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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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REGISTRATION NUMBER 33-85930
TRANSAMERICAN REFINING CORPORATION
(Exact name of registrant as specified in its charter)
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TEXAS 76-0229632
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1300 NORTH SAM HOUSTON PARKWAY EAST
SUITE 320
HOUSTON, TEXAS 77032
(Address of principal executive offices) (Zip code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 986-8811
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The number of shares of common stock of the registrant outstanding on April
30, 1998, was 30,000,000. None of the registrant's common stock is owned by
non-affiliates.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 9
Item 3. Legal Proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9
PART II
Item 5. Market for Registrant's Common Equity and Related 9
Stockholder Matters.........................................
Item 6. Selected Financial Data..................................... 10
Item 7. Management's Discussion and Analysis of Financial Condition 11
and Results of
Operations..................................................
Item 7A. Quantitative and Qualitative Disclosures About Market 18
Risk........................................................
Item 8. Financial Statements and Supplementary Data................. 19
Item 9. Changes in and Disagreements With Accountants on Accounting 47
and Financial Disclosure....................................
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 47
Item 11. Executive Compensation...................................... 48
Item 12. Security Ownership of Certain Beneficial Owners and 50
Management..................................................
Item 13. Certain Relationships and Related Transactions.............. 50
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 52
8-K.........................................................
Signatures............................................................ 57
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PART I
ITEM 1. BUSINESS
GENERAL
TransAmerican Refining Corporation (the "Company" or "TARC") was formed in
1987 to hold and operate the refinery assets of TransAmerican Natural Gas
Corporation (together with its predecessors, "TransAmerican") and owns
facilities for the refining and storage of crude oil and petroleum products.
TARC's refinery is located in the Gulf Coast region along the Mississippi River,
approximately 20 miles from New Orleans, Louisiana. TARC's business strategy is
to modify, expand and reactivate its refinery and to maximize its gross refining
margins by converting low-cost, heavy, sour crude oils into high-value, light
petroleum products, including primarily gasoline and heating oil. TARC is a
wholly-owned subsidiary of TransAmerican Energy Corporation ("TEC"). TEC was
formed in 1994 to hold certain shares of common stock of TransTexas Gas
Corporation ("TransTexas") and all of the outstanding capital stock of TARC.
TARC, TransTexas and TEC are all direct or indirect subsidiaries of
TransAmerican. The address of TARC's principal executive offices is 1300 North
Sam Houston Parkway East, Suite 320, Houston, Texas 77032, and its telephone
number at that address is (281) 986-8811.
In February 1995, TARC began a construction and expansion program (the
"1995 Program") designed to reactivate the refinery and increase its complexity.
From February 1, 1995 through May 1997, TARC spent approximately $251 million on
the 1995 Program, procured a majority of the essential equipment required and
completed substantially all of the process design engineering and a substantial
portion of the remaining engineering necessary for its completion.
In order to capitalize on the progress on the refinery made through its
expenditures on the 1995 Program, in June 1997 TARC commenced a modified
two-phase construction and expansion program (the "Capital Improvement
Program"). TARC spent approximately $215 million on the Capital Improvement
Program during the period between June 1997 and January 31, 1998. The design and
estimated timing and cost of the Capital Improvement Program are based on
substantial input from several engineering and construction firms which have
been engaged to perform design engineering and construction management services.
Phase I of the Capital Improvement Program includes the completion and
start-up of several units, including the Delayed Coking Unit, one of the
refinery's major conversion units. Phase II of the Capital Improvement Program
includes the completion and start-up of the Fluid Catalytic Cracking Unit
utilizing state-of-the-art MSCC(SM) technology and the installation of
additional equipment expected to further improve operating margins by allowing
for a significant increase in the refinery's capacity to produce gasoline. After
completion of the Capital Improvement Program, TARC will own and operate one of
the largest independent refineries in the Gulf Coast region, with a replacement
cost estimated by management to be approximately $1.4 billion. TARC currently
believes that the costs of construction of the refinery will exceed the budget
established in June 1997, but that sufficient cash will be available to fund
such costs. See "-- Capital Improvement Program -- Capital Budget Status" and
"-- Completion Status." The foregoing estimates, as well as other estimates and
projections herein, are subject to substantial revision upon the occurrence of
future events, such as unavailability of financing, engineering problems, work
stoppages and cost overruns, over which TARC may not have any control, and there
can be no assurance that any such projections or estimates will prove accurate.
INDUSTRY OVERVIEW
Total growth in United States refining capacity has remained very low over
the past several years. Over the same period, however, demand for refined
products has increased. As a result, capacity utilization has increased to
approximately 95.0% in 1997 from approximately 83.1% in 1987. The refinery
utilization rate is an important factor in achieving and maintaining refining
profitability. Management of TARC believes that over the next several years
domestic demand for refined products will continue to increase while refining
capacity growth will remain slow, causing United States refining utilization
rates to remain high. These factors, if sustained, would likely result in an
increased demand for product imports into the United States. Management
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believes that these factors, together with relatively low prices expected by it
for heavy, sour crude oil, should have a positive effect on TARC's refining
margins.
DOMESTIC REFINING CAPACITY
UTILIZATION RATES, AND DEMAND FOR REFINED PRODUCTS
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1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
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Capacity MMBpd).............................. 15.6 15.9 15.6 15.6 15.7 15.7 15.1 15.0 15.4 15.3 15.5
Utilization.................................. 83.1% 84.7% 86.6% 87.1% 86.0% 87.9% 91.5% 92.6% 91.9% 93.5% 95.0%
Demand for refined products (MMBpd).......... 16.7 17.3 17.3 17.0 16.7 17.0 17.2 17.7 17.7 18.2 18.6
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Source: Energy Information Administration.
CURRENT OPERATIONS
The No. 2 Vacuum Unit was operated intermittently between March 1994 and
January 1997. Modifications and tie-ins to the No. 2 Crude Unit have been
completed. Although both units are operational, TARC is not currently operating
these units due to low operating margins obtainable for these units on a
stand-alone basis.
The following is a brief description of TARC's No. 2 Vacuum Unit and No. 2
Crude Unit:
No. 2 Vacuum Unit. TARC believes that the No. 2 Vacuum Unit has a capacity
in excess of 200,000 Bpd. TARC reactivated the No. 2 Vacuum Unit in March 1994.
The No. 2 Vacuum Unit is designed to process atmospheric tower bottoms into VGO
and, with the addition of cutterstocks, into No. 6 residual fuel oil. When the
No. 2 Crude Unit is placed into operation, the No. 2 Vacuum Unit will process
bottoms from the No. 2 Crude Unit. When the Delayed Coking Unit is complete, the
No. 2 Vacuum Unit tower bottoms are expected to be processed through the Delayed
Coking Unit into lighter, more valuable products. Upon completion of Phase II,
VGO is expected to be upgraded in the Fluid Catalytic Cracking Unit to gasoline
and No. 2 fuel oil.
No. 2 Crude Unit. The No. 2 Crude Unit was designed to process heavy, sour
crude oil and previously has demonstrated a capacity of 175,000 Bpd. Upon
completion of the Capital Improvement Program, the No. 2 Crude Unit is expected
to process up to 200,000 Bpd of a mix of crude oils into naphtha, kerosene, No.
2 fuel oil, atmospheric gas oil and atmospheric residual oil.
CAPITAL IMPROVEMENT PROGRAM
The Capital Improvement Program is designed to increase the capacity and
complexity of the refinery. The most significant projects include: (i)
converting the visbreaker unit into a delayed coking unit to process vacuum
tower bottoms into lighter petroleum products, (ii) modernizing and upgrading a
fluid catalytic cracking unit to increase gasoline production capacity and allow
the direct processing of low cost atmospheric residual feedstocks and (iii)
upgrading and expanding hydrotreating, alkylation and sulfur recovery units to
increase sour crude processing capacity. In addition, TARC plans to expand,
modify and add other processing units, tankage and offsite facilities as part of
the Capital Improvement Program. The Capital Improvement Program includes
expenditures necessary to ensure that the refinery is in compliance with certain
existing air and water discharge regulations and that gasoline produced will
comply with federal standards. TARC is acting and will act as general
contractor, but has engaged a number of specialty consultants and engineering
and construction firms to assist TARC in completing the individual projects that
comprise the Capital Improvement Program. Each of these firms was selected
because of its specialized expertise in a particular process or unit integral to
the Capital Improvement Program.
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The Capital Improvement Program will be executed in two phases, described
as follows:
Phase I
Phase I includes the Delayed Coking Unit, the HDS Unit, the Naphtha
Pretreater, the No. 2 Reformer, the Sulfur Recovery System and the supporting
Offsite Facilities. Completion of Phase I, along with the Crude and Vacuum
Units, will enable the refinery to process heavy crude and other purchased
feedstocks into finished and intermediate products. Products from this phase are
expected to include NGLs, naphtha, conventional gasoline, No. 2 fuel oil, VGO,
sulfur and petroleum coke. The following is a brief description of the units and
offsite facilities that are scheduled to be added or improved during Phase I and
TARC's plans and expectations therefor:
Delayed Coking Unit. TARC's Visbreaking Unit is being converted to a
Delayed Coking Unit. The process engineering for this conversion has been
completed by ABB Lummus Crest Inc. Detailed design engineering has been
completed and all major equipment has been purchased and installed. Fluor
Daniel, Inc. is managing the construction, which consists primarily of the
installation of piping and instrumentation systems. The Delayed Coking Unit is
expected to be able to process approximately 75,000 Bpd of vacuum tower bottoms
produced from the No. 2 Vacuum Unit. Products from this unit will include light
gas, naphtha, coker distillate, and coker gas oil, which can all be further
upgraded by TARC's refinery or sold to other refiners for upgrading. Petroleum
coke will be produced as a by-product of the coking process.
Naphtha Pretreater. TARC has purchased a used naphtha pretreater, which it
has disassembled and moved to the refinery site. Recent inspection of the used
piping in the naphtha pretreater indicates that a majority of it will need to be
replaced. Upon re-assembly, this unit will produce desulfurized heavy naphtha,
to be processed by the No. 2 Reformer into reformate for blending into gasoline,
and light naphtha for gasoline blending or sales. The Naphtha Pretreater is
designed to process up to 30,000 Bpd of naphtha feedstock produced by the No. 2
Crude Unit and the Delayed Coking Unit.
No. 2 Reformer. The No. 2 Reformer was purchased by TARC's predecessor and
relocated to the refinery during the 1980s expansion. Although re-assembly is
not complete, all major equipment is installed. Field construction will include
reconditioning of equipment plus installation of piping and instrumentation
systems. The No. 2 Reformer will process desulfurized heavy naphtha to raise its
octane level to that suitable for gasoline blending. The unit is designed to
process up to 12,000 Bpd of feedstock to produce high octane reformate for
gasoline blending. This unit will also provide a portion of the hydrogen
required for operation of the Naphtha Pretreater and the HDS Unit.
Hydrodesulfurization (HDS) Unit. In the early 1980s, TARC's predecessor
designed and commenced construction of a two-train distillate HDS Unit with a
common fractionation section. During Phase I, TARC will install two new
reactors, both of which have been purchased and delivered, and add another
fractionation section to permit independent operation of both trains. Other
major equipment required is in place. When completed, each train will be capable
of treating either distillate or VGO depending on unit or product requirements.
Sulfur Recovery System. Sulfur is captured in various refining processes,
primarily cracking and hydrodesulfurization, in the form of hydrogen sulfide
which is absorbed into an amine solution or into sour water streams. The
hydrogen sulfide is stripped from these streams and processed in a series of
reactors into elemental sulfur. TARC will reactivate and expand an existing
sulfur unit to a capacity of 150 LT/D and construct a 220 LT/D unit, and
construct ancillary facilities to support these units. These plants will have a
combined base capacity of 370 LT/D of sulfur, which can be increased to 510 LT/D
of sulfur with standard oxygen enrichment.
Offsite Facilities/Tankage. TARC will add steam-generating capacity, air
compression equipment and new electrical equipment during Phase I. A marine
vapor recovery system will also be installed at the terminal docks. TARC is
adding equipment necessary to load petroleum coke at one of its docks. TARC is
performing the engineering on these facilities with support from specialty
engineering firms such as River Consulting Inc., Lanier and Associates, ABB
Combustion Engineering Systems and RPM Engineering Inc. TARC has
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purchased an adjacent storage terminal to provide additional storage.
Pressurized tanks with a storage capacity of 127,500 barrels will be constructed
for LPG and butane.
Other. Additional equipment will be installed to enhance waste water
treatment and reduce the generation of solid waste. TARC has commenced Hazardous
Operation ("HAZOP") analyses of the refinery process units as required by
Occupational Safety and Health Administration ("OSHA") regulations.
Phase II
Phase II includes the FCC Unit, FCC Upgrades, Alkylation Unit and some
additional Offsite Facilities. Startup of these facilities will increase the
refinery's output of higher margin finished products, primarily gasoline and No.
