead any other Person as to the identity or authority of the
Company and its Subsidiaries;
(f) it will maintain procedures designed to assure that all
written communications of the Company and its Subsidiaries, including, without
limitation, letters, invoices, purchase orders, contracts, statements and
applications, will appropriately identify the entity on whose behalf such
communication is made; and
(g) the Company and its Subsidiaries will provide for all of its
operating expenses and liabilities from its own separate funds.
Section 4.20 Rating. Within 60 days after the Issue Date, the
Company shall apply for a rating for the Securities by S&P and Moody's.
Section 4.21 TTXD Spinoff. If the TTXD Spinoff is effected
through a pro rata distribution or dividend to stockholders of the Company or
if the Company completes an Asset Sale described in Section 4.14(b)(viii) in
which less than 50% of the value of the consideration received consists of
cash, then
(a) from the date of such distribution or dividend or Asset Sale,
in addition to the interest set forth in paragraph 1 of the Notes, interest
shall accrue on the outstanding Notes and the additional Notes issued pursuant
to paragraph (b) of this Section 4.21 at the rate of 3/8% 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 herein, as nearly as may be, as though the interest rate provided
in paragraph 1 of the Notes had been increased by 3/8% per annum from the date
of such distribution or dividend or Asset Sale; and
(b) promptly following such distribution or dividend or Asset
Sale, the Company shall issue to each Holder of record on the date of such
distribution or dividend or Asset Sale additional Notes bearing interest from
the date of such distribution or dividend or Asset Sale, in principal amount
equal to 1 1/2% of the aggregate principal amount of the Notes then held by
such Holder; provided that, additional Notes will be issued only in integral
multiples of $1,000 and any Holder entitled to receive additional Notes in a
principal amount other than an integral multiple of $1,000 will receive a
payment in cash in lieu of such fractional amount.
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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 Persons acting in concert, 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;
(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, (x) the Net Worth of
the Surviving Person is at least equal to the Net
Worth 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 45 days after such transaction,
the Notes have not been or are not downgraded by S&P,
Moody's 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, additional paid-in capital and 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
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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.
(b) 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.
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 aggregating in excess of $20,000,000 if
either (a) such default results from the failure to pay principal of, premium,
if any, or interest on any such Debt when due and continuance of such default
beyond any applicable cure, forbearance or notice period, provided that a
waiver by the lenders of such Debt of such default shall constitute a waiver
hereunder for the same period, or (b) as a result of such default, the maturity
of such Debt has been accelerated prior to its scheduled maturity, and such
default and acceleration continues without having been rescinded or annulled
for a period of 10 days;
(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
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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 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 $25,000,000 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 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; or
(i) there having occurred any amendment to the Certificate of
Incorporation or Bylaws of the 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.
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.
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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 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 all of the principal 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 principal and accrued
interest 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:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(1) all overdue interest on all Securities,
(2) the principal 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
(b) 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 (1) or (2) 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.
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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 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 or Custodian in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due 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
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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.
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 employ-
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ment 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 such direction shall not be in
conflict with any rule of law or with this Indenture,
(a) 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
(b) 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
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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:
(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.
(c) 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.
(d) 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.
(e) 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.
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(f) 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.
(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
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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.
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
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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 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.
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
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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 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, and the
Company specifies whether the Securities are being defeased to maturity or to a
particular redemption date;
(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 other greater period of time in which any such deposit
of trust funds may remain subject to set aside or avoidance bankruptcy or
insolvency laws, e.g., one year after any such deposit) 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;
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(g) 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; and
(h) 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:
(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.
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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 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 material 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 in any material respect;
(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;
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(e) to comply with the TIA; or
(f) to provide for the issuance of the Series D 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:
(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 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, 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 in a manner adverse to any Holder in any material respect;
(f) reduce the relative ranking of the Notes;
(g) 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;
(h) make any changes in Section 6.4, 6.7 or this third sentence of
this Section 9.2; or
(i) 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.
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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.
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.
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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;
(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
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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
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.
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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 principal amount 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") 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:
(1) 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;
(2) the Change of Control Purchase Price, the Change of
Control Payment Date and the Final Change of Control Put Date (as
defined below);
(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 (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;
(5) 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
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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");
(6) 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;
(7) 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
(8) 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
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.
ARTICLE XII
SUBORDINATION; EQUAL RANKING
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 is 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
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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 Securities, such payment or
distribution being hereinafter 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
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<PAGE> 67
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 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.
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<PAGE> 68
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, 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 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,
62
<PAGE> 69
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 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.
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<PAGE> 70
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.
Section 12.15 Pari Passu with Series A/B Notes.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that (subject to the
provisions of Article VIII) the Securities are and shall be in right of payment
pari passu with the Series A/B Notes.
ARTICLE XIII
[INTENTIONALLY OMITTED]
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 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032
Attention: Ed Donahue
if to the Trustee:
Bank One, 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
64
<PAGE> 71
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:
(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
65
<PAGE> 72
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
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> 73
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: /s/ ED DONAHUE
---------------------------------------------
Name: Ed Donahue
Title: Vice President
BANK ONE, NA,
as Trustee
By: /s/ JEFFERY L. EUBANK
---------------------------------------------
Name: Jeffery L. Eubank
Title: Authorized Signatory
<PAGE> 74
EXHIBITS
Exhibit A - Form of Note
<PAGE> 75
Exhibit A
[FORM OF NOTE]
TRANSTEXAS GAS CORPORATION
[IF SERIES C 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 ONE YEAR FROM THE LATER OF JUNE ___, 1997, 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) 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 C NOTES, THEN INSERT -- 13 3/4% SERIES C SENIOR SUBORDINATED NOTE
DUE 2001]
[IF SERIES D NOTES, THEN INSERT -- 13 3/4% SERIES D SENIOR SUBORDINATED NOTE
DUE 2001]
No. _________________
$__________________
CUSIP Number _______________
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, 2001.
Interest Payment Dates: June 30 and December 31,
commencing December 31, 1997.
Record Dates: June 15 and December 15
A-1
<PAGE> 76
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, NA,
as Trustee
By:
--------------------------------------
Authorized Signatory
Dated:
---------------------------
A-2
<PAGE> 77
TRANSTEXAS GAS CORPORATION
[IF SERIES C NOTES, THEN INSERT 13 3/4% SERIES C SENIOR SUBORDINATED NOTE DUE
2001]
[IF SERIES D NOTES, THEN INSERT 13 3/4% SERIES D SENIOR SUBORDINATED NOTE DUE
2001]
1. Interest.
TransTexas Gas Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at a rate of
13 3/4% per annum. 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 3/4% 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 December 31, 1997.
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 June 30, 1997.
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, 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
___________ ___, 1997 (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 Securities
are senior subordinated obligations of the Company limited in principal amount
to $_______________ 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 June 30, 1999, the Company may redeem, at its option, up to $35
million of the principal amount of the Securities at a price equal to 113.250%
of the principal amount thereof at the date of redemption, plus accrued and
unpaid interest, if any, to the date of redemption, with net proceeds of any
Public Equity Offering.