2 fuel oil. TARC anticipates that, following completion of Phase II, it will
have the capacity to process in excess of 200,000 Bpd of combined heavy, sour
crude oil and atmospheric residual oil. The following is a brief description of
the units and offsite facilities that are scheduled to be added or improved
during Phase II and TARC's plans and expectations therefor:
Fluid Catalytic Cracking (FCC) Unit. TARC's FCC Unit will process gas oil
feedstocks directly from the No. 2 Crude Unit, the No. 2 Vacuum Unit, the
Delayed Coking Unit, or from outside purchases of VGO or atmospheric residual
oil. Before being fed to the FCC Unit, some of the VGO will be desulfurized in
the HDS Unit in order to meet environmental guidelines and improve product
quality from the FCC Unit. Modernization of the FCC Unit includes
reconfiguration of the fractionation plant.
The FCC Unit will have an initial capacity of 100,000 Bpd and will
incorporate the state-of-the-art MSCC(SM) technology licensed by UOP, formerly
Universal Oil Products ("UOP"). The MSCC(SM) technology is currently being used
at a major U.S. refinery. TARC believes that this technology will improve
product yields and quality in comparison to conventional catalytic cracking
processes. TARC also plans to add a catalyst cooler, which will make the unit
capable of processing significant quantities of atmospheric residual feedstocks.
The FCC Unit will produce refinery fuel, propane, butane, light olefins,
gasoline blendstock, No. 2 fuel oil, and a residual product (decant/slurry oil).
Light olefins will be processed in the Alkylation Unit for further upgrade.
Other materials will be blended to finished products or consumed in the
refinery.
Process engineering for the MSCC(SM) technology has been completed by UOP.
Raytheon Engineers and Constructors Inc. ("Raytheon") is providing detailed
design engineering and is managing construction of the FCC Unit. All major
equipment has been procured, delivered and erected.
FCC Flue Gas Scrubber. TARC plans to install a scrubber for the FCC flue
gases to reduce particulate and sulfur dioxide emissions. The flue gas scrubber
has been designed and fabricated by Belco Technologies Inc., and is being
erected under a fixed price contract.
Alkylation Unit. Light olefins from the FCC Unit are converted to high
octane gasoline blendstock (alkylate) in the Alkylation Unit. Alkylate is a
relatively clean burning fuel component important in the production of
environmentally sensitive gasolines. The Alkylation Unit will be reactivated and
expanded to an ultimate capacity of approximately 26,000 Bpd of alkylate product
by installing four new contactors and two new settlers designed by Stratco Inc.
and a new refrigeration system. Remaining work includes inspection and testing
of the equipment in the existing unit and installation of a new electronic
instrumentation system. Fluor Daniel is providing engineering and construction
management services for this work.
Offsite Facilities/Tankage. Additional capacity will be installed for
cooling water, steam, plant air, instrument air and electrical distribution.
Construction of nine tanks, with aggregate capacity of one million barrels, will
be completed. Other piping, electrical and instrumentation equipment will be
installed to connect the Phase II process units with the refinery and new
storage tanks.
Other. TARC is required to perform HAZOP analysis of the refinery process
units added during Phase II as required by OSHA regulations.
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CAPITAL BUDGET AND EXPENDITURES
The following table sets forth certain information with respect to the
Capital Improvement Program, including the budget as of June 13, 1997 and
expenditures as of January 31, 1998.
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BUDGET EXPENDITURES TO DAILY
TO COMPLETE(1) JANUARY 31, 1998(2) CAPACITY
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(DOLLARS IN (DOLLARS IN
MILLIONS) MILLIONS) (BPD)
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PHASE I:
Crude Unit................................ $ 3 $ 3.7 200,000
Delayed Coking Unit....................... 27 45.2 75,000
Naphtha Pretreater........................ 12 7.1 30,000
No. 2 Reformer............................ 9 0.7 12,000
HDS Unit.................................. 24 11.8 60,000
Sulfur Recovery System.................... 53 23.8 370(4)
Offsite Facilities/Tankage................ 46 33.3 N/A
Other..................................... 3 0.4 N/A
Engineering and Administrative............ 7 8.0 N/A
Contingencies(3).......................... 39 -- N/A
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Total Phase I..................... 223 134.0
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PHASE II:
FCC Unit.................................. 115 67.9 100,000
FCC Flue Gas Scrubber..................... 14 5.5 N/A
Alkylation Unit........................... 24 6.6 26,000
Offsite Facilities/Tankage................ 26 1.0 N/A
Other..................................... 2 -- N/A
Engineering and Administrative............ 3 -- N/A
Contingencies(3).......................... 20 -- N/A
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Total Phase II.................... 204 81.0
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Total Phase I and Phase II........ $427 $215.0
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(1) Budget as of June 13, 1997 for estimated expenditures from June 13, 1997 to
completion. See "-- Capital Budget Status"
(2) From June 13, 1997 through January 31, 1998.
(3) To the extent expenditures have exceeded or are expected to exceed the
approved capital budget for a unit or units, the contingencies portion of
the budget is allocated to specific units. As of January 31, 1998, the
entire contingencies portion of the budget has been allocated to specific
units.
(4) Units are LT/D. Capacity can be increased to 510 LT/D with oxygen
enrichment.
CAPITAL BUDGET STATUS
As of April 30, 1998, TARC was in the process of preparing information for
the Construction Supervisor in connection with the Construction Supervisor's
bimonthly report, to be finalized by the Construction Supervisor in May. TARC
believes that the report will indicate the necessity for expenditures in excess
of the budget of up to approximately $45 million, of which approximately $30
million will be allocated to Phase I. These estimates are preliminary, and may
change in the May report. Cash available in the TARC Disbursement Account is
sufficient to fund the projected remaining costs of Phase I. Although there can
be no assurance, TARC believes that cash available in the TARC Disbursement
Account, other cash on hand (exclusive of any proceeds of the issuance of Port
Commission Bonds, discussed below), and anticipated cash flow from operation of
certain Phase I units will be sufficient to fund the projected remaining costs
of Phase II.
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COMPLETION STATUS
TARC anticipates Mechanical Completion of the Delayed Coking Unit, the HDS
Unit and the related portion of the Sulfur Recovery System in May 1998. Upon
Mechanical Completion of these units, TARC will be able to purchase feedstocks
using funds in the TARC Disbursement Account reserved for such purpose. TARC
believes that the remainder of Phase I (other than the No. 2 Reformer) will
reach Mechanical Completion during the second quarter of fiscal 1999. TARC
intends to defer additional expenditures on the No. 2 Reformer until the fourth
quarter of fiscal 1999, ending January 31, 1999. TARC expects to complete both
Phase I and Phase II in advance of the Phase I completion date required by the
TEC Indenture.
PORT COMMISSION BONDS
TARC and the South Louisiana Port Commission ("Port Commission") have
entered into a preliminary agreement for the issuance of revenue bonds which, if
issued, are expected to provide net proceeds to TARC of approximately $50
million. Of such proceeds, TARC anticipates that approximately $35 million would
be available to fund construction of facilities included in the Capital
Improvement Program budget. The Port Commission would own a coke handling system
and certain tank storage and dock facilities. TARC would operate such facilities
pursuant to a long-term (25-year) lease. TARC is currently working with an
underwriter to structure an offering of revenue bonds pursuant to this
preliminary agreement. There can be no assurance, however, that the issuance of
an such tax-exempt bonds will occur.
FEEDSTOCK FINANCING ARRANGEMENTS AND PROCESSING AGREEMENTS
During periods of limited operations, TARC has entered into financing
arrangements in order to maintain an available supply of feedstocks. Typically,
TARC entered into an agreement with a third party to acquire a cargo of
feedstock scheduled for delivery to TARC's refinery. TARC paid through the third
party all transportation costs, related taxes and duties and letter of credit
fees for the cargo, plus a negotiated commission. Prior to arrival at the
refinery, another third party purchased the cargo, and TARC committed to
purchase, at a later date, the cargo at an agreed priced plus commission and
costs. TARC also placed margin deposits with the third party to permit the third
party to hedge its price risk. TARC purchased these cargos in quantities
sufficient to maintain expected operations and was obligated to purchase all of
the cargos delivered pursuant to these arrangements. In the event the refinery
was not operating, these cargos could be sold on the spot market.
In April 1996, TARC entered into a processing agreement with a third party
to process feedstocks. Under the terms of the agreement, the processing fee
earned by TARC is based on the margin, if any, earned by the third party from
product sales, after deducting all of its related costs such as feedstock
acquisition, hedging, transportation, processing and inspections plus a
commission for each barrel processed. As of January 31, 1998, TARC has processed
6.4 million barrels of feedstocks under this agreement. TARC also entered into
processing agreements with this third party to process approximately 1.1 million
barrels of the third party's feedstocks for a fixed price per barrel. For the
years ended January 31, 1998 and 1997, TARC recorded income (loss) from
processing agreements of $1.4 million and $(7.1) million, respectively. As of
January 31, 1998 and 1997, TARC was storing approximately 0.7 million and 1.0
million barrels, respectively, of feedstock and intermediate or refined products
pursuant to these processing agreements. Included in the 0.7 million barrels of
product stored at the refinery as of January 31, 1998, is approximately 0.6
million barrels of feedstock owned by a third party related to a purchase
commitment entered into in April 1997. For the year ended January 31, 1998, TARC
incurred a loss of approximately $7.8 million related to this purchase
commitment.
PRICE MANAGEMENT ACTIVITIES
In order to mitigate the commodity price risks associated with the refining
business, TARC has previously entered, and may in the future enter, into futures
contracts, options on futures, swap agreements and forward sale agreements
commensurate with its inventory levels and feedstock requirements and as
permitted under TARC's debt instruments. If TARC believes it can capitalize on
favorable market conditions,
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it will attempt to utilize the futures market to fix a portion of its crude oil
costs and refined products values. This hedging strategy is designed to retain
the value of a portion of its work-in-process inventory.
CRUDE OIL AND FEEDSTOCK SUPPLY
TARC has no crude oil reserves and is not engaged in the exploration for
crude oil. TARC plans to obtain all its crude oil requirements from unaffiliated
sources. Although TARC currently has no long-term supply contracts, it has
entered into negotiations with a major supplier of heavy, sour crude oil and is
in discussions with two other suppliers. TARC expects to be able to purchase
feedstocks on the spot market as needed and believes that it will have access to
adequate supplies of crude oil it intends to process; however, there can be no
assurance that such supplies will be available on favorable terms.
Crude oil prices are affected by a variety of factors that are beyond the
control of TARC. The principal factors currently influencing prices include the
pricing and production policies of members of the Organization of Petroleum
Exporting Countries, the availability to world markets of production from
Kuwait, Iraq and Russia and the worldwide and domestic demand for oil and
refined products. Oil pricing will continue to be unpredictable and greatly
influenced by governmental and political forces.
The refinery has a variety of available options for the receipt of
feedstocks. The Mississippi River permits delivery of feedstocks from both barge
and ocean-going vessels. TARC has four ship docks and a barge dock on the
Mississippi River. TARC's title to and continued use of these facilities is
subject to the rights of the government and public use. TARC's ship dock can
accommodate 100,000 deadweight ton ("dwt") tankers that draw less than 45 feet
of water, or up to 200,000 dwt tankers that have been partially offloaded and
draw less than 45 feet of water. The barge dock provides access to smaller
cargos of intermediate feedstocks such as VGOs or atmospheric residuals.
Additionally, TARC is connected to a Shell Oil Company ("Shell") crude pipeline
that provides access to Louisiana Offshore Oil Port's 24-inch pipeline network,
thereby permitting TARC to receive large quantities of foreign crude oil. This
pipeline also provides access to Louisiana and other domestic crudes.
PRODUCT DISTRIBUTION
TARC currently has no long-term sales contracts. Major market areas for
TARC's refined products will include the Gulf Coast region, the Mississippi
River Valley and the East Coast of the United States, as well as foreign
markets. TARC's refined products will be transported by pipeline, rail tanker,
ocean-going vessel and tank truck. TARC's refinery is connected, through
third-party pipelines, to two major Gulf Coast common carrier pipelines, the
Colonial and the Plantation, which will permit transportation of the refinery's
products to East Coast markets. Products can be discharged into these pipelines
at rates of up to 15,000 Bbls per hour. TARC is also connected to several
pipelines designed to transfer refined products to a nearby refinery operated by
Shell. Railroad lines serve the refinery and adjacent industries. TARC's barge
and ship docks provide access to the Mississippi River and the intracoastal
waterway.
TANK STORAGE ACQUISITION
On September 9, 1997, TARC acquired tank storage facilities and property
located adjacent to TARC's refinery for $40 million. The acquired assets
included approximately 5.5 million barrels of tank storage capacity for crude
oil, feedstocks and finished products, and three docks on the Mississippi River,
as well as almost 500 acres of undeveloped wetlands. TARC is integrating the
tank storage and terminal facilities with its refinery offsites systems and is
leasing to other persons storage that is not needed for its own operations.
FOREIGN TRADE ZONE
The refinery is approved for purposes of processing foreign crude to
operate as a foreign trade zone. This allows the refinery to realize the
benefits of processing foreign crude and exporting the products duty free or
deferring the duty on products sold domestically.