A-3
<PAGE> 78
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 principal amount) 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 June 30, 2001 106.00%
- --------------------------------------------------------------------------------
On or after June 30, 2001 100.00%
================================================================================
</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. Securities in
denominations larger than $1,000 may be redeemed from time to time in part.
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.
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).
A-4
<PAGE> 79
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 principal amount thereof, together
with accrued and unpaid interest, if any, to the Change of Control Payment
Date.
14. 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.
15. 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.
16. 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.
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<PAGE> 80
17. 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.
18. 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.
19. 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.
20. Ranking
As provided in the Indenture, the Securities shall be (a) subordinated
in right of payment to the prior payment in full of all Senior Debt and (b)
pari passu in right of payment with the Series A/B Notes, and the Company may
not incur any Debt that is senior to the Securities and contractually
subordinated in right of payment to any Debt.
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<PAGE> 81
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this security to
---------------------------------------------------------------
(Insert assignee's 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> 82
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.14 or Section 11.1 of the Indenture, check the
appropriate box:
[ ] Section 4.14 [ ] Section 11.1
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.14 or Section 11.1 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-8
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
Dated as of June 13, 1997
among
TRANSTEXAS GAS CORPORATION
and
THE RECIPIENTS TO WHOM NOTES ARE ORIGINALLY ISSUED
--------------------
13 3/4% Series C Senior Subordinated Notes due 2002
<PAGE> 2
<TABLE>
<S> <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 . . . . . . . . . . . . . . . . . -9-
SECTION 7. Registration Expenses . . . . . . . . . . . . . . . . . -16-
SECTION 8. Indemnification . . . . . . . . . . . . . . . . . . . . -17-
SECTION 9. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . -20-
SECTION 10. Underwritten Registrations . . . . . . . . . . . . . . -20-
SECTION 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . -21-
</TABLE>
<PAGE> 3
This REGISTRATION RIGHTS AGREEMENT dated as of June 13, 1997, among
TransTexas Gas Corporation (the "Company") and the persons to whom the Notes
(as defined below) are originally issued (the "Recipients"), is made pursuant
to the Exchange Offer and Consent Solicitation dated May 17, 1997, as
supplemented (the "Exchange Offer and Consent Solicitation"), pursuant to which
the Company offered to exchange its 13 3/4% Series C Senior Subordinated Notes
due 2001 in an aggregate original principal amount of $115,836,000 (the
"Notes") for all of its outstanding 13 1/4% Series A Senior Subordinated Notes
due 2003 (the "Existing Notes"). In order to induce the Recipients to exchange
Existing Notes for Notes, the Company agreed to provide the registration rights
set forth in this Registration Rights 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 Exchange Offer
and Consent Solicitation 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.
"Closing Date" shall mean June 13, 1997.
"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.
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<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 received pursuant to the Exchange Offer and
Consent Solicitation.
"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 June 13, 1997, between
the Company and Bank One, Columbus, NA, 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).
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<PAGE> 6
"Managing Underwriters" shall mean the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"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 3/4% Series C or Series D Senior
Subordinated Notes due 2001 of the Company received pursuant to the Exchange
Offer and Consent Solicitation 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.
"Recipients" shall mean those persons listed as holders 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
-4-
<PAGE> 7
such Registration Statement, including post-effective amendments, all exhibits,
and all material 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
Holder 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 from time to time, or any similar rules or
regulations 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
Recipients, 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
-5-
<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 Recipients (other than any Restricted Person), by its
acceptance of the Notes and the benefits of this Agreement, 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
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<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 of two years (subject to extension pursuant to the last
paragraph of Section 6) (the
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<PAGE> 10
"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 Recipients (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 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
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<PAGE> 11
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, by its acceptance of the Notes and the benefits of this
Agreement, 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 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
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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.
(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
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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 or 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.
(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).
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<PAGE> 14
(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 Registrable Notes
or to enable the Holders thereof to consummate the Registered Exchange Offer.
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<PAGE> 15
(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.
(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 Exchange Offer and Consent
Solicitation; (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 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
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<PAGE> 16
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 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.
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<PAGE> 17
(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 security
holders 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.
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
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<PAGE> 18
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 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)
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<PAGE> 19
(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, 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
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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, by its acceptance of the Notes and the benefits of this
Agreement, 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 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.
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(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 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
-19-
<PAGE> 22
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 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.
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<PAGE> 23
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 is inconsistent with the rights
granted to the Holders of Registrable Notes herein or otherwise conflicts with
the provisions hereof.
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<PAGE> 24
(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 North Sam Houston Parkway East, 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.
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.
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<PAGE> 25
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
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.
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<PAGE> 26
(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 Recipients 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.
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<PAGE> 27
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first written above.
TRANSTEXAS GAS CORPORATION
By /s/ EDWIN B. DONAHUE
-------------------------------
Name: Edwin B. Donahue
Title: Vice President and Chief
Financial Officer
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<PAGE> 1
EXHIBIT 12.1
TRANSTEXAS GAS CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended July 31, January 31,
----------------------------------------------- ----------------------
1992 1993 1994 1995 1995 1996
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes $56,683 $110,363 $ 29,136 $(14,307) $ (375) $ (1,188)
Add:
Fixed charges 3,367 3,256 52,760 69,921 30,254 51,088
Exclude capitalized interest -- -- (710) (883) -- (7,381)
------- -------- -------- -------- -------- --------
A. Earnings before fixed charges $60,050 $113,619 $ 81,186 $ 54,731 $ 29,879 $ 42,519
======= ======== ======== ======== ======== ========
Fixed Charges:
Interest, net of amounts capitalized $ 3,152 $ 2,982 $ 51,671 $ 68,508 $ 29,971 $ 43,370
Capitalized interest -- -- 710 883 -- 7,381
Portion of rental expense representative of
an interest factor 215 274 379 530 283 337
------- -------- -------- -------- -------- --------
B. Fixed charges $ 3,367 $ 3,256 $ 52,760 $ 69,921 $ 30,254 $ 51,088
======= ======== ======== ======== ======== ========
Ratio of earnings to fixed charges
(A divided by B) 17.8 34.9 1.5 -- -- --
======= ======== ======== ======== ======== ========
Earnings inadequate to cover fixed charges $ -- $ -- $ -- $ 15,190 $ 375 $ 8,569
======= ======== ======== ======== ======== ========
<CAPTION>
Year Ended Three Months Ended
January 31, April 30,
----------------------- ----------------------
1996 1997 1996 1997
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Income (loss) before income taxes $(15,120) $ 95,816 $ 4,646 $(22,366)
Add:
Fixed charges 90,576 113,581 26,180 30,330
Exclude capitalized interest (8,264) (15,888) (3,683) (4,668)
-------- --------- -------- --------
A. Earnings before fixed charges $ 67,192 $ 193,509 $ 27,143 $ 3,296
======== ========= ======== ========
Fixed Charges:
Interest, net of amounts capitalized $ 81,907 $ 97,007 $ 22,286 $ 25,358
Capitalized interest 8,264 15,888 3,683 4,668
Portion of rental expense representative of
an interest factor 405 686 211 304
-------- --------- -------- --------
B. Fixed charges $ 90,576 $ 113,581 $ 26,180 $ 30,330
======== ========= ======== ========
Ratio of earnings to fixed charges
(A divided by B) -- 1.7 1.0 --
======== ========= ======== ========
Earnings inadequate to cover fixed charges $ 23,384 $ -- $ -- $ 27,034
======== ========= ======== ========
</TABLE>
<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-4
Ladies and Gentlemen:
We are aware that our report dated June 18, 1997 on our review of
interim condensed consolidated financial information of the Company for the
three month period ended April 30, 1997, which is included in the Company's
report on Form 10-Q for the quarter then ended, is incorporated by reference in
the Company's Registration Statement on Form S-4, filed with the Securities and
Exchange Commission on August 15, 1997. 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
August 15, 1997
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement of TransTexas Gas Corporation on Form S-4 as filed with the
Securities and Exchange Commission on August 15, 1997 of our report dated May
1, 1997 relating to our audit of the consolidated balance sheet of TransTexas
Gas Corporation as of January 31, 1997 and 1996 and the related consolidated
statements of operations, stockholders' deficit and cash flows for the year
ended January 31, 1997, the six months ended January 31, 1996 and each of the
two years in the period 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
August 15, 1997
<PAGE> 1
EXHIBIT 25.1
Registration No. ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, N.A. F/K/A BANK ONE, COLUMBUS, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio
(Address of trustee's principal 43271-0181
executive offices) (Zip Code)
Jon Beacham
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6229
(Name, address and telephone number of agent for service)
TRANSTEXAS GAS CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 76-0401023
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1300 N. Sam Houston Parkway E. 77032-2949
Suite 310, Houston, Texas (Zip Code)
(Address of principal executive
office)
13 3/4% Series D Senior Subordinated Notes
(Title of the Indenture securities)
<PAGE> 2
GENERAL
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING
AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System,
Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES,
ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS
EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
<PAGE> 3
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
March 31, 1997, published pursuant to the requirements of the Comptroller of
the Company, see Exhibit 7 to Form T-1, filed in connection with Form S-4
relating to Reliant Building Products 10 7/8% Senior Subordinated Notes Due
2004, Securities and Exchange Commission File No. 333- 30699.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, NA, a national banking association organized
under the National Banking Act, has duly caused this statement of eligibility
and qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in Columbus, Ohio, on July 25, 1997.
Bank One, NA
By: /s/ Jon Beacham
Jon Beacham
Authorized Signer
<PAGE> 4
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County
of Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined
from time-to- time by resolution of the shareholders at any annual or special
meeting thereof, provided, however, that the Board of Directors, by resolution
of a majority thereof, shall be authorized to increase the number of its
members by not more than two between regular meetings of the shareholders.
Each Director, during the full term of his directorship, shall own, as
qualifying shares, the minimum number of shares of either this Association or
of its parent bank holding company in accordance with the provisions of
applicable law. Unless otherwise provided by the laws of the United States,
any vacancy in the Board of Directors for any reason, including an increase in
the number thereof, may be filled by action of the Board of Directors.
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9/13/91
<PAGE> 5
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year
specified therefor in the By-Laws, but if no election is held on that day, it
may be held on any subsequent business day according to the provisions of law;
and all elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be 2,073,750 shares of common stock of the par value of Ten Dollars ($10) each;
but said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such,
if any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time
fix.
This Association, at any time and from time-to-time, may authorize
and issue debt obligations, whether or not subordinated, without the approval
of the shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of the Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall
have the power to appoint one or more Vice Presidents and to appoint a
Secretary and such other officers and employees as may be required to transact
the business of this Association.
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9/13/91
<PAGE> 6
The Board of Directors shall have the power to define the duties
of the officers and employees of this Association; to fix the salaries to be
paid to them; to dismiss them; to require bonds from them and to fix the
penalty thereof; to regulate the manner in which any increase of the capital of
this Association shall be made; to manage and administer the business and
affairs of this Association; to make all By-Laws that it may be lawful for them
to make; and generally to do and perform all acts that it may be legal for a
Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this Association.
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<PAGE> 7
TENTH. Every person who is or was a Director, officer or employee of the
Association or of any other corporation which he served as a Director, officer
or employee at the request of the Association as part of his regularly assigned
duties may be indemnified by the Association in accordance with the provisions
of this paragraph against all liability (including, without limitation,
judgments, fines, penalties and settlements) and all reasonable expenses
(including, without limitation, attorneys' fees and investigative expenses)
that may be incurred or paid by him in connection with any claim, action, suit
or proceeding, whether civil, criminal or administrative (all referred to
hereafter in this paragraphs as "Claims") or in connection with any appeal
relating thereto in which he may become involved as a party or otherwise or
with which he may be threatened by reason of his being or having been a
Director, officer or employee of the Association or such other corporation, or
by reason of any action taken or omitted by him in his capacity as such
Director, officer or employee, whether or not he continues to be such at the
time such liability or expenses are incurred, provided that nothing contained
in this paragraph shall be construed to permit indemnification of any such
person who is adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty or criminal acts, unless, at the time such indemnification is
sought, such indemnification in such instance is permissible under applicable
law and regulations, including published rulings of the Comptroller of the
Currency or other appropriate supervisory or regulatory authority, and provided
further that there shall be no indemnification of directors, officers, or
employees against expenses, penalties, or other payments incurred in an
administrative proceeding or action instituted by an appropriate regulatory
agency which proceeding or action results in a final order assessing civil
money penalties or requiring affirmative action by an individual or individuals
in the form of payments to the Association. Every person who may be
indemnified under the provisions of this paragraph and who has been wholly
successful on the merits with respect to any Claim shall be entitled to
indemnification as of right. Except as provided in the preceding sentence, any
indemnification under this paragraph shall be at the sole discretion of the
Board of Directors and shall be made only if the Board of Directors or the
Executive Committee acting by a quorum consisting of
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Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or
non-existence of a contract of insurance or indemnity under which the
Association would be wholly or partially reimbursed for such indemnification,
but the existence or non-existence of such insurance is not the sole
circumstance to be considered nor shall it be wholly determinative of whether
such indemnification shall be made. In addition to such finding or opinion, no
indemnification under this paragraph shall be made unless the Board of
Directors or the Executive Committee acting by a quorum consisting of Directors
who are not parties to such Claim shall find or if independent legal counsel
(who may be the regular counsel of the Association) selected by the Board of
Directors or Executive Committee whether or not a disinterested quorum exists
shall render their opinion that the Director, officer or employee acted in good
faith in what he reasonably believed to be the best interests of the
Association or such other corporation and further in the case of any criminal
action or proceeding, that the Director, officer or employee reasonably
believed his conduct to be lawful. Determination of any Claim by judgment
adverse to a Director, officer or employee by settlement with or without Court
approval or conviction upon a plea of guilty or of nolocontendere or its
equivalent shall not create a presumption that a Director, officer or employee
failed to meet the standards of conduct set forth in this paragraph. Expenses
incurred with respect to any Claim may be advanced by the Association prior to
the final disposition thereof upon receipt of an undertaking satisfactory to
the Association by or on behalf of the recipient to repay such amount unless it
is ultimately determined that he is entitled to indemnification under this
paragraph. The rights of indemnification provided in this paragraph shall be
in addition to any rights to which any Director, officer or employee may
otherwise be entitled by contract or as a matter of law.