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INSURANCE
TARC maintains insurance in accordance with customary industry practices to
cover some, but not all, risks. TARC currently maintains property insurance for
the refinery in an amount and with deductibles that management believes will
allow TARC to survive damage to the refinery. TARC plans to increase insurance
coverage amounts from time to time as it completes certain portions of the
Capital Improvement Program.
SEASONALITY
TARC anticipates that its operations will be subject to significant
fluctuations in seasonal demand. In TARC's markets, demand for gasoline is
typically higher during the first and second quarters of TARC's fiscal year.
During winter months, demand for heating oil increases. The refinery is
designed, upon completion of the Capital Improvement Program, to change its
product yields to take advantage of seasonal demands.
FLUCTUATION IN PRICES
Factors that are beyond the control of TARC may cause the cost of crude oil
purchased by TARC and the price of refined products sold by TARC to fluctuate
widely. Although prices of crude oil and refined petroleum products generally
move in the same direction, prices of refined products often do not respond
immediately to changes in crude oil costs. An increase in market prices for
crude oil or a decrease in market prices for refined products could have an
adverse impact on TARC's earnings and cash flow.
COMPETITION
The industry in which TARC operates is highly competitive. TARC primarily
competes with refiners in the Gulf Coast region, many of which are owned by
large, integrated oil companies which, because of their more diverse operations,
stronger capitalizations or crude oil supply arrangements, are better able than
TARC to withstand volatile industry conditions, including shortages or excesses
of crude oil or refined products or intense price competition. The principal
competitive factors affecting TARC's refining operations are the quality,
quantity and delivered costs of crude oil and other refinery feedstocks,
refinery processing efficiency, mix of refined products, refined product prices
and the cost of delivering refined products to markets. Competition also exists
between the petroleum refining industry and other industries supplying energy
and fuel to industrial, commercial and individual consumers.
EMPLOYEES
As of January 31, 1998, TARC had approximately 450 employees and will
employ additional personnel as required by its operations and may engage the
services of engineering and other consultants from time to time. Currently, none
of TARC's employees is a party to a collective bargaining agreement.
Since July 1994, Southeast Louisiana Contractors of Norco, Inc. ("Southeast
Contractors"), a subsidiary of TransAmerican, has provided construction
personnel to TARC in connection with construction at the refinery. Southeast
Contractors will continue to provide construction personnel to TARC as required
to implement the Capital Improvement Program. These construction workers are
temporary employees, and the number and composition of the workforce will vary
throughout the reactivation of the refinery during the Capital Improvement
Program. Southeast Contractors charges TARC for the direct costs it incurs,
which consist solely of employee payroll and benefits plus administrative costs
and fees. Such administrative costs and fees charged to TARC may be up to $2
million per year. As of January 31, 1998, Southeast Contractors was providing
approximately 2,500 construction workers to TARC. The Equal Employment
Opportunity Commission (the "EEOC") has initiated an investigation into the
employment practices of TARC and Southeast Contractors alleging discriminatory
hiring and promotion practices. See "-- Legal Proceedings."
ENVIRONMENTAL MATTERS
See Note 14 of Notes to Financial Statements for a discussion of
environmental matters affecting TARC.
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OTHER GOVERNMENTAL REGULATIONS
TARC must also comply with federal and state laws and regulations
promulgated by the Department of Transportation for the movement of volatile and
flammable materials, the U.S. Coast Guard for marine operations and oil spill
prevention and the Occupational Safety and Health Administration ("OSHA") for
worker and job site safety. To comply with OSHA regulations, TARC must conduct
extensive Process Safety Management and Hazardous Operations reviews prior to
placing units into service. TARC has budgeted funds in the Capital Improvement
Program to comply with all of these requirements.
ITEM 2. PROPERTIES
TARC owns the approximately 457-acre site on which the refinery and tank
storage facility are located. TARC also owns approximately 500 acres of wetlands
adjacent to the refinery site. TARC leases office space in Houston, Texas from
TransTexas.
TITLE INSURANCE
TARC has obtained a lender's title insurance policy in the amount of $859
million for the benefit of the Trustee under the TEC Notes Indenture (the
"Trustee") to insure against certain claims made against title to the refinery
parcel site. The title insurance policy is reinsured through various title
insurance companies in the United States. The ability to successfully recover
under the policy is dependent on the creditworthiness of the title company and
its reinsurers at the time of the claim and any defenses that the title insurers
and its reinsurers may have. The title insurance policy does not insure TARC or
the Trustee for defects, liens, encumbrances, adverse claims or other matters
known to TARC that affect the validity of the mortgage or title to the refinery.
There can be no assurance that the amount of title insurance will be sufficient
to cover any losses incurred by TARC or the Trustee as a result of a title
defect impairing the ability to use the refinery site or that the title insurers
will be able to fulfill their financial obligations under the title insurance
policy. The title insurance policy contains customary exceptions to coverage,
including taxes not yet due and payable, riparian rights and numerous
servitudes, rights of way, rights of access and other encroachments in favor of
utilities, railroads, pipelines and adjacent refineries and tank farms, as well
as exceptions for (i) government claims with respect to, and public rights to
use, TARC's property located between the Mississippi River and the road upon
which pipe racks and TARC's docking facilities are located, (ii) a right of
first refusal in favor of an adjacent landowner with respect to a certain
portion of property which, in the event exercised, may require TARC to relocate
at its expense certain pipelines that connect various refinery parcels, (iii)
tax benefits that have been conveyed to certain tax lessors, (iv) the priority
of liens that may be filed by materialmen and mechanics in connection with the
Capital Improvement Program and (v) any rights of creditors pursuant to federal
or state bankruptcy and insolvency laws, which rights may affect the
enforceability of the mortgage securing the TARC Intercompany Loan.
ITEM 3. LEGAL PROCEEDINGS
See Note 14 of Notes to Financial Statements for a discussion of TARC's
legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of TARC's security holders during
the three months ended January 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for TARC's common stock. On
April 30, 1998, there was one holder of TARC's common stock.
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TARC has not paid any cash dividends on its capital stock since inception.
TARC's ability to pay dividends is restricted by TARC's debt instruments and
will depend in part upon TARC's debt levels. In determining whether to declare
and pay a dividend, the Board of Directors will consider various other factors,
including TARC's capital requirements and financial condition.
ITEM 6. SELECTED FINANCIAL DATA
On January 29, 1996, TARC changed its fiscal year end for financial
reporting purposes from July 31 to January 31. The following table sets forth
selected financial data of TARC as of and for each of the three years ended
January 31, 1998, the six months ended January 31, 1996 and 1995 and each of the
three years ended July 31, 1995. This data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto. The financial data
for fiscal year ended July 31, 1993 represent the results of operations and
financial position of TARC prior to the reactivation of the refinery. During
this period, TARC had only maintenance expenses and lease income from storage
facilities. The data for the year ended July 31, 1994 reflects limited
operations of the refinery and expenses related to reactivation of portions of
the refinery. The No. 2 Vacuum Unit was operated intermittently between March
1994 and January 1997. TARC does not consider its historical results to be
indicative of future results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JANUARY 31, YEAR ENDED JULY 31,
---------------------------------- ------------------- ------------------------------
1998 1997 1996 1996 1995 1995 1994 1993
--------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product sales................ $ -- $ 10,857 $176,229 $107,237 $ 71,035 $140,027 $174,143 $ --
Other........................ 2,828 -- 1 -- 551 552 3,035 5,178
--------- -------- -------- -------- -------- -------- -------- --------
Total revenues......... 2,828 10,857 176,230 107,237 71,586 140,579 177,178 5,178
Operating costs and
expenses................... 30,030 54,004 206,798 121,770 86,383 171,411 187,208 13,238
General and administrative
expenses(1)................ 19,196 11,848 12,610 7,438 8,442 13,614 4,496 11,341
--------- -------- -------- -------- -------- -------- -------- --------
Operating loss............... (46,398) (54,995) (43,178) (21,971) (23,239) (44,446) (14,526) (19,401)
Equity in income (loss)
before extraordinary item
of TransTexas.............. 44,552 12,325 (2,584) (156) -- (2,428) -- --
Other income (expense)....... (15,251) 52,076(4) (9,999) (3,944) 89 (5,966) (2,827) 28
Extraordinary items (2)...... (94,911) -- (11,497) -- -- (11,497) -- --
Net income (loss)............ (112,008) 9,406 (67,258) (26,071) (23,150) (64,337) (17,353) (19,373)
Net income (loss) per common
share:(3)
Basic...................... (3.73) 0.31 (2.24) (0.87) (0.77) (2.14) (0.58) (0.65)
Diluted.................... (3.73) 0.25 (2.24) (0.87) (0.77) (2.14) (0.58) (0.65)
Dividends declared per common
share(5)................... -- -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
------------------------------------------- -----------------------------
1998 1997 1996 1995 1995 1994 1993
---------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............. $ 70,501 $(40,814) $(17,707) $(35,509) $ 5,965 $(16,838) $(1,494)
Total assets.......................... 1,195,449 564,241 518,323 229,462 499,879 176,327 70,900
Total long-term liabilities........... 979,805 440,775 368,091 112,719 352,696 45,373 64,512
Stockholder's equity.................. 160,408 81,363 71,957 77,250 87,837 100,400 4,253
</TABLE>
- ---------------
(1) Includes a charge to operations of approximately $2.2 million of intangible
costs for the year ended January 31, 1998 and litigation accruals of $2.0
million, $4.5 million and $9.0 million for the six months ended January 31,
1996, and the years ended July 31, 1995 and 1993, respectively.
(2) Represents loss on early extinguishment of debt for the year ended January
31, 1998 and TARC's equity in the early extinguishment of debt at TransTexas
for the years ended January 31, 1998 and 1996 and July 31, 1995.
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<PAGE> 13
(3) Gives retroactive effect to a 30,000-for-1 stock split effected in July
1994.
(4) Includes a gain of $56.2 million related to the sale of 4.55 million shares
of TransTexas stock in March 1996.
(5) TARC's debt instruments contain certain restrictions with respect to the
payment of dividends on TARC's common stock.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with TARC's
financial statements and notes thereto.
RESULTS OF OPERATIONS
General
TARC's refinery was inoperative from January 1983 through February 1994.
During this period, TARC's revenues were derived primarily from tank rentals and
its expenses consisted of maintenance and repairs, tank rentals, general and
administrative expenses and property taxes. The No. 2 Vacuum Unit was operated
intermittently between March 1994 and January 1997. TARC may operate the No. 2
Crude Unit and the No. 2 Vacuum Unit if market conditions are favorable. TARC's
decision to commence or suspend operations will depend on the availability of
working capital, current operating margins and the need to tie-in units as they
are completed. TARC does not consider its historical results to be indicative of
future results.
TARC's results of operations are dependent on the operating status of
certain units within its refinery, which determines the types of feedstocks
processed and refined product yields. The results are also affected by the unit
costs of purchased feedstocks and the unit prices of refined products, which can
vary significantly. The Capital Improvement Program is designed to significantly
change TARC's throughput capacity, the feedstocks processed, and refined product
yields.
TARC believes, based on current estimates of refining margins and costs of
the expansion and modification of the refinery, that future undiscounted cash
flows will be sufficient to recover the cost of the refinery over its estimated
useful life. Management believes there have been no events or changes in
circumstances that would require the recognition of an impairment loss. However,
due to the inherent uncertainties in estimating future refining margins, and in
constructing and operating a large-scale refinery, there can be no assurance
that TARC will ultimately recover the cost of the refinery. Management believes
that the book value of the refinery is in excess of its current estimated fair
market value.
Year Ended January 31, 1998, Compared with the Year Ended January 31, 1997
There were no product sales for the year ended January 31, 1998 as compared
to $10.9 million for the year ended January 31, 1997, due primarily to TARC not
operating the No. 2 Vacuum Unit since January 1997 and TARC's use during fiscal
1998 of processing arrangements pursuant to which TARC processed feedstocks
owned by third parties (as opposed to TARC's purchase of feedstock and sale of
refined product).
Other revenues of $2.8 million for the year ended January 31, 1998 resulted
primarily from rental income from TARC's tank storage facility acquired in
September 1997.
There were no costs of products sold for the year ended January 31, 1998 as
compared to $11.5 million for the year ended January 31, 1997, due primarily to
TARC not operating the No. 2 Vacuum Unit since January 1997 and TARC's use
during fiscal 1998 of processing arrangements pursuant to which TARC processed
feedstocks owned by third parties (as opposed to TARC's purchase of feedstock
and sale of refined product).
During 1997 and 1998, TARC entered into other processing arrangements
whereby TARC did not take title to feedstocks or refined products but received a
fee based on margins, if any, realized by the counterparty to the arrangement.
TARC retained all market and production risks related to barrels processed.
These
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<PAGE> 14
arrangements, which are recorded net in the statement of operations, resulted in
income of $1.4 million and a loss of $7.1 million for the years ended January
31, 1998 and 1997, respectively. Income and losses were primarily due to
unfavorable prices for refined products and unfavorable results of price
management activities.
Operations and maintenance expense for the year ended January 31, 1998
decreased $12.1 million to $11.8 million from $23.9 million for the year ended
January 31, 1997, primarily due to TARC not operating the No. 2 Vacuum Unit
since January 1997, a $1.9 million decrease in labor costs, and a decrease of
$1.9 million in tank rentals due to the acquisition of a tank storage facility
adjacent to the refinery and the settlement of a tank rental dispute during
1996.
Depreciation and amortization expense for the year ended January 31, 1998
increased $1.2 million to $8.4 million from $7.2 million for the year ended
January 31, 1997, primarily due to depreciation related to the tank storage
facility acquired in September 1997.
General and administrative expenses increased $7.4 million to $19.2 million
for the year ended January 31, 1998 from $11.8 million for the year ended
January 31, 1997, primarily due to a charge to operations of approximately $2.2
million of certain intangible costs, increased fees of approximately $3.7
million related to a new services agreement entered into among TransAmerican,
TEC, TARC and TransTexas and increased professional fees related to the
modification and issuance of debt.
Taxes other than income taxes for the year ended January 31, 1998 decreased
$0.8 million to $3.4 million from $4.2 million for the year ended January 31,
1997, primarily due to decreased property tax expense.
Loss on purchase commitments for the year ended January 31, 1998 consists
of a $7.8 million loss related to a commitment to purchase 0.6 million barrels
of feedstock. These barrels have been sold to a third party and the Company
intends to subject them to a processing agreement with the third party. TARC
remains subject to market risk related to these barrels.
Interest income for the year ended January 31, 1998 increased $5.0 million
as compared to the year ended January 31, 1997, primarily due to the investment
of proceeds from the TARC Intercompany Loan and Senior Subordinated Notes.
Interest expense for the year ended January 31, 1998 increased $39.9 million,
primarily due to interest on the TARC Intercompany Loan and Senior Subordinated
Notes. During the year ended January 31, 1998, TARC capitalized approximately
$93.0 million of interest related to property and equipment additions at TARC's
refinery compared to $68.8 million for the year ended January 31, 1997. The
increase was primarily due to higher capital spending.
Equity in income of TransTexas before extraordinary item for the year ended
January 31, 1998 increased to $44.6 million as compared to $12.3 million for the
year ended January 31, 1997, due primarily to a $543 million gain on the sale by
TransTexas of a subsidiary. In September 1997, TARC sold approximately 8.5
million shares of TransTexas common stock pursuant to the TransTexas share
repurchase program. TARC received $136.2 million in connection with the
repurchase, of which $124.5 million (representing the excess of the cash
received over TARC's carrying value of the stock) was recorded as a capital
contribution. TARC recognized equity in an extraordinary item of TransTexas of
$(10.2) million for the year ended January 31, 1998. The extraordinary loss of
TransTexas is attributable to a loss on the early extinguishment of debt as a
result of the repurchase by TransTexas of its Senior Secured Notes and an
exchange offer by TransTexas for its Subordinated Notes. The gain on the sale of
TransTexas stock of $56.2 million for the year ended January 31, 1997 was a
result of TARC's sale of 4.55 million shares of TransTexas common stock to third
parties in March 1996. In April 1998, TARC distributed its remaining shares of
TransTexas common stock to TEC.
The additional loss on the early extinguishment of debt of $84.8 million
for the year ended January 31, 1998 is a result of the completion of the TARC
Notes Tender Offer as described in Note 8 of Notes to Financial Statements.
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<PAGE> 15
Year Ended January 31, 1997, Compared with the Year Ended January 31, 1996
Total revenues for the year ended January 31, 1997 decreased to $10.9
million from $176.2 million for the same period in 1996, due primarily to a
significant decrease in the purchase and processing of feedstocks for third
parties compared to the prior year. During fiscal 1997, the refinery's principal
activity was the processing of feedstocks pursuant to third party processing
arrangements.
Cost of products sold for the year ended January 31, 1997 decreased to
$11.5 million from $185.3 million for the same period in 1996, due primarily to
a significant decrease in the purchase and processing of feedstocks for third
parties compared to the prior year.
Losses from processing arrangements were $7.1 million for the year ended
January 31, 1997, primarily due to price management activities. See "Liquidity
and Capital Resources."
Operations and maintenance expense for the year ended January 31, 1997
increased to $23.9 million from $12.5 million for the same period in 1996,
primarily due to a write-off of approximately $6.5 million for assets included
in construction work in process and not intended for use in the 1995 Program, an
increase in fuel costs during the first six months of fiscal 1997, and higher
contract labor costs.
Depreciation and amortization expense for the year ended January 31, 1997
increased $0.9 million to $7.2 million from $6.3 million for the same period in
1996, primarily due to the reclassification of construction work in process to
depreciable assets during 1997.
Taxes other than income taxes for the year ended January 31, 1997 increased
to $4.2 million from $2.7 million for the same period in 1996, primarily due to
increased property tax expense.
General and administrative expense for the year ended January 31, 1997
decreased to $11.8 million from $12.6 million for the same period in 1996,
primarily due to decreased litigation expense.
Interest income for the year ended January 31, 1997 decreased by $6.1
million as compared to the same period in 1996, primarily due to interest earned
in 1996 on a higher balance held in a disbursement account. Interest expense,
net, for the year ended January 31, 1997 decreased $13.8 million, primarily due
to a larger portion of interest capitalized as well as a reduction of product
financing costs in 1997 versus 1996. During the year ended January 31, 1997,
TARC capitalized approximately $68.8 million of interest related to construction
activities at TARC's refinery, compared to $41.5 million for the year ended
January 31, 1996.
The equity in income of TransTexas for the year ended January 31, 1997 of
$12.3 million reflects TARC's 20.3% equity interest in TransTexas until TARC's
sale of 4.55 million shares of TransTexas stock in March 1996 (which reduced
TARC's interest in TransTexas to 14.1%). The increase of $14.9 million in the
equity in income of TransTexas is primarily the result of higher gas prices and
a favorable litigation settlement.
Other income for the year ended January 31, 1997 was $56.5 million, which
was primarily a result of the $56.2 million gain on the sale of 4.55 million
shares of TransTexas stock in March 1996. Other income for the year ended
January 31, 1996 was $2.1 million, primarily resulting from trading gains on
futures contracts.
Six Months Ended January 31, 1996, Compared with the Six Months Ended January
31, 1995
Total revenues for the six months ended January 31, 1996 increased $35.6
million to $107.2 million from $71.6 million in the same period in 1995,
primarily due to an increase in the volume of products sold to 6.1 million
barrels in 1996 from 4.2 million barrels in 1995. In addition, $1.2 million of
the increase was due to an increase in the average product sales price of $0.19
per barrel in 1996 over 1995.
Cost of products sold for the six months ended January 31, 1996 increased
$36.2 million to $110.1 million from $73.9 million for the same period in 1995,
primarily due to an increase in the volume of products sold, partially offset by
a decrease in the average price of feedstocks purchased.
Operations and maintenance expense for the six months ended January 31,
1996 increased $0.2 million to $7.9 million from $7.7 million for the same
period in 1995, primarily due to an increase in the number of days the vacuum
unit was operating.
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<PAGE> 16
Depreciation and amortization expense for the six months ended January 31,
1996 increased $0.5 million to $3.2 million from $2.7 million for the same
period in 1995, primarily due to the transfer of certain terminal facilities and
tankage equipment from construction in progress to depreciable assets during the
1996 period.
General and administrative expense for the six months ended January 31,
1996, decreased $1.0 million to $7.4 million from $8.4 million for the same
period in 1995, primarily as a result of a $2.5 million reduction in litigation
accruals, partially offset by an increase in payroll of $1.1 million arising
from operations support requirements.
Taxes other than income taxes for the six months ended January 31, 1996
decreased $1.4 million to $0.7 million from $2.1 million for the same period in
1995, primarily due to decreased property tax expense.
Interest income for the six month period ended January 31, 1996 increased
$2.3 million compared to the same period in 1995 due primarily to interest
earned on long-term debt proceeds held in a disbursement account. Interest
expense for the six month period ended January 31, 1996 increased $28.6 million
due to interest accrued on long-term debt issued in February 1995, amortization
of debt issue costs and financing costs associated with product purchases.
During the six months ended January 31, 1996, TARC capitalized $26.2 million of
interest related to construction activities associated with the 1995 Program.
LIQUIDITY AND CAPITAL RESOURCES
Although TARC may operate the No. 2 Crude Unit and the No. 2 Vacuum Unit if
it obtains a favorable processing arrangement, TARC anticipates that, until
completion of the Delayed Coking Unit, its liquidity and capital needs will be
limited to expenditures for the Capital Improvement Program, general and
administrative expenses and refinery maintenance costs.
TARC estimates that capital expenditures for the Capital Improvement
Program will be $256 million and $0, respectively, during the fiscal years
ending January 31, 1999 and 2000. TARC currently estimates that Capital
Improvement Program costs may increase by as much as $45 million over the $427
million originally estimated. Although there can be no assurance, TARC believes
that it will have cash sufficient to fund the remaining construction. See
"Business -- Capital Improvement Program -- Capital Budget Status" and
"-- Completion Status." If engineering problems, cost overruns or delays occur
and other financing sources are not available, TARC may not be able to complete
both phases of the Capital Improvement Program. TARC has historically incurred
losses and negative cash flow from operating activities as a result of limited
refinery operations that did not cover the fixed costs of maintaining the
refinery, increased working capital requirements (including debt service) and
losses on refined product sales and processing arrangements. There is no
assurance that TARC can complete the Capital Improvement Program, fund its
future working capital requirements or achieve positive cash flow from
operations. As a result, there is substantial doubt about TARC's ability to
continue as a going concern. The Financial Statements do not include any
adjustments that might result from the outcome of these uncertainties.
On June 13, 1997, TEC 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 a portion of the proceeds of the TEC Notes Offering, TEC made an
intercompany loan to TARC in the original amount of $676 million (the "TARC
Intercompany Loan"). The TARC Intercompany Loan will accrete principal at the
rate of 16% per annum, compounded semi-annually until June 15, 1999 to a final
accreted value of $920 million, and cash interest will thereafter accrue at a
rate of 16% per annum, payable semi-annually. The TARC Intercompany Loan will
mature on June 1, 2002. The TARC Intercompany Loan Agreement contains certain
restrictive covenants including, among others, limitations on incurring
additional debt, asset sales, dividends and transactions with affiliates. If
TARC's cash flow from operations is insufficient to pay interest as it becomes
payable on the TARC Intercompany Loan, TARC may be required to attempt to sell
debt or equity securities of TARC. There can be no assurance that proceeds from
such sales would be
14
<PAGE> 17
adequate to pay interest due. TARC used approximately $103 million of the
proceeds from the TARC Intercompany Loan to repay certain indebtedness,
including $36 million of senior secured notes issued in March 1997 and $66
million of advances and notes payable owed to an affiliate, and used
approximately $437 million to complete the TARC Notes Tender Offer described
below. Remaining proceeds have been or will be used for the Capital Improvement
Program described in Note 2 of Notes to Financial Statements and for general
corporate purposes.
In June 1997, TransTexas implemented a share repurchase program pursuant to
which it repurchased approximately 3.9 million shares of common stock from
public stockholders for an aggregate purchase price of approximately $61.4
million, and approximately 12.6 million shares from TARC and TEC for an
aggregate purchase price of approximately $201 million. TARC received $136.2
million of the purchase price, of which $124.5 million (representing the excess
of the cash received over TARC's carrying value of the stock) was recorded as a
capital contribution. The amounts received by TEC and TARC were deposited in the
TARC Disbursement Account.
As of January 31, 1998, TARC and TEC had deposited an aggregate of
approximately $529 million into accounts (collectively, the "TARC Disbursement
Account") from which disbursements are made pursuant to a disbursement
agreement, as amended (the "Disbursement Agreement") among TARC, TEC, the TEC
Indenture Trustee, Firstar Bank of Minnesota, N. A., as Disbursement Agent, and
Baker & O'Brien, Inc., as Construction Supervisor. See Note 3 of Notes to
Financial Statements. Of these funds, $427 million was designated for the
Capital Improvement Program, approximately $25.5 million was designated for
general and administrative expenses, $7 million was designated for outstanding
accounts payable, $50 million was designated for working capital upon completion
of the Delayed Coking Unit and certain supporting units and $19 million was
designated for the payment of interest on, or the redemption, purchase,
defeasance or other retirement of, the outstanding TARC Notes. There is no
assurance that the funds deposited in the TARC Disbursement Account will be
adequate for their designated purposes. As of January 31, 1998, $225 million had
been disbursed to TARC out of the TARC Disbursement Account for use in the
Capital Improvement Program, $18 million for accounts payable and general and
administrative expenses and $19 million for the payment of interest on, and the
redemption, repurchase and defeasance of the TARC Notes.
On June 13, 1997, TARC completed a tender offer (the "TARC Notes Tender
Offer") for the (i) TARC Mortgage Notes for 112% of their principal amount (plus
accrued and unpaid interest) and (ii) TARC Discount Notes for 112% of their
accreted value. TARC Mortgage Notes and TARC Discount Notes with an aggregate
carrying value of $423 million were tendered and accepted by TARC at a cost to
TARC of approximately $437 million (including accrued interest, premiums and
other costs). As a result of the TARC Notes Tender Offer, $22.8 million in debt
issuance costs were written off and TARC recorded a total extraordinary charge
of $84.8 million during the year ended January 31, 1998. As of January 31, 1998,
TARC Mortgage Notes and TARC Discount Notes with a carrying value of
approximately $14.4 million remained outstanding.