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Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon the
right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
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Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders
of the Bank for the election of Directors and for the transaction of such
business as may properly come before the meeting shall be held at its main
banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from any
cause, an election of directors is not made on the day fixed for the regular
meeting of shareholders or, in the event of a legal holiday, on the next
succeeding banking day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to
the provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting. Notice of such annual meeting shall be given
by or under the direction of the Secretary or such other officer as may be
designated by the Chief Executive Officer by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as
shown upon the books of the Bank mailed not less than ten days prior to the
date fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
Bank may be called at any time by the Board of Directors or by any three or
more shareholders owning, in the aggregate, not less than ten percent of the
stock of this Bank. The notice of any special meeting of the shareholders
called by the Board of Directors, stating the time, place and purpose of the
meeting, shall be given by or under the direction of the Secretary, or such
other officer as is designated by the Chief Executive Officer, by first-class
mail, postage prepaid, to all shareholders of
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record of the Bank at their respective addresses as shown upon the books of the
Bank, mailed not less than ten days prior to the date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.
The Secretary of the meetings of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded in the
minute book of the Bank. The presiding officer shall notify the
directors-elect of their election and to meet forthwith for the organization of
the new board.
The minutes of the meeting shall be signed by the presiding officer and
the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many
as three shareholders to be judges of the election, who shall hold and conduct
the same, and who shall, after the election has been held, notify, in writing
over their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the
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meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall notify, in writing over their signatures, the secretary of
the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as many
persons as there are Directors to be elected, or to cumulate such shares as
provided by Federal Law. In deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of
stock of record in his name. Shareholders may vote by proxy duly authorized in
writing. All proxies used at the annual meeting shall be secured for that
meeting only, or any adjournment thereof, and shall be dated, and if not dated
by the shareholder, shall be dated as of the date of receipt thereof. No
officer or employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to
time until a quorum is obtained. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
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ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION and
shall be employed either in the position of Chief Executive Officer or active
leadership within his or her business, professional or community interest which
shall be located within the geographic area in which the Bank operates, or as
an executive officer of the Bank. A director shall not be eligible for
nomination and re-election as a director of the Bank if such person's executive
or leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The
age of 70 is the mandatory retirement age as a director of the Bank. When a
person's eligibility as director of the Bank terminates, whether because of
change in share ownership, position, residency or age, within 30 days after
such termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event
shall such person be nominated or elected as a director. Provided, however,
following a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the
right to participate in board meetings but shall be without the power to vote
and shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the powers
of his office until he has taken the oath of such office.
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SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to his prior
death, resignation, or removal from office. Whenever any vacancy shall occur
among the directors, the remaining directors shall constitute the directors of
the Bank until such vacancy is filled by the remaining directors, and any
director so appointed shall hold office for the unexpired term of his or her
successor. Notwithstanding the foregoing, each director shall hold office and
serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
holders shall meet for organization of the new board at the time fixed by the
presiding officer of the annual meeting. If at the time fixed for such meeting
there is no quorum present, the Directors in attendance may adjourn from time
to time until a quorum is obtained. A majority of the number of Directors
elected by the shareholders shall constitute a quorum for the transaction of
business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held on the third Monday of each calendar month excluding
March and July, which meeting will be held at 4:00 p.m. When any regular
meeting of the Board falls on a holiday, the meeting shall be held on such
other day as the Board may previously designate or should the Board fail to so
designate, on such day as the Chairman of the Board of President may fix.
Whenever a quorum is not present, the directors in attendance shall adjourn the
meeting to a time not later than the date fixed by the Bylaws for the next
succeeding regular meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held at the call of the Chairman of the Board or President, or at the
request of two or more Directors. Any special meeting may be held at such
place in Franklin County, Ohio, and at such time as may be fixed in the call.
Written or oral notice shall be given to each Director not later than the day
next preceding the day on which special meeting is to be held, which notice may
be waived in writing.
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The presence of a Director at any meeting of the Board shall be deemed a waiver
of notice thereof by him. Whenever a quorum is not present the Directors in
attendance shall adjourn the special meeting from day to day until a quorum is
obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank
may be transacted and matters before the Board approved or disapproved by the
unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
receive such fees for, and transportation expenses incident to, attendance at
Board and Board Committee Meetings and such fees for service as a Director
irrespective of meeting attendance as from time to time are fixed by resolution
of the Board; provided, however, that payment hereunder shall not be made to a
Director for meetings attended and/or Board service which are not for the
Bank's sole benefit and which are concurrent and duplicative with meetings
attended or board service for an affiliate of the Bank for which the Director
receives payment; and provided further, that payment hereunder shall not be
made in the case of any Director in the regular employment of the Bank or of
one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers
of the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
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exist or may be amended hereafter. The Executive Committee shall consist of
not fewer than four board members, including the Chairman of the Board and
President of the Bank, one of whom, as hereinafter required by these By-laws,
shall be the Chief Executive Officer. The other members of the Committee shall
be appointed by the Chairman of the Board or by the President, with the
approval of the Board and shall continue as members of the Executive Committee
until their successors are appointed, provided, however, that any member of the
Executive Committee may be removed by the Board upon a majority vote thereof at
any regular or special meeting of the Board. The Chairman or President shall
fill any vacancy in the Committee by the appointment of another Director,
subject to the approval of the Board of Directors. The regular meetings of the
Executive Committee shall be held on a regular basis as scheduled by the Board
of Directors. Special meetings of the Executive Committee shall be held at the
call of the Chairman or President or any two members thereof at such time or
times as may be designated. In the event of the absence of any member or
members of the Committee, the presiding member may appoint a member or members
of the Board to fill the place or places of such absent member or members to
serve during such absence. Not fewer than three members of the Committee must
be present at any meeting of the Executive Committee to constitute a quorum,
provided, however that with regard to any matters on which the Executive
Committee shall vote, a majority of the Committee members present at the
meeting at which a vote is to be taken shall not be officers of the Bank and,
provided further, that if, at any meeting at which the Chairman of the Board
and President are both present, Committee members who are not officers are not
in the majority, then the Chairman of the Board or President, which ever of
such officers is not also the Chief Executive Officer, shall not be eligible to
vote at such meeting and shall not be recognized for purposes of determining if
a quorum is present at such meeting. When neither the Chairman of the Board
nor President are present, the Committee shall appoint a presiding officer.
The Executive Committee shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
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SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE.