On January 14, 1998, TARC called for redemption on February 17, 1998
approximately $7 million in aggregate principal amount of TARC Notes pursuant to
the terms of the indenture governing the TARC Notes. On January 16, 1998, TARC
deposited pursuant to an irrevocable trust agreement approximately $9.8 million
for defeasance of the remaining TARC Notes outstanding after the redemption. The
deposited funds are sufficient to pay the principal of the remaining TARC Notes
and interest thereon from the date of deposit to and including the final
redemption date, as well as a call premium of 6%. The final redemption date is
February 15, 1999.
On December 30, 1997, TARC issued in a private offering 175,000 Units
consisting of $175 million in aggregate principal amount of 16% Series A Senior
Subordinated Notes due 2003 (the "Series A Subordinated Notes") and 175,000
warrants (the "December 1997 Warrants") to purchase 2,335,245 shares of TARC
common stock. Net proceeds to TARC, after deducting fees and expenses of
approximately $8 million, were approximately $167 million. Net proceeds of $8.2
million from the sale of the Units was allocated to the December 1997 Warrants.
TARC deposited $119 million of the net proceeds into the TARC Disbursement
Account for use in the Capital Improvement Program and deposited $42 million
into an interest
15
<PAGE> 18
reserve account for interest payments on the Series A Senior Subordinated Notes
through June 30, 1999. The remaining $6 million of net proceeds was used for
general corporate purposes including the redemption and defeasance of the TARC
Notes.
On March 16, 1998, TARC issued in a private offering 25,000 Units
consisting of $25 million in aggregate principal amount of 16% Series C Senior
Subordinated Notes due 2003 (the "Series C Senior Subordinated Notes" and,
together with the Series A Senior Subordinated Notes, the "Senior Subordinated
Notes") and 25,000 warrants (the "March 1998 Warrants" and, together with the
December 1997 Warrants, the "Warrants") to purchase 333,606 shares of TARC
common stock. Net proceeds to TARC, after deducting fees and expenses of
approximately $1.2 million, were approximately $26.2 million. Net proceeds of
approximately $2.8 million from the sale of the Units was allocated to the March
1998 Warrants. TARC deposited $6.0 million into an interest reserve account for
interest payments on the Series C Senior Subordinated Notes from December 30,
1997 through June 30, 1999. The remaining $20.2 million of net proceeds has been
or will be used for general corporate purposes.
In April 1996, TARC entered into a processing agreement with a third party
to process feedstocks. Under the terms of the agreement, the processing fee
earned by TARC is based on the margin, if any, earned by the third party from
product sales, after deducting all of its related costs such as feedstock
acquisition, hedging, transportation, processing and inspections plus a
commission for each barrel processed. As of January 31, 1998, TARC has processed
6.4 million barrels of feedstocks under this agreement. TARC also entered into
processing agreements with this third party to process approximately 1.1 million
barrels of the third party's feedstocks for a fixed price per barrel. For the
years ended January 31, 1998 and 1997, TARC recorded income (loss) from
processing agreements of $1.4 million and $(7.1) million, respectively. As of
January 31, 1998 and 1997, TARC was storing approximately 0.7 million and 1.0
million barrels, respectively, of feedstock and intermediate or refined products
pursuant to these processing agreements. Included in the 0.7 million barrels of
product stored at the refinery as of January 31, 1998, is approximately 0.6
million barrels of a feedstock owned by a third party related to a purchase
commitment entered into in April 1997. For the year ended January 31, 1998, TARC
incurred a loss of approximately $7.8 million related to this purchase
commitment and remains subject to market risk for these barrels.
In July and September 1997, TARC received advances from TEC in the
aggregate amount of $46 million. In November and December 1997, TARC repaid
approximately $31 million in principal, and in December 1997 paid approximately
$2.9 million in interest to TEC. See Note 9 of Notes to Financial Statements.
In September 1997, TARC purchased a tank storage facility adjacent to the
refinery for a cash purchase price of $40 million (which does not include a $3.1
million liability recorded for environmental remediation, as discussed below).
Environmental investigations conducted by the previous owner of the facilities
have indicated soil and groundwater contamination in several areas of the
property. As a result, the former owner submitted to the Louisiana Department of
Environmental Quality (the "LDEQ") plans for the remediation of any significant
indicated contamination in such areas. TARC has analyzed these investigations
and has carried out further Phase II Environmental Assessments to verify their
results. TARC intends to incorporate any required remediation into its ongoing
work at the refinery. In connection with the purchase of the facilities, TARC
agreed to indemnify the seller for all cleanup costs and certain other damages
resulting from contamination on the property, and created a $5 million escrow
account to fund required remediation costs and indemnification claims by the
seller. As a result of TARC's Phase II Environmental Assessments, TARC believes
that the amount in escrow should be sufficient to fund the remediation costs
associated with identified contamination; however, because the LDEQ has not yet
approved certain of the remediation plans, there can be no assurance that the
funds set aside in the escrow account will be sufficient to pay all required
remediation costs. As of January 31, 1998, TARC has recognized a liability of
$3.1 million for this contingency.
On December 10, 1997, TARC issued to an unaffiliated third party a 13%
Senior Secured Note due 2002 (the "Acquisition Note") in the principal amount of
$36 million to finance a portion of the purchase price of the tank storage
facility purchased in September 1997. The Acquisition Note is secured by a
mortgage on the tank storage facility, and is governed by a Note Purchase
Agreement containing restrictive covenants
16
<PAGE> 19
substantially similar to those contained in the TARC Intercompany Loan and TEC
Indenture. The Acquisition Note bears interest at 13%, payable semiannually on
June 15 and December 15, and matures on December 15, 2002. TARC deposited $7
million in an interest reserve account for interest payments on the Acquisition
Note through June 15, 1999.
The TEC Notes Indenture permits TARC to obtain a revolving credit facility
but places certain limitations on TARC's ability to incur other indebtedness. In
order to operate the refinery at expected levels after the completion of Phase I
of the Capital Improvement Program, TARC will require additional working
capital. Although TARC and a lender have engaged in discussions concerning the
terms of a revolving credit facility, there can be no assurance TARC will be
able to obtain such a facility.
Environmental compliance and permitting issues are an integral part of the
capital expenditures anticipated in connection with the expansion and
modification of the refinery. TARC does not expect to incur any additional
significant expenses for environmental compliance during fiscal 1998 or fiscal
1999 other than those budgeted for the Capital Improvement Program. There is no
assurance, however, that costs incurred to comply with environmental laws will
not have a material adverse effect on TARC's future financial condition, results
of operations or cash flow. TARC also has contingent liabilities with respect to
certain legal proceedings as more fully described in Note 14 of Notes to
Financial Statements.
INFLATION AND CHANGES IN PRICES
TARC's revenues and feedstock costs have been, and will continue to be,
affected by changes in the prices of petroleum and petroleum products. TARC's
ability to obtain additional capital is also substantially dependent on refining
margins, which are subject to significant seasonal, cyclical and other
fluctuations that are beyond TARC's control.
From time to time, TARC enters into futures contracts, options on futures,
swap agreements and forward sale agreements for crude and refined products
intended to protect against a portion of the price risk associated with price
declines from holding inventory of feedstocks and refined products, or for fixed
price purchase commitments. TARC's policy is not to enter into fixed price or
other purchase commitments in excess of anticipated processing requirements.
TARC believes that these current and anticipated futures transactions do not and
will not constitute speculative trading as specified under and prohibited by the
TEC Notes Indenture.
RECENTLY ISSUED PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which establishes
standards for reporting and display of comprehensive income and its components
in financial statements. This statement will be adopted by TARC effective
February 1, 1998. TARC believes that adoption of this statement will not have a
material impact on its financial statements.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start Up Activities,"
("SOP 98-5") which provides guidance on the financial reporting of start-up
costs and organization costs. This statement of position will be adopted by TARC
effective February 1, 1998. Implementation of the statement requires start-up
activities, such as those related to the Capital Improvement Program, to be
expensed as incurred.
IMPACT OF YEAR 2000 ISSUE
The year 2000 issue relates to computer programs or computerized equipment
designed to use two digits rather than four digits to define the applicable
year. As a result, computer systems with time-sensitive software may not
accurately calculate, store or use a date subsequent to December 31, 1999. This
could result in system failures or miscalculations and disruptions of
operations, including among other things, a temporary inability to process
transactions or engage in other normal business activities.
In June 1997, management began a Company-wide program to prepare its
computer systems for year 2000 compliance. In January 1998, TARC began
implementation of new client/server based systems which
17
<PAGE> 20
are anticipated to be completed by January 1999. TARC estimates the cost of
upgrading its computer systems to be approximately $2 million. There can be no
assurance that TARC will timely complete the implementation of the new systems.
The year 2000 issue should not impact TARC's ability to continue refining,
storage or sales activities.
FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
are included throughout this report. All statements, other than statements of
historical fact, included in this Annual Report on Form 10-K regarding TARC's
financial position, business strategy, plans and objectives of management for
future operations and expansion and modification of the refinery, including, but
not limited to, words such as "anticipates," "expects," "believes," "estimates,"
"intends," "projects" and "likely" indicate forward-looking statements. TARC's
management believes that its current views and expectations are based on
reasonable assumptions; however, there are significant risks and uncertainties
that could significantly affect expected results. Factors that could cause
actual results to differ materially from those in the forward-looking statements
include, without limitation, engineering problems, work stoppages, cost
overruns, personnel or materials shortages, fluctuations in commodity prices for
petroleum and refined products, casualty losses, conditions in the capital
markets and competition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
18
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 20
Financial Statements:
Balance Sheet............................................. 21
Statement of Operations................................... 22
Statement of Stockholder's Equity......................... 23
Statement of Cash Flows................................... 24
Notes to Financial Statements............................. 25
</TABLE>
19
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder and Board of Directors
TransAmerican Refining Corporation:
We have audited the accompanying balance sheet of TransAmerican Refining
Corporation (the "Company" or "TARC") as of January 31, 1998 and 1997 and the
related statements of operations, stockholder's equity and cash flows for the
years ended January 31, 1998 and 1997, the six months ended January 31, 1996 and
the year ended July 31, 1995. These financial statements are the responsibility
of TARC's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TransAmerican Refining
Corporation as of January 31, 1998 and 1997, and the results of its operations
and its cash flows for the years ended January 31, 1998 and 1997, the six months
ended January 31, 1996 and the year ended July 31, 1995, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that TARC
will continue as a going concern. TARC has historically incurred losses and
negative cash flow from operating activities as a result of limited refinery
operations that did not cover the fixed costs of maintaining the refinery,
increased working capital requirements, including debt service and losses on
refinery product sales and processing arrangements. There is no assurance that
the Company can complete its refinery construction and expansion program, fund
its future working capital requirements and achieve positive cash flow from
operations. As a result, there is substantial doubt about TARC's ability to
continue as a going concern. Management's plans are described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
COOPERS & LYBRAND L.L.P.