There shall be a standing committee of the Board of Directors known as the
Community Reinvestment Act and Compliance Policy Committee the duties of which
shall be, at least once in each calendar year, to review, develop and recommend
policies and programs related to the Bank's Community Reinvestment Act
Compliance and regulatory compliance with all existing statutes, rules and
regulations affecting the Bank under state and federal law. Such Committee
shall provide and promptly make a full report of such review of current Bank
policies with regard to Community Reinvestment Act and regulatory compliance in
writing to the Board, with recommendations, if any, which may be necessary to
correct any unsatisfactory conditions. Such Committee may, in its discretion,
in fulfilling its duties, utilize the Community Reinvestment Act officers of
the Bank, Banc One Ohio Corporation and Banc One Corporation and may engage
outside Community Reinvestment Act experts, as approved by the Board, to
review, develop and recommend policies and programs as herein required. The
Community Reinvestment Act and regulatory compliance policies and procedures
established and the recommendations made shall be consistent with, and shall
supplement, the Community Reinvestment Act and regulatory compliance programs,
policies and procedures of Banc One Corporation and Banc One Ohio Corporation.
The Community Reinvestment Act and Compliance Policy Committee shall consist of
not fewer than four board members, one of whom shall be the Chief Executive
Officer and a majority of whom are not officers of the Bank. Not fewer than
three members of the Committee, a majority of whom are not officers of the
Bank, must be present to constitute a quorum. The Chairman of the Board or
President of the Bank, whichever is not the Chief Executive Officer, shall be
an ex officio member of the Community Reinvestment Act and Compliance Policy
Committee. The Community Reinvestment Act and Compliance Policy Committee,
whose chairman shall be appointed by the Board, shall keep a record of its
proceedings and report its proceedings and the action taken by it to the Board
of Directors.
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SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known
as the Trust Management Committee and the Trust Examination Committee appointed
as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
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ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or
more Vice Chairmen, one or more Vice Presidents (which may include
one or more Executive Vice Presidents and/or Senior Vice
Presidents) and one or more Assistant Secretaries, all of whom
shall be elected by the Board. All other officers may be elected
by the Board or appointed in writing by the Chief Executive
Officer. The salaries of all officers elected by the Board shall
be fixed by the Board. The Board from time-to-time shall
designate the President or Chairman of the Board to serve as the
Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and
Chairman of the Board shall be re-elected by the Board annually at
the organizational meeting of the Board of Directors following the
Annual Meeting of Shareholders. Such officers as the Board shall
elect from their own number shall hold office from the date of
their election as officers until the organization meeting of the
Board of Directors following the next Annual Meeting of
Shareholders, provided, however, that such officers may be
relieved of their duties at any time by action of the Board in
which event all the powers incident to their office shall
immediately terminate.
(c) Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed,
shall hold office at the pleasure of the Board. Except as
otherwise limited by law or these By-laws, the Board assigns to
Chief Executive Officer and/or his
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<PAGE> 20
designees the authority to appoint and dismiss any elected or
appointed officer or other member of the Bank's management staff
and other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section, operation,
function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected by
the Board, officers appointed by the Chief Executive Officer, and
such other persons in the employment of the Bank who, pursuant to
written appointment and authorization by a duly authorized officer
of the Bank, perform management functions and have management
responsibilities. Any two or more offices may be held by the same
person except that no person shall hold the office of Chairman of
the Board and/or President and at the same time also hold the
office of Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of
the Bank, to the extent that such officer is authorized in writing
by the Chief Executive Officer, may appoint persons other than
officers who are in the employment of the Bank to serve in
management positions and in connection therewith, the appointing
officer may assign such title, salary, responsibilities and
functions as are deemed appropriate by him, provided, however,
that nothing contained herein shall be construed as placing any
limitation on the authority of the Chief Executive Officer as
provided in this and other sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Bank shall have general and active management of the business of the Bank and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. Except as otherwise prescribed or limited by these By-Laws, the
Chief Executive Officer shall have full right, authority and power to control
all personnel, including elected and appointed officers, of the Bank, to employ
or direct the
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<PAGE> 21
employment of such personnel and officers as he may deem necessary, including
the fixing of salaries and the dismissal of them at pleasure, and to define and
prescribe the duties and responsibility of all Officers of the Bank, subject to
such further limitations and directions as he may from time-to-time deem
proper. The Chief Executive Officer shall perform all duties incident to his
office and such other and further duties, as may, from time-to-time, be
required of him by the Board of Directors or the shareholders. The
specification of authority in these By-Laws wherever and to whomever granted
shall not be construed to limit in any manner the general powers of delegation
granted to the Chief Executive Officer in conducting the business of the Bank.
The Chief Executive Officer or, in his absence, the Chairman of the Board or
President of the Bank, as designated by the Chief Executive Officer, shall
preside at all meetings of shareholders and meetings of the Board. In the
absence of the Chief Executive Officer, such officer as is designated by the
Chief Executive Officer shall be vested with all the powers and perform all the
duties of the Chief Executive Officer as defined by these By-Laws. When
designating an officer to serve in his absence, the Chief Executive Officer
shall select an officer who is a member of the Board of Directors whenever such
officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attor-
neys; to sign and give any notice required to be given; to demand payment
and/or to declare due for any default any debt or obligation due or payable to
the Bank upon demand or authorized to be declared due; to foreclose any
mortgages, to exercise any option, privilege or election to forfeit, terminate,
extend or renew any lease; to authorize and direct any proceedings for the
collection of any money or for the enforcement
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<PAGE> 22
of any right or obligation; to adjust, settle and compromise all claims of
every kind and description in favor of or against the Bank, and to give
receipts, releases and discharges therefor; to borrow money and in connection
therewith to make, execute and deliver notes, bonds or other evidences of
indebtedness; to pledge or hypothe- cate any securities or any stocks, bonds,
notes or any property real or personal held or owned by the Bank, or to
rediscount any notes or other obligations held or owned by the Bank, to employ
or direct the employment of all personnel, including elected and appointed
officers, and the dismissal of them at pleasure, and in furtherance of and in
addition to the powers hereinabove set forth to do all such acts and to take
all such proceedings as in his judgment are necessary and incidental to the
operation of the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer being a member of the Bank's management
staff who is also a person in charge of and responsible for any department
within the Bank and any other officer to the extent such officer is so
designated and authorized by the Chief Executive Officer, the Chairman of the
Board, the President, or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
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the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease,
mortgage, transfer, deliver and convey any real or personal property now or
hereafter owned by or standing in the name of the Bank or its nominee, or held
by this Bank as collateral security, and to execute and deliver such deeds,
contracts, leases, assignments, bills of sale, transfers or other papers or
documents as may be appropriate in the circumstances; to execute any loan
agreement, security agreement, commitment letters and financing statements and
other documents on behalf of the Bank as a lender; to execute purchase orders,
documents and agreements entered into by the Bank in the ordinary course of
business, relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to execute
powers of attorney to perform specific or general functions in the name of or
on behalf of the Bank; to execute promissory notes or other instruments
evidencing debt of the Bank; to execute instruments pledging or releasing
securities for public funds, documents submitting public fund bids on behalf of
the Bank and public fund contracts; to purchase and acquire any real or
personal property including loan portfolios and to execute and deliver such
agreements, contracts or other papers or documents as may be appropriate in the
circumstances; to execute any indemnity and fidelity bonds, proxies or other
papers or documents of like or different character necessary, desirable or
incidental to the conduct of its banking business; to execute and deliver
settlement agreements or other papers or documents as may be appropriate in
connection with a dismissal authorized by Section 3.01(c) of these By-laws; to
execute agreements, instruments, documents, contracts or other papers of like
or difference character necessary, desirable or incidental to the conduct of
its banking business; and to execute and deliver partial releases from and
discharges or assignments of mortgages, financing statements and assignments or
surrender of insurance policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any
officer being a member of the Bank's management staff who is also a person in
charge of and responsible for any department within the Bank, and any other
officer of the Bank so designated and authorized by the Chief Executive
Officer, Chairman of the
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<PAGE> 24
Board, President or any officer who is a member of the Bank's management staff
who is in charge of and responsible for any department within the Bank are
authorized for and on behalf of the Bank to sign and issue checks, drafts, and
certificates of deposit; to sign and endorse bills of exchange, to sign and
countersign foreign and domestic letters of credit, to receive and receipt for
payments of principal, interest, dividends, rents, fees and payments of every
kind and description paid to the Bank, to sign receipts for property acquired
by or entrusted to the Bank, to guarantee the genuineness of signatures on
assignments of stocks, bonds or other securities, to sign certifications of
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management
staff, may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall
be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.