Houston, Texas
April 30, 1998
20
<PAGE> 23
TRANSAMERICAN REFINING CORPORATION
BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JANUARY 31,
-----------------------
1998 1997
---------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 10,021 $ 613
Restricted cash held in disbursement accounts............. 71,563 --
Cash restricted for interest.............................. 32,823 --
Investments held in trust................................. 9,114 --
Accounts receivable....................................... 870 --
Receivable from affiliates................................ -- 22
Other..................................................... 1,346 654
---------- ---------
Total current assets.............................. 125,737 1,289
---------- ---------
Property and equipment...................................... 939,780 555,816
Less accumulated depreciation and amortization.............. 25,257 16,930
---------- ---------
Net property and equipment........................ 914,523 538,886
---------- ---------
Restricted cash held in disbursement accounts............... 60,166 --
Cash restricted for interest................................ 16,348 --
Investments held in trust................................... 8,591 --
Receivable from affiliates.................................. 1,655 393
Other assets, net........................................... 68,429 23,673
---------- ---------
$1,195,449 $ 564,241
========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 32,022 $ 20,033
Payable to affiliates..................................... 6,976 7,094
Accrued liabilities....................................... 9,528 14,976
Current maturities of long-term debt...................... 6,710 --
---------- ---------
Total current liabilities......................... 55,236 42,103
---------- ---------
Payable to affiliates....................................... 3,825 6,674
Long-term debt, less current maturities..................... 210,666 365,730
Notes payable to affiliate.................................. 760,266 46,589
Investment in TransTexas.................................... -- 20,706
Other....................................................... 5,048 1,076
Commitments and contingencies (Note 14)..................... -- --
Stockholder's equity:
Common stock, $0.01 par value, 100,000,000 shares
authorized, 30,000,000 shares issued and outstanding... 300 300
Additional paid-in capital................................ 439,566 248,513
Accumulated deficit....................................... (279,458) (167,450)
---------- ---------
Total stockholder's equity........................ 160,408 81,363
---------- ---------
$1,195,449 $ 564,241
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 24
TRANSAMERICAN REFINING CORPORATION
STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JANUARY 31, YEAR ENDED
---------------------------------- ---------------------- JULY 31,
1998 1997 1996 1996 1995 1995
--------- -------- ----------- -------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales......................... $ -- $ 10,857 $176,229 $107,237 $ 71,035 $140,027
Other................................. 2,828 -- 1 -- 551 552
--------- -------- -------- -------- -------- --------
Total revenues.................. 2,828 10,857 176,230 107,237 71,586 140,579
--------- -------- -------- -------- -------- --------
Costs and expenses:
Cost of products sold................. -- 11,544 185,277 110,052 73,862 149,087
Processing arrangements, net.......... (1,413) 7,090 -- -- -- --
Operations and maintenance............ 11,834 23,945 12,482 7,910 7,727 12,299
Depreciation and amortization......... 8,416 7,225 6,308 3,159 2,706 5,855
General and administrative............ 19,196 11,848 12,610 7,438 8,442 13,614
Taxes other than income taxes......... 3,369 4,200 2,731 649 2,088 4,170
Loss on purchase commitment........... 7,824 -- -- -- -- --
--------- -------- -------- -------- -------- --------
Total costs and expenses........ 49,226 65,852 219,408 129,208 94,825 185,025
--------- -------- -------- -------- -------- --------
Operating loss.................. (46,398) (54,995) (43,178) (21,971) (23,239) (44,446)
--------- -------- -------- -------- -------- --------
Other income (expense):
Interest income....................... 5,190 204 6,346 2,263 4 4,087
Interest expense...................... (113,400) (73,503) (59,994) (32,180) (3,540) (31,354)
Interest capitalized.................. 92,954 68,840 41,543 26,202 3,509 18,850
Equity in income (loss) before
extraordinary item of TransTexas.... 44,552 12,325 (2,584) (156) -- (2,428)
Other income (expense)................ 5 56,535 2,106 (229) 116 2,451
--------- -------- -------- -------- -------- --------
Total other income (expense).... 29,301 64,401 (12,583) (4,100) 89 (8,394)
--------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
items............................... (17,097) 9,406 (55,761) (26,071) (23,150) (52,840)
Extraordinary items:
Equity in extraordinary loss
of TransTexas....................... (10,158) -- (11,497) -- -- (11,497)
Loss on the early extinguishment of
debt................................ (84,753) -- -- -- -- --
--------- -------- -------- -------- -------- --------
Net income (loss)............... $(112,008) $ 9,406 $(67,258) $(26,071) $(23,150) $(64,337)
========= ======== ======== ======== ======== ========
Basic net income (loss) per share:
Income (loss) before extraordinary
items............................... $ (0.57) $ 0.31 $ (1.86) $ (0.87) $ (0.77) $ (1.76)
Extraordinary items................... (3.16) -- (0.38) -- -- (0.38)
--------- -------- -------- -------- -------- --------
$ (3.73) $ 0.31 $ (2.24) $ (0.87) $ (0.77) $ (2.14)
========= ======== ======== ======== ======== ========
Diluted net income (loss) per share:
Income (loss) before extraordinary
items............................... $ (0.57) $ 0.25 $ (1.86) $ (0.87) $ (0.77) $ (1.76)
Extraordinary items................... (3.16) -- (0.38) -- -- (0.38)
--------- -------- -------- -------- -------- --------
$ (3.73) $ 0.25 $ (2.24) $ (0.87) $ (0.77) $ (2.14)
========= ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 25
TRANSAMERICAN REFINING CORPORATION
STATEMENT OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- ADDITIONAL ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT PAID-IN CAPITAL DEFICIT EQUITY
------ ------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1994.................. 30,000 $300 $186,548 $ (86,448) $ 100,400
Net loss................................ -- -- -- (64,337) (64,337)
Issuance of warrants.................... -- -- 23,300 -- 23,300
Equity contribution by TransAmerican.... -- -- 71,170 -- 71,170
Contribution of TransTexas stock by
TEC.................................. -- -- (32,505) -- (32,505)
------ ---- -------- --------- ---------
Balance at July 31, 1995.................. 30,000 300 248,513 (150,785) 98,028
Net loss................................ -- -- -- (26,071) (26,071)
------ ---- -------- --------- ---------
Balance at January 31, 1996............... 30,000 300 248,513 (176,856) 71,957
Net income.............................. -- -- -- 9,406 9,406
------ ---- -------- --------- ---------
Balance at January 31,1997................ 30,000 300 248,513 (167,450) 81,363
Net loss................................ -- -- -- (112,008) (112,008)
Stock repurchase by TransTexas.......... -- -- 124,485 -- 124,485
Purchase of warrants by parent.......... -- -- 10,398 -- 10,398
Allocation of debt issue costs by TEC... -- -- 30,768 -- 30,768
Contributions by TEC.................... -- -- 13,726 -- 13,726
Issuance of warrants.................... -- -- 11,676 -- 11,676
------ ---- -------- --------- ---------
Balance at January 31, 1998............... 30,000 $300 $439,566 $(279,458) $ 160,408
====== ==== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 26
TRANSAMERICAN REFINING CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JANUARY 31, YEAR ENDED
---------------------------------- ----------------------- JULY 31,
1998 1997 1996 1996 1995 1995
--------- -------- ----------- --------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)...................... $(112,008) $ 9,406 $ (67,258) $ (26,071) $(23,150) $ (64,337)
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Loss on the early extinguishment
of debt............................ 84,753 -- -- -- -- --
Depreciation and amortization........ 8,416 7,225 6,308 3,159 2,706 5,855
Litigation........................... -- -- 2,000 2,000 4,500 4,500
Amortization of discount on long-term
debt............................... 16,345 83 11,062 3,389 -- 7,673
Amortization of debt issue costs..... 1,108 6 790 238 -- 552
Equity in net (income) loss of
TransTexas......................... (34,394) (12,325) 14,081 156 -- 13,925
Inventory write-down................. -- -- 5,671 4,406 -- 1,265
Gain on the sale of TransTexas
stock.............................. -- (56,162) -- -- -- --
Loss on disposition of equipment..... -- 6,513 -- -- -- --
Changes in assets and liabilities:
Accounts receivable................ (870) 121 1,340 3,671 6,901 4,570
Inventories........................ -- 25 (4,070) 7,242 3,063 (8,249)
Other current assets............... (692) 4,825 (5,258) 1,765 (221) (7,244)
Accounts payable................... 2,631 4,000 (4,260) (1,675) (105) (2,690)
Payable to affiliate, net.......... 203 6,077 1,530 1,979 (765) (1,214)
Accrued liabilities................ (5,350) 953 (886) (3,132) (4,871) (2,625)
Other assets....................... (3,533) 63 (2,818) (130) 562 (2,126)
Other liabilities.................. 3,366 474 (157) -- (102) (259)
--------- -------- --------- --------- -------- ---------
Net cash used by operating
activities..................... (40,025) (28,716) (41,925) (3,003) (11,482) (50,404)
--------- -------- --------- --------- -------- ---------
Investing activities:
Capital expenditures................... (284,458) (86,581) (174,633) (119,565) (52,306) (107,374)
Prepaid capital expenditures........... (24,216) -- -- -- -- --
Proceeds from the sale of
TransTexas stock..................... 136,158 42,607 -- -- -- --
Increase in investments held in
trust................................ (17,706) -- -- -- -- --
--------- -------- --------- --------- -------- ---------
Net cash used by investing
activities..................... (172,516) (43,974) (174,633) (119,565) (52,306) (107,374)
--------- -------- --------- --------- -------- ---------
Financing activities:
Issuance of long-term debt............. 247,000 -- 300,750 -- -- 300,750
Issuance of notes payable to
affiliate............................ 725,649 -- -- -- -- --
Retirement of long-term debt........... (470,583) -- -- -- -- --
Increase in debt proceeds held in
disbursement accounts................ (425,404) (26,549) (173,000) -- -- (173,000)
Withdrawals from disbursement
accounts............................. 293,675 50,949 148,595 116,452 -- 32,143
Increase in cash restricted for
interest............................. (49,171) -- -- -- -- --
Advances from affiliates............... 15,026 49,152 17,333 16,698 86,925 87,560
Repayment of advances and notes payable
to affiliates........................ (100,990) (1,925) (53,450) (13,450) (20,000) (60,000)
Capital contributions from affiliate... 13,726 -- -- -- -- --
Debt issue costs....................... (7,981) -- (20,479) -- (3,126) (23,605)
Principal payments on capital lease and
seller financed obligations.......... (1,292) (1,103) (458) (458) -- --
--------- -------- --------- --------- -------- ---------
Net cash provided by financing
activities..................... 221,949 70,524 219,291 119,242 63,799 163,848
--------- -------- --------- --------- -------- ---------
Increase (decrease) in cash and
cash equivalents............... 9,408 (2,166) 2,733 (3,326) 11 6,070
Beginning cash and cash equivalents...... 613 2,779 46 6,105 35 35
--------- -------- --------- --------- -------- ---------
Ending cash and cash equivalents......... $ 10,021 $ 613 $ 2,779 $ 2,779 $ 46 $ 6,105
========= ======== ========= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 27
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE YEAR ENDED JANUARY 31, 1996 AND
INTERIM PERIOD ENDED JANUARY 31, 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Formation of TARC
TransAmerican Refining Corporation, a Texas corporation (the "Company" or
"TARC"), owns facilities for the refining and storage of crude oil and petroleum
products. TARC's refinery is located in the Gulf Coast region along the
Mississippi River approximately 20 miles from New Orleans, Louisiana. TARC was
incorporated in September 1987 for the purpose of holding and eventually
operating certain refinery assets previously held by TransAmerican Natural Gas
Corporation ("TransAmerican") and its subsidiaries. In 1987, TransAmerican
transferred substantially all of its refinery assets at net book value to TARC.
From 1987 through 1993, TARC incurred operating losses principally as a
result of maintaining its idled refinery. The refinery was operated
intermittently between March 1994 and January 1997 based on operating margins
and has continued to incur operating losses. In June 1997, TARC commenced a
two-phase construction and expansion program on its refinery designed to
increase the capacity and complexity of the refinery (the "Capital Improvement
Program"). See Note 2.
TARC is a wholly owned subsidiary of TransAmerican Energy Corporation
("TEC") which is a wholly owned subsidiary of TransAmerican. In 1994,
TransAmerican formed TEC to hold certain shares of common stock of TransTexas
Gas Corporation ("TransTexas") and all of TARC's capital stock.
Change in Fiscal Year
On January 29, 1996, the Board of Directors approved a change in TARC's
fiscal year end for financial reporting purposes from July 31 to January 31. The
financial statements include presentation of the year ended January 31, 1997,
the six months ended January 31, 1996 (the "Transition Period") and the
comparable prior year periods which are unaudited.
Cash and Cash Equivalents
TARC considers all highly liquid investments purchased with an original
maturity of three months or less to be a cash equivalent. Cash equivalents in
restricted accounts are excluded from cash and are classified in accordance with
the terms of the restrictions.
Inventories
TARC's inventories consist primarily of feedstocks and refined products and
are stated at the lower of average cost or market. TARC wrote down the value of
its inventories by approximately $4.4 million and $1.3 million at January 31,
1996 and July 31, 1995, respectively, to reflect existing market prices.
Price Management Activities
TARC's revenues and feedstock costs have been and will continue to be
affected by changes in the prices of petroleum and petroleum products. TARC's
ability to obtain additional capital is also substantially dependent on refined
product prices and refining margins, which are subject to significant seasonal,
cyclical and other fluctuations that are beyond TARC's control.
From time to time, TARC enters into futures contracts, options on futures,
swap agreements and forward sale agreements with the intent to protect against a
portion of the price risk associated with price declines from holding inventory,
or fixed price purchase commitments. Commitments involving future settlement
give rise to market risk, which represents the potential loss that can be caused
by a change in the market value of a particular instrument and credit risk,
which represents the potential loss if a counterparty is unable to perform.
25
<PAGE> 28
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Under the guidelines of Statement of Financial Accounting Standards No. 80,
"Accounting for Futures Contracts" ("SFAS 80"), gains and losses associated with
such transactions that meet the hedge criteria in SFAS 80 will be deferred and
recognized when the related products are sold. Those transactions which do not
meet the hedging criteria in SFAS 80 are recorded at market value and marked to
market each period resulting in a gain or a loss which is recorded in other
income in the period in which a change in market value occurs.
Investments
Investments in fixed income securities are classified as held to maturity
and are carried at amortized cost. Short-term investments are carried at cost,
which approximates market value. The realized gain or loss on investment
transactions is determined on the basis of specific identification and is
included in earnings on the trade date.
Property and Equipment
Property and equipment acquired subsequent to 1983, including assets
transferred from TransAmerican in 1994, are stated at TransAmerican's or TARC's
historical cost. During the period from 1987 through August 1993, property and
equipment acquired prior to 1983 were carried at estimated net realizable value
and no depreciation expense was charged. New or refurbished units are
depreciated as placed in service. Depreciation of refinery equipment and other
buildings and equipment, including assets acquired under capital leases, is
computed using the straight-line method over the estimated useful lives of the
assets. Costs of improving leased property are amortized over the estimated
useful lives of the assets or the terms of the leases, whichever is shorter.
The cost of repairs and minor replacements is charged to operating expense.
The cost of renewals and improvements are capitalized. At the time depreciable
assets are retired or otherwise disposed of, the cost and related accumulated
depreciation or amortization are removed from the accounts. Gains or losses on
dispositions in the ordinary course of business are included in the statement of
operations. Impairment of property and equipment is reviewed whenever events or
changes in circumstances indicate that the carrying amount of assets may not be
recoverable. Events or circumstances that may indicate impairment may include,
among others, a prolonged shutdown of the refinery or a prolonged period of
negative or low refining margins.
Maintenance Turnaround Costs
A turnaround consists of a complete shutdown, inspection and maintenance of
a unit. The estimated costs of turnarounds are accrued over the period to the
next scheduled turnaround, which is generally greater than one year.
Environmental Remediation Costs
Environmental expenditures are expensed or capitalized as appropriate,
depending on their future economic benefit. Expenditures relating to an existing
condition caused by past operations that do not have future economic benefits
are expensed. Liabilities for these expenditures are provided when the
responsibility to remediate is probable and the amount of associated costs is
reasonably estimable.
Debt Issue Costs
Debt issue costs are deferred and amortized to interest expense over the
scheduled maturity of the debt utilizing the interest method.
26
<PAGE> 29
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Stockholder's Equity
Stockholder's equity was retroactively adjusted to reflect a 30,000-for-1
stock split which was effective in July 1994. In July 1994, TARC increased its
authorized capital to 100,000,000 shares and decreased the par value of its
common stock from $1.00 to $0.01.
Defined Contribution Plan
TARC, through its parent company, TransAmerican, maintains a defined
contribution plan, which incorporates a "401(k) feature" as allowed under the
Internal Revenue Code. All investments are made through Massachusetts Mutual
Life Insurance Company. Employees who are at least 21 years of age and have
completed one year of credited service are eligible to participate on the next
semiannual entry date. TARC matches 10%, 20% or 50% of employee contributions up
to a maximum of 3% of the participant's compensation, based on years of plan
participation. All contributions are currently funded. TARC recognized
approximately $83,000, $75,000, $32,000, and $41,000 of expenses related to the
Defined Contribution Plan for the years ended January 31, 1998 and 1997, the six
months ended January 31, 1996 and the year ended July 31, 1995.
Revenue Recognition
TARC recognizes revenue from sales of refined products in the period of
delivery and other revenue in the period in which the service has been provided.
Concentration of Credit Risk
Financial instruments which potentially expose TARC to credit risk consist
principally of cash, trade receivables and forward contracts. TARC selects
depository banks based on management's review of the stability of the
institution. Balances periodically exceed the $100,000 level covered by federal
deposit insurance. To date, there have been no losses incurred due to excess
deposits in any financial institution. Trade accounts receivable are generally
from companies with significant petroleum activities, who would be impacted by
conditions or occurrences affecting that industry. All futures contracts were
with major brokerage firms and, in the opinion of management, did not expose
TARC to any undue credit risks. See Note 14.
TARC performs ongoing credit evaluations and, generally, requires no
collateral from its customers. For the year ended January 31, 1998, TARC
processed feedstocks from one customer which accounted for 100% of the net
processing arrangement income, and three customers accounted for 76% of storage
revenues. For the year ended January 31, 1997, TARC had two customers which
accounted for 96% of total revenues. For the six months ended January 31, 1996,
TARC had three customers which accounted for 41% of total revenues. For the year
ended July 31, 1995, TARC had two customers which accounted for 56% of total
revenues.
Income Taxes
TARC files a consolidated tax return with TransAmerican. Income taxes are
due from or payable to TransAmerican in accordance with a tax allocation
agreement. It is TARC's policy to record income tax expense as though TARC had
filed separately. Deferred income taxes are recognized, at enacted tax rates, to
reflect the future effects of tax carryforwards and temporary differences
arising between the tax bases of assets and liabilities and their financial
reporting amounts in accordance with Statement of Financial Accounting Standards
No. 109 and the Tax Allocation Agreement between TARC, TNGC Holdings Corporation
'("TNGC"), TransAmerican, and TransAmerican's other direct and indirect
subsidiaries. Income taxes include federal and state income taxes.
27
<PAGE> 30
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
TARC includes fair value information in the notes to the financial
statements when the fair value of its financial instruments is different from
the book value. TARC uses quoted market prices or, to the extent that there are
no available quoted market prices, market prices for similar instruments. When
the book value approximates fair value, no additional disclosure is made.
Net Income (Loss) Per Share
As of January 31, 1998, TARC had implemented Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Net income (loss) per share
has been restated for all periods presented to the extent applicable. Basic net
income per share is calculated by dividing net income available to common
shareholders by the weighted average number of shares of common stock. Diluted
net income per share is calculated by dividing net income available to common
shareholders by the weighted average number of shares of common stock and
potential shares of common stock. Warrants, if dilutive, are considered to be
potential shares of common stock for the purpose of diluted net income per
share. The treasury method is used to determine the potential shares of common
stock.
Weighted average shares outstanding used in calculating basic and diluted
net income (loss) per share ("EPS") are as follows in thousands:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JANUARY 31, YEAR ENDED
--------------------------- ------------------- JULY 31,
1998 1997 1996 1996 1995 1995
------ ------ ----------- ------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Common shares outstanding for
basic EPS....................... 30,000 30,000 30,000 30,000 30,000 30,000
Dilutive effect of warrants....... -- 7,458 -- -- -- --
------ ------ ------ ------ ------ ------
Common shares and potential common
shares outstanding for diluted
EPS............................. 30,000 37,458 30,000 30,000 30,000 30,000
====== ====== ====== ====== ====== ======
</TABLE>
Weighted average shares outstanding exclude potential common shares of
approximately 2,352,000 for the year ended January 31, 1998 and approximately
7,458,000 for the year ended January 31, 1996, the six months ended January 31,
1996 and the year ended July 31, 1995 because they are anti-dilutive.
Use of Estimates and Reclassifications
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date(s) of the financial
statements and the reported amounts of revenues and expenses during the
reporting period(s). Actual results could differ from those estimates. Certain
previously reported financial information has been reclassified to conform with
the current presentation. The reclassifications did not affect net income (loss)
or stockholder's equity.
Recently Issued Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which establishes
standards for reporting and display of comprehensive income and its components
in financial statements. This statement will be adopted by TARC effective
February 1, 1998. TARC does not believe that adoption of this statement will
have a material impact on its financial statements.
28
<PAGE> 31
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start Up Activities,"
("SOP 98-5"), which provides guidance on the financial reporting of start-up
costs and organization costs. This statement of position will be adopted by TARC
effective February 1, 1998. Implementation of the statement requires start-up
activities, such as those related to the Capital Improvement Program, to be
expensed as incurred.
2. CAPITAL IMPROVEMENT PROGRAM
TARC's refinery is located in the Gulf Coast region along the Mississippi
River, approximately 20 miles from New Orleans, Louisiana. TARC's business
strategy is to modify, expand and reactivate its refinery and to maximize
refining margins by converting low-cost, heavy, sour crude oils into high-value,
light petroleum products including primarily gasoline and heating oil.
In February 1995, TARC began a construction and expansion program (the
"1995 Program") designed to reactivate the refinery and increase its complexity.
From February 1995 through May 1997, TARC spent approximately $251 million on
the 1995 Program, procured a majority of the equipment required and completed
substantially all of the process design engineering and a substantial portion of
the remaining engineering necessary for its completion.
In June 1997, in connection with the TEC Notes Offering, the TARC
Intercompany Loan and the TARC Notes Tender Offer, TARC adopted the Capital
Improvement Program. The most significant projects include: (i) converting the
visbreaker unit into a delayed coking unit to process vacuum tower bottoms into
lighter petroleum products, (ii) modernizing and upgrading a fluid catalytic
cracking unit to increase gasoline production capacity and allow the direct
processing of low-cost atmospheric residual feedstocks, and (iii) upgrading and
expanding hydrotreating, alkylation and sulfur recovery units to increase sour
crude processing capacity. In addition, TARC plans to expand, modify and add
other processing units, tankage and offsite facilities as part of the Capital
Improvement Program. The Capital Improvement Program includes expenditures
necessary to ensure that the refinery is in compliance with certain existing air
and water discharge regulations and that gasoline produced will comply with
federal standards. TARC will act as general contractor, but has engaged a number
of specialty consultants and engineering and construction firms to assist TARC
in completing the individual projects that comprise the Capital Improvement
Program. Each of these firms was selected because of its specialized expertise
in a particular process or unit integral to the Capital Improvement Program.
The Capital Improvement Program will be executed in two phases. In June
1997, TARC estimated that Phase I would be completed at a cost of $223 million,
would be tested and operational by September 30, 1998 and would result in the
refinery having the capacity to process up to 200,000 Bpd of sour crude oil.
Phase II of the Capital Improvement Program includes the completion and start-up
of the Fluid Catalytic Cracking Unit utilizing state-of-the-art MSCC(SM)
technology and the installation of additional equipment expected to further
improve operating margins by allowing for a significant increase in the
refinery's capacity to produce gasoline. In June 1997, TARC estimated that Phase
II would be completed at a cost of $204 million and would be tested and
operational by July 31, 1999. TARC currently believes that actual expenditures
may exceed the budget by as much as $45 million (of which $30 million is
allocated to Phase I). Although there can be no assurance, TARC believes that it
will have cash sufficient to fund the remaining construction, and that both
Phase I and Phase II will be completed in advance of the Phase I completion date
required by the TEC Indenture (as defined in Note 9). TARC anticipates
Mechanical Completion of the Delayed Coking Unit, the HDS Unit and the related
portion of the Sulfur Recovery System in May 1998. Upon Mechanical Completion of
these units, TARC will be able to purchase feedstocks using funds in the TARC
Disbursement Account reserved for such purpose. TARC believes that the remainder
of Phase I (other than the No. 2 Reformer) will reach Mechanical Completion
during the second quarter of fiscal 1999. TARC intends to defer additional
expenditures on the No. 2 Reformer until the fourth quarter of fiscal 1999,
ending January 31, 1999. TARC
29
<PAGE> 32
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expects to complete both Phase I and Phase II in advance of the Phase I
completion date required by the TEC Indenture. TARC spent approximately $215
million on the Capital Improvement Program during the period between June 1997
and January 31, 1998. As of January 31, 1998, TARC had commitments to spend
another $83.3 million. The foregoing estimates, as well as other estimates and
projections herein, are subject to substantial revision upon the occurrence of
future events, such as unavailability of financing, engineering problems, work
stoppages and cost overruns, over which TARC may not have any control, and there
can be no assurance that any such projections or estimates will prove accurate.
TARC believes, based on current estimates of refining margins and costs of
the expansion and modification of the refinery, that future undiscounted cash
flows will be sufficient to recover the cost of the refinery over its estimated
useful life. Management believes there have been no events or changes in
circumstances that would require the recognition of an impairment loss. However,
due to the inherent uncertainties in estimating future refining margins, and in
constructing and operating a large scale refinery, there can be no assurance
that TARC will ultimately recover the cost of the refinery. Management believes
that the book value of the refinery is in excess of its current estimated fair
market value.
TARC has historically incurred losses and negative cash flow from operating
activities as a result of limited refinery operations that did not cover the
fixed costs of maintaining the refinery, increased working capital requirements
(including debt service) and losses on refined product sales and processing
arrangements. There is no assurance that TARC can complete the Capital
Improvement Program, fund its future working capital requirements or achieve
positive cash flow from operations. As a result, there is substantial doubt
about TARC's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
3. DISBURSEMENT ACCOUNTS
Pursuant to a disbursement agreement dated June 13, 1997, as amended
December 30, 1997 (the "Disbursement Agreement") among TARC, TEC, Firstar Bank
of Minnesota, N.A., as trustee (the "TEC Indenture Trustee"), Firstar Bank of
Minnesota, N.A., as disbursement agent (the "Disbursement Agent"), and Baker &
O'Brien, Inc., as construction supervisor (the "Construction Supervisor"), $208
million of the net proceeds from the sale of the TEC Notes (as defined in Note
9) was placed into accounts (collectively, the "TARC Disbursement Account") to
be held and invested by the Disbursement Agent until disbursed. TEC
disbursements for TARC expenditures will be treated as capital contributions. In
addition, proceeds to TEC and TARC of approximately $201 million from the
TransTexas share repurchase program have been deposited in the TARC Disbursement
Account. On December 30, 1997, TARC deposited $119 million of the net proceeds
from the issuance of its Series A Senior Subordinated Notes (defined in Note 8)
into the TARC Disbursement Account for use in the Capital Improvement Program.
All funds in the TARC Disbursement Account are pledged as security for the
repayment of the TEC Notes.