- 24 -
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<PAGE> 25
ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
this Bank under the provisions of Federal Law and Regulations of the
Comptroller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
known as the Trust Management Committee, consisting of at least five members, a
majority of whom shall not be officers of the Bank. The Committee shall
consist of the Chairman of the Board who shall be Chairman of the Com- mittee,
the President, and at least three other Directors appointed by the Board of
Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion,
appoint members of the Board to fill the place of such absent members to serve
during such absence. Three members of the Committee shall constitute a quorum.
Any member of the Committee may be removed by the Board by a majority vote at
any regular or special meeting of the Board. The Committee shall meet at such
times as it may determine or at the call of the Chairman, or President or any
two members thereof.
The Trust Management Committee, under the general direction of the Board
of Directors, shall supervise the policy of the Trust Department which shall be
formulated and executed in accordance with Law, Regulations of the Comptroller
of the Currency, and sound fiduciary principles.
- 25 -
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<PAGE> 26
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Commit-
tee known as the Trust Examination Committee, consisting of three directors
appointed by the Board of Directors and who shall continue as members of the
committee until their successors are appointed. Such members shall not be
active officers of the Bank. Two members of the Committee shall constitute a
quorum. Any member of the Committee may be removed by the Board by a majority
vote at any regular or special meeting of the Board. The Committee shall meet
at such times as it may determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable
audits of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law,
Regulations of the Comptroller of the Currency and sound fiduciary principles.
The Committee shall promptly make a full report of such audits in writing
to the Board of Directors of the Bank, together with a recommendation as to
what action, if any, may be necessary to correct any unsatisfactory condition.
A report of the audits together with the action taken thereon shall be noted in
the Minutes of the Board of Directors and such report shall be a part of the
records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management
and supervision of an officer of the Bank or of the trust affiliate of the Bank
designated by and subject to the advice and direction of the Chief Executive
Officer. Such officer having supervisory responsibility over the Trust
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust Department in accordance with provi-
sions of law and applicable regulations.
- 26 -
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<PAGE> 27
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may
be carried in the name of the Bank in its fiduciary capacity, in the name of
Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify
the character or class of investments to be made and does not vest in the Bank
any discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated and
authorized by the Chief Executive Officer, the President, or the officer in
charge of the Trust Department, are hereby authorized, on behalf of this Bank,
to sell, assign, lease, mortgage, transfer, deliver and convey any real
property or personal property and to purchase and acquire any real or personal
property and to execute and deliver such agreements, contracts, or other papers
and documents as may be appropriate in the circumstances for property now or
hereafter owned by or standing in the name of this Bank, or its nominee, in any
fiduciary capacity, or in the name of any principal for whom this Bank may now
or hereafter be acting under a power of attorney, or as agent and to execute
and deliver partial releases from
- 27 -
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<PAGE> 28
any discharges or assignments or mortgages and assignments or surrender of
insurance policies, to execute and deliver deeds, contracts, leases,
assignments, bills of sale, transfers or such other papers or documents as may
be appropriate in the circumstances for property now or hereafter held by this
Bank in any fiduciary capacity or owned by any principal for whom this Bank may
now or hereafter be acting under a power of attorney or as agent; to execute
and deliver settlement agreements or other papers or documents as may be
appropriate in connection with a dismissal authorized by Section 3.01(c) of
these By-laws; provided that the signature of any such person shall be attested
in each case by any officer of the Trust Department or by any other person who
is specifically authorized by the Chief Executive Officer, the President or the
officer in charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any
officer of the Trust Department and such other officers of the trust affiliate
of the Bank as are specifically designated and authorized by the Chief
Executive Officer, the President, or the officer in charge of the Trust
Department, or any other person or corporation as is specifically authorized by
the Chief Executive Officer, the President or the officer in charge of the
Trust Department, are hereby authorized on behalf of this Bank, to sign any and
all pleadings and papers in probate and other court proceedings, to execute any
indemnity and fidelity bonds, trust agreements, proxies or other papers or
documents of like or different character necessary, desirable or incidental to
the appointment of the Bank in any fiduciary capacity and the conduct of its
business in any fiduciary capacity; also to foreclose any mortgage, to execute
and deliver receipts for payments of principal, interest, dividends, rents,
fees and payments of every kind and description paid to the Bank; to sign
receipts for property acquired or entrusted to the Bank; also to sign stock or
bond certificates on behalf of this Bank in any fiduciary capacity and on
behalf of this Bank as transfer agent or registrar; to guarantee the
genuineness of signatures on assignments of stocks, bonds or other securities,
and to authenticate bonds, debentures, land or lease trust certificates or
other forms of security issued pursuant to any indenture under which this Bank
now or hereafter is acting as
- 28 -
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<PAGE> 29
Trustee. Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the Trust
Department, may sign checks, drafts and orders for the payment of money
executed by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
officer of the Trust Department, any officer of the trust affiliate of the Bank
and such other persons as may be specifically authorized by Resolution of the
Trust Management Committee or the Board of Directors, may vote shares of stock
of a corporation of record on the books of the issuing company in the name of
the Bank or in the name of the Bank as fiduciary, or may grant proxies for the
voting of such stock of the granting if same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law
applicable to such fiduciary account. In the case of shares of stock which are
held by a nominee of the Bank, such shares may be voted by such person(s)
authorized by such nominee.
- 29 -
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<PAGE> 30
ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required
by law and deemed appropriate by the Board. The corporate seal may be
facsimile engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
be transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the
Chief Executive Officer, may authorize the issuance of a new certificate
therefor without the furnishing of indemnity. Stock Transfer Books, in which
all transfers of stock shall be recorded, shall be provided.
- 30 -
1/18/94
<PAGE> 31
The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful purpose.
In lieu of closing the transfer books, the Board may, in its discretion, fix a
record date and hour constituting a reasonable period prior to the day
designated for the holding of any meeting of the shareholders or the day
appointed for the payment of any dividend or for any other purpose at the time
as of which shareholders entitled to notice of and to vote at any such meeting
or to receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time shall
be entitled to notice of or to vote at such meeting or to receive such
dividends or to be treated as shareholders for such other purpose.
- 31 -
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<PAGE> 32
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the seal
adopted by the Board of Directors of BANK ONE, NA f/k/a Bank One, Columbus, NA.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of
the Board of Directors shall be recorded in the minute book of the Bank. The
minutes of each such meeting shall be signed by the presiding Officer and
attested by the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
majority of the Directors.
- 32 -
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<PAGE> 33
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for
TransTexas Gas Corporation described in the attached Statement of Eligibility
and Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such
authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One, NA
Dated: July 25, 1997 By: /s/ Jon Beacham
Jon Beacham
Authorized Signer
- 33 -
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<PAGE> 1
EXHIBIT 99.1
TRANSTEXAS GAS CORPORATION
LETTER OF TRANSMITTAL
FOR
TENDER OF OUTSTANDING
13 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2001
IN EXCHANGE FOR
13 3/4% SERIES D SENIOR SUBORDINATED NOTES DUE 2001
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED (THE "EXPIRATION DATE")
OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE
DELIVER TO THE EXCHANGE AGENT:
BANK ONE, NA
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or Overnight Courier:
Bank One, NA (614) 248-5088 Bank One, NA-OH1-0184
Attention: Lora Marsch Attention: Lora Marsch
P.O. Box 70184 Confirm by Telephone 100 East Broad Street
Columbus, Ohio 43271-0184 (614) 248-4856 Columbus, Ohio 43215
</TABLE>
---------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated , 1997 (the "Prospectus") of TransTexas Gas Corporation, a
Delaware corporation (the "Company"), and this Letter of Transmittal (the
"Letter of Transmittal"), which together describe the Company's offer (the
"Exchange Offer") to exchange its 13 3/4% Series D Senior Subordinated Notes due
2001 (the "Exchange Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement
of which the Prospectus is a part, for a like principal amount of its issued and
outstanding 13 3/4% Series C Senior Subordinated Notes due 2001 (the
"Outstanding Notes"). Capitalized terms used but not defined herein have the
respective meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The Company
shall notify the holders of the Outstanding Notes of any extension by
announcement thereof prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a holder of Outstanding Notes
pursuant to the procedures set forth in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering." Holders of Outstanding Notes whose
Outstanding Notes are not immediately available, or who are unable to deliver
their Outstanding Notes and all other documents required by this Letter of
Transmittal to the Exchange Agent on or prior to the Expiration Date, must
tender their Outstanding Notes according to the guaranteed delivery procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures." See Instructions 1 and 2.
The term "holder" with respect to the Exchange Offer means any person in
whose name Outstanding Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
<PAGE> 2
registered holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Outstanding
Notes must complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space below is inadequate, list the registered numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- -------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S) EXACTLY AS NAME(S)
APPEAR(S) ON OUTSTANDING NOTES
(PLEASE FILL IN, IF BLANK) OUTSTANDING NOTE(S) TENDERED
- -------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL PRINCIPAL
REGISTERED AMOUNT REPRESENTED BY AMOUNT
NUMBER(S) NOTE(S) TENDERED*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
=========================================================================================================================
* Unless otherwise indicated, any tendering holder of Outstanding Notes will be deemed to have tendered the entire
aggregate principal amount represented by such Outstanding Notes. All tenders must be in integral multiples of $1,000.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING:
Name(s) of Registered holder(s) of Outstanding Notes:
---------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
Window Ticket Number (if available):
--------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
--------------------------
Account Number (if delivered by book-entry transfer):
---------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
<PAGE> 3
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Outstanding
Notes indicated above. Subject to and effective upon the acceptance for exchange
of the principal amount of Outstanding Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Company all right, title and interest in and to the Outstanding Notes
tendered for exchange hereby. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent, the agent and attorney-in-fact of the undersigned
(with full knowledge that the Exchange Agent also acts as the agent of the
Company in connection with the Exchange Offer) with respect to the tendered
Outstanding Notes with full power of substitution to (i) deliver such
Outstanding Notes to the Company and deliver all accompanying evidences of
transfer and authenticity, and (ii) present such Outstanding Notes for transfer
on the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Outstanding Notes, all in accordance with
the terms of the Exchange Offer. The power of attorney granted in this paragraph
shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the
Outstanding Notes tendered hereby and to acquire the Exchange Notes issuable
upon the exchange of such tendered Outstanding Notes, and that the Company will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim,
when the same are accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC
No-Action Letter (available June 5, 1991), that the Exchange Notes issued in
exchange for the Outstanding Notes pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by holders thereof (other than (i)
a broker-dealer who purchased Outstanding Notes exchanged for such Exchange
Notes directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act and (ii) an affiliate of the
Company), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders are not
participating in, and have no arrangement with any person to participate in, the
distribution of such Exchange Notes. The undersigned specifically represent(s)
to the Company that (i) any Exchange Notes acquired in exchange for Outstanding
Notes tendered hereby are being acquired in the ordinary course of business of
the person receiving such Exchange Notes, whether or not the undersigned, (ii)
the undersigned is not participating in, and has no arrangement with any person
to participate in, the distribution of Exchange Notes, and (iii) neither the
undersigned nor any such other person is an "affiliate" (as defined in Rule 405
under the Securities Act) of the Company or a broker-dealer tendering
Outstanding Notes acquired directly from the Company for its own account.
If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account pursuant to
the Exchange Offer, the undersigned acknowledges that it or such other person
will deliver a prospectus in connection with any resale of such Exchange Notes.
The undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the SEC in the Morgan
Stanley Letter and similar SEC no-action letters, and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes, in which case the registration statement must
contain the selling security holder information required by Item 507 or Item
508, as applicable, of Regulation S-K of the SEC, and (ii) a broker-dealer that
delivers such a prospectus to purchasers in connection with such resales will be
subject to certain of the civil liability provisions under the Securities Act
and will be bound by the provisions of the Registration Rights Agreement
(including certain indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Outstanding
Notes tendered hereby.
<PAGE> 4
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Outstanding Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any tendered
Outstanding Notes that are not accepted for exchange pursuant to the Exchange
Offer for any reason will be returned, without expense, to the undersigned at
the address shown below or at a different address as may be indicated herein
under "Special Delivery Instructions" as promptly as practicable after the
Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Outstanding Notes pursuant to the procedures described under the
caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus and
in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer. The undersigned further acknowledges its obligations under the
Registration Rights Agreement as applicable to the Exchange Offer and the
Registration Statement of which the Prospectus is a part.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Outstanding Notes accepted
for exchange and return any Outstanding Notes not tendered or not exchanged, in
the name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail or deliver the Exchange Notes
issued in exchange for the Outstanding Notes accepted for exchange and any
Outstanding Notes not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both the "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the Exchange Notes
issued in exchange for the Outstanding Notes accepted for exchange in the
name(s) of, and return any Outstanding Notes not tendered or not exchanged to,
the person(s) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" and "Special Delivery
Instructions" to transfer any Outstanding Notes from the name of the registered
holder(s) thereof if the Company does not accept for exchange any of the
Outstanding Notes so tendered for exchange.
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Outstanding Notes in a principal amount not tendered, or
Exchange Notes issued in exchange for Outstanding Notes accepted for exchange,
are to be issued in the name of someone other than the undersigned.
ISSUE EXCHANGE NOTES AND/OR OUTSTANDING NOTES TO:
NAME:
---------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
ADDRESS:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(Complete Substitute Form W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Outstanding Notes in a principal amount not tendered, or
Exchange Notes issued in exchange for Outstanding Notes accepted for exchange,
are to be mailed or delivered to someone other than the undersigned, or to the
undersigned at an address other than that shown below the undersigned's
signature.
MAIL OR DELIVER EXCHANGE NOTES AND/OR OUTSTANDING NOTES TO:
NAME:
---------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
ADDRESS:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
<PAGE> 5
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OUTSTANDING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holders of Outstanding Notes)
Dated: , 1997
- --------------------------------------------------------------------------
(The above lines must be signed by the registered holder(s) of Outstanding Notes
as name(s) appear(s) on the Outstanding Notes or on a security position listing,
or by person(s) authorized to become registered holder(s) by a properly
completed bond power from the registered holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Outstanding Notes to which this
Letter of Transmittal relate are held of record by two or more joint holders,
then all such holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the completion of this
Letter of Transmittal, printed below.)
Name(s):
------------------------------------------------------------------------
(Please Type or Print)
Capacity:
-----------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
-------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
-----------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 1997
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Outstanding Notes. All
physically delivered Outstanding Notes, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile hereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. The method of delivery of the tendered Outstanding
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent is at the election and risk of the holder and, except as
otherwise provided below, the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. Instead of delivery by mail, it is
recommended that the holder use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure delivery to the Exchange
Agent before the Expiration Date. No Letter of Transmittal or Outstanding Notes
should be sent to the Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their
Outstanding Notes and whose Outstanding Notes are not immediately available or
who cannot deliver their Outstanding Notes, this Letter of Transmittal or any
other documents required hereby to the Exchange Agent prior to the Expiration
Date, must tender their Outstanding Notes according to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedures: (i) such
tender must be made by or through a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers Inc., a commercial bank or a trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received from
the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder of the Outstanding Notes, the
registration number(s) of such Outstanding Notes and the total principal amount
of Outstanding Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five business days after the Expiration Date, this
Letter of Transmittal (or facsimile hereof) together with the Outstanding Notes
in proper form for transfer and any other documents required hereby, must be
deposited by the Eligible Institution with the Exchange Agent within five
business days after the Expiration Date; and (iii) the certificates for all
physically tendered shares of Outstanding Notes, in proper form for transfer and
all other documents required hereby are received by the Exchange Agent within
five business days after the Expiration Date.
Any holder of Outstanding Notes who wishes to tender Outstanding Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00
p.m., New York City time, on the Expiration Date. Upon request of the Exchange
Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to
tender their Outstanding Notes according to the guaranteed delivery procedures
set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender of Holder. Only a holder of Outstanding Notes may tender such
Outstanding Notes in the Exchange Offer. Any beneficial holder of Outstanding
Notes who is not the registered holder and who wishes to tender should arrange
with the registered holder to execute and deliver this Letter of Transmittal on
his behalf or must, prior to completing and executing this Letter of Transmittal
and delivering his Outstanding Notes, either make appropriate arrangements to
register ownership of the Outstanding Notes in such holder's name or obtain a
properly completed bond power from the registered holder.
4. Partial Tenders. Tenders of Outstanding Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Outstanding Notes is tendered, the tendering holder should fill in the principal
amount tendered in the third column of the box entitled "Description of
Outstanding Notes Tendered" above. The entire principal amount of Outstanding
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Outstanding
Notes is not tendered, then Outstanding Notes for the principal amount of
Outstanding Notes not tendered and Exchange Notes issued in exchange for any
Outstanding Notes accepted will be sent to the holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Outstanding Notes are accepted for
exchange.
<PAGE> 7
5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures. If this Letter of Transmittal (or facsimile
hereof) is signed by the record holder(s) of the Outstanding Notes tendered
hereby, the signature must correspond with the name(s) as written on the face of
the Outstanding Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Outstanding Notes listed and tendered hereby and
the Exchange Notes issued in exchange therefor are to be issued (or any
untendered principal amount of Outstanding Notes is to be reissued) to the
registered holder, the holder need not and should not endorse any tendered
Outstanding Notes, nor provide a separate bond power. In any other case, such
holder must either properly endorse the Outstanding Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Outstanding Notes listed,
such Outstanding Notes must be endorsed or accompanied by appropriate bond
powers, in each case signed as the name of the registered holder or holders
appears on the Outstanding Notes.
If this Letter of Transmittal (or facsimile hereof) or any Outstanding
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, evidence satisfactory to the Company
of their authority to act must be submitted with this Letter of Transmittal.
Endorsements on Outstanding Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Outstanding Notes
tendered herein and the Exchange Notes are to be issued directly to such
registered holder(s) and neither the box entitled "Special Delivery
Instructions" nor the box entitled "Special Registration Instructions" has been
completed, or (ii) such Outstanding Notes are tendered for the account of an
Eligible Institution. In all other cases, all signatures on this Letter of
Transmittal (or facsimile hereof) must be guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which Exchange
Notes or substitute Outstanding Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Outstanding Notes pursuant to the Exchange Offer.
If, however, Exchange Notes or Outstanding Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Outstanding Notes tendered hereby, or if tendered Outstanding Notes are
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Outstanding Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OUTSTANDING NOTES LISTED IN THIS LETTER
OF TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a holder
of any Outstanding Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual is his or her social
security number. If the Company is not provided with the correct TIN, the holder
may be subject to a $50 penalty imposed by Internal Revenue Service. (If
withholding results in an over-payment of taxes, a refund may be obtained).
Certain holders (including, among others, all corporations
<PAGE> 8
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Outstanding Notes are registered in more than one name or are not in the
name of the actual owner, see the enclosed "Guidelines for Certification of
Taxpayer Identification Number of Substitute Form W-9" for information on which
TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Outstanding Notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Outstanding Notes not properly tendered or any
Outstanding Notes the Company's acceptance of which would, in the opinion of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any conditions of the Exchange Offer or defects or irregularities
in tenders as to particular Outstanding Notes. The Company's interpretation of
the terms and conditions of the Exchange Offer (including this Letter of
Transmittal and the instructions hereto) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Outstanding Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any person shall be under
any duty to give notification of defects or irregularities with regard to
tenders of Outstanding Notes nor shall any of them incur any liability for
failure to give such notification.
10. Waiver of Conditions. The Company reserves the absolute right to waive,
in whole or part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular, or
contingent tender of Outstanding Notes on transmittal of this Letter of
Transmittal will be accepted.
12. Mutilated, Lost, Stolen or Destroyed Outstanding Notes. Any holder
whose Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OUTSTANDING NOTES) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR
THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR
TO THE EXPIRATION DATE.