The Disbursement Agent will make disbursements for the Capital Improvement
Program out of the TARC Disbursement Account in accordance with requests made by
TARC and approved by the Construction Supervisor. The Construction Supervisor is
required to review each such disbursement request by TARC. No disbursements may
be made from the TARC Disbursement Account for purposes other than the Capital
Improvement Program other than (i) up to $1.5 million per month (except for
December 1997, in which disbursements may be up to $4.5 million) to fund
administrative costs and certain taxes and insurance payments, not in excess of
$25.5 million in the aggregate; provided, that if less than $1.5 million is
spent in any month (or less than $4.5 million is spent in December 1997) the
amounts that may be disbursed in one or more subsequent months will be increased
by the amount of such difference, (ii) up to $50 million for feedstock upon
certification by the Construction Supervisor of the Mechanical Completion (as
defined in the TEC Notes Indenture) of the Delayed Coking Unit and associated
facilities, (iii) up to $19 million to pay interest on, and to redeem,
repurchase, defease, or otherwise retire the remaining TARC Notes and (iv) up to
30
<PAGE> 33
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
$7 million for outstanding accounts payable. In addition, interest income from
the TARC Disbursement Account may be used for the Capital Improvement Program or
disbursed to fund administrative and other costs of TARC and TEC. As of January
31, 1998, $225 million had been disbursed to TARC out of the TARC Disbursement
Account for use in the Capital Improvement Program, $18 million for accounts
payable and general and administrative expenses and $19 million for payments of
interest on, and the redemption, repurchase and defeasance of the TARC Notes.
4. OTHER CURRENT ASSETS
The major components of other current assets are as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1998 1997
------ ------
<S> <C> <C>
Insurance prepayments....................................... $ 949 $ 603
Tax prepayments............................................. 335 --
Other....................................................... 62 51
------ ------
$1,346 $ 654
====== ======
</TABLE>
5. PROPERTY AND EQUIPMENT
The major components of property and equipment are as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
ESTIMATED JANUARY 31,
USEFUL LIFE --------------------
(YEARS) 1998 1997
----------- -------- --------
<S> <C> <C> <C>
Land............................................... $ 18,435 $ 9,362
Refinery........................................... 20 to 30 898,835 532,428
Other.............................................. 3 to 10 22,510 14,026
-------- --------
$939,780 $555,816
======== ========
</TABLE>
Approximately $97 million and $45 million of refinery assets were being
depreciated at January 31, 1998 and 1997, respectively. The remaining refinery
and other assets are considered construction in process. Approximately $90.4
million of property, plant and equipment represents assets transferred by
TransAmerican at net realizable value and $465.4 million represents additions
recorded at historical cost. As of January 31, 1997, TARC changed the estimated
useful lives of the refinery equipment currently under construction from 10
years to a range of 20 to 30 years. The change in estimate was not material to
1997 net income. TARC recognized $7.8 million, $6.7 million, $2.9 million and
$5.9 million in depreciation expense for the years ended January 31, 1998 and
1997, the six months ended January 31, 1996 and the year ended July 31, 1995,
respectively.
TARC believes, based on current estimates of refining margins and projected
costs of the Capital Improvement Program, that future undiscounted cash flows
will be sufficient to recover the cost of the refinery over its estimated useful
life as well as the costs of related identifiable intangible assets. Management
believes there have been no events or changes in circumstances that would
require the recognition of an impairment loss. However, due to the inherent
uncertainties in estimating future refining margins, in constructing and
operating a large scale refinery and the uncertainty regarding TARC's ability to
complete the Capital Improvement Program, there can be no assurance that TARC
will ultimately recover the cost of the refinery. Management believes that the
book value of the refinery is in excess of its current estimated fair market
value.
31
<PAGE> 34
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. OTHER ASSETS
The major components of other assets are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
JANUARY 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Debt issue costs, net of accumulated amortization of $2,477
and $6,445 at January 31, 1998 and 1997, respectively..... $32,473 $17,482
Prepaid capital expenditures................................ 24,217 --
Contractual rights and licenses, net of accumulated
amortization of $0 and $992 at January 31, 1998 and
1997...................................................... 3,500 5,979
Environmental escrow........................................ 5,062 --
Investment in TransTexas.................................... 2,015 --
Other....................................................... 1,162 212
------- -------
$68,429 $23,673
======= =======
</TABLE>
TARC uses the straight-line method to amortize intangibles over the periods
estimated to be benefited.
During fiscal 1998, TARC charged to income $22.8 million in debt issue
costs (see Note 8) and $2.2 million of intangible costs in connection with the
acquisition of a tank storage facility.
7. ACCRUED LIABILITIES
The major components of accrued liabilities are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1998 1997
------ -------
<S> <C> <C>
Interest.................................................... $3,665 $ 7,608
Taxes other than income taxes............................... 584 3,365
Maintenance turnarounds..................................... 2,673 1,909
Payroll..................................................... 1,343 599
Insurance................................................... 641 748
Other....................................................... 622 747
------ -------
$9,528 $14,976
====== =======
</TABLE>
8. LONG-TERM DEBT
TARC's long-term debt is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Guaranteed First Mortgage Discount Notes due 2002........... $ 6,890 $269,606
Guaranteed First Mortgage Notes due 2002.................... 7,531 96,124
Acquisition Note............................................ 36,000 --
Subordinated Notes due 2003................................. 166,955 --
-------- --------
Total long-term debt.............................. 217,376 365,730
Less current maturities..................................... 6,710 --
-------- --------
$210,666 $365,730
======== ========
</TABLE>
32
<PAGE> 35
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On February 23, 1995, TARC issued 340,000 A Units consisting of $340
million aggregate principal amount of 18 1/2% Guaranteed First Mortgage Discount
Notes due 2002 ("Discount Mortgage Notes") and 5,811,773 Common Stock Purchase
Warrants ("1995 Warrants"), and 100,000 B Units consisting of $100 million
aggregate principal amount of 16 1/2% Guaranteed First Mortgage Notes due 2002
("Mortgage Notes" and, together with the Discount Mortgage Notes, the "TARC
Notes") and 1,683,540 1995 Warrants. Interest is payable semi-annually with the
first interest payment on the Discount Mortgage Notes due August 15, 1998.
Interest payments on the Mortgage Notes began August 15, 1995. The TARC Notes
are senior obligations of TARC, collateralized as of January 31, 1998 by a first
priority lien on substantially all of TARC's property and assets and pledges of
1.9 million shares of common stock of TransTexas and all of TARC's outstanding
common stock. The 1995 Warrants are exercisable at a price of $0.01 per share
and expire on February 15, 2002. TARC allocated $23.3 million of the proceeds
from the issuance of the TARC Notes to the 1995 Warrants based on their
estimated fair value.
TARC received approximately $301 million from the sale of A Units and B
Units. Net proceeds to TARC were approximately $92 million after deducting
approximately $16 million for underwriting discounts, commissions, fees and
expenses, approximately $20 million for the repayment of the balance of a loan
from TransAmerican ("TransAmerican Loan"), and $173 million which was deposited
into a cash collateral account to fund the 1995 Program.
On June 13, 1997, TEC completed a tender offer for all of the outstanding
1995 Warrants at a price of $4.50 per warrant. Pursuant to the tender offer, TEC
purchased 7,320,552 1995 Warrants for an aggregate purchase price of
approximately $33 million. TransAmerican subsequently purchased 163,679 1995
Warrants for an aggregate purchase price of approximately $0.7 million. In
December 1997, TransAmerican sold 11,100 1995 Warrants to an unaffiliated third
party. The remaining 1995 Warrants owned by TransAmerican, as well as the 1995
Warrants purchased by TEC in the tender offer, were contributed to TARC and
cancelled. As of January 31, 1998, there were 22,119 1995 Warrants outstanding.
On June 13, 1997, TARC completed a tender offer (the "TARC Notes Tender
Offer") for the (i) TARC Mortgage Notes for 112% of their principal amount (plus
accrued and unpaid interest) and (ii) TARC Discount Notes for 112% of their
accreted value. In connection with the TARC Notes Tender Offer, TARC obtained
consents from holders of the TARC Notes to certain waivers under, and amendments
to, the indenture governing the TARC Notes (the "TARC Notes Indenture"), which
eliminated or modified certain of the covenants and other provisions contained
in the TARC Notes Indenture. TARC Mortgage Notes and TARC Discount Notes with an
aggregate carrying value of $423 million were tendered and accepted by TARC at a
cost to TARC of approximately $437 million (including accrued interest, premiums
and other costs). As a result of the TARC Notes Tender Offer, $22.8 million of
debt issuance costs were written off and TARC recorded a total extraordinary
charge of $84.8 million during the year ended January 31, 1998. On January 14,
1998, TARC called for redemption on February 17, 1998 approximately $7 million
in aggregate principal amount of TARC Notes. On January 16, 1998, TARC
deposited, pursuant to an irrevocable trust agreement, approximately $9.8
million in order to defease the remaining TARC Notes. The amount deposited was
invested in U.S. Treasury strip securities which will yield on maturity amounts
sufficient to pay the principal of the remaining TARC Notes and interest thereon
from the date of deposit to and including the final redemption date, as well as
a call premium of 6%. The maturity dates of the strip securities coincide with
the final redemption date of February 15, 1999 and all scheduled interest
payment dates occurring during the period ending on such final redemption date.
As of January 31, 1998, the amortized cost of these investments approximated
fair value. As of January 31, 1998, TARC Mortgage Notes and TARC Discount Notes
with an aggregate carrying value of approximately $14.4 million remained
outstanding. On April 17, 1998, the TARC Notes were defeased and the collateral
securing the TARC Notes was released.
On December 10, 1997, TARC issued to an unaffiliated third party a 13%
Senior Secured Note due 2002 (the "Acquisition Note") in the principal amount of
$36 million to finance a portion of the purchase price of a
33
<PAGE> 36
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
tank storage facility purchased in September 1997. The Acquisition Note is
secured by a mortgage on the tank storage facility, and is governed by a Note
Purchase Agreement containing restrictive covenants substantially similar to
those contained in the TARC Intercompany Loan and the TEC Indenture. The
Acquisition Note bears interest at 13%, payable semiannually on June 15 and
December 15, and matures on December 15, 2002.
On December 30, 1997, TARC issued in a private offering 175,000 Units
consisting of $175 million in aggregate principal amount of 16% Series A Senior
Subordinated Notes due 2003 (the "Series A Senior Subordinated Notes") and
175,000 common stock purchase warrants (the "December 1997 Warrants"). The
Series A Senior Subordinated Notes bear interest at 16%, payable semi-annually
on June 30 and December 30 and mature on June 30, 2003. The December 1997
Warrants will be exercisable on or after December 30, 1998 at a price of $0.01
per share and expire on June 20, 2003. Net proceeds to TARC, after deducting
fees and expenses of approximately $8 million, were approximately $167 million.
Net proceeds of $8.2 million from the sale of the Units was allocated to the
December 1997 Warrants. TARC deposited $119 million of the net proceeds into the
TARC Disbursement Account for use in the Capital Improvement Program and
deposited $42 million into an interest reserve account for interest payments on
the Series A Senior Subordinated Notes through June 30, 1999. The remaining $6
million of net proceeds was used for general corporate purposes including the
redemption and defeasance of the TARC Notes. The indenture governing the Series
A Senior Subordinated Notes contains certain restrictive covenants, including,
among others, limitations on incurring additional debt, asset sales, dividends
and transactions with affiliates.
On March 16, 1998, TARC issued in a private offering 25,000 Units
consisting of $25 million in aggregate principal amount of 16% Series C Senior
Subordinated Notes due 2003 (the "Series C Senior Subordinated Notes" and,
together with the Series A Senior Subordinated Notes, the "Senior Subordinated
Notes") and 25,000 warrants (the "March 1998 Warrants" and, together with the
December 1997 Warrants, the "Warrants") to purchase 333,606 shares of TARC
common stock. The Series C Subordinated Notes bear interest at 16%, payable
semiannually on June 30 and December 30, and mature on June 30, 2003. The March
1998 Warrants will be exercisable on or after December 30, 1998 at a price of
$0.01 per share and expire on June 20, 2003. Net proceeds to TARC, after
deducting fees and expenses of approximately $1.2 million, were approximately
$26.2 million. Net proceeds of approximately $2.8 million from the sale of the
Units was allocated to the March 1998 Warrants. TARC deposited $6 million into
an interest reserve account for interest payments on the Series C Senior
Subordinated Notes from December 30, 1997 through June 30, 1999. The remaining
$20.2 million of net proceeds has been or will be used for general corporate
purposes. The indenture governing the Series C Senior Subordinated Notes
contains certain restrictive covenants, including, among others, limitations on
incurring additional debt, asset sales, dividends and transactions with
affiliates.
The fair value of the TARC Notes was approximately $16 million and $404
million as of January 31, 1998 and 1997, respectively. The fair value of the
Series A Subordinated Notes was approximately $182 million as of January 31,
1998. Fair value is based on quoted market prices. Aggregate maturities of long-
term debt for the next five years are (in millions): fiscal year 1999 -- $7,
2000 -- $8, 2001 -- $0, 2002 -- $0 and 2003 -- $36.
34
<PAGE> 37
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. NOTES PAYABLE TO AFFILIATES
TARC's notes payable to affiliates are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
TARC Intercompany Loan...................................... $745,257 $ --
Note payable to affiliate................................... 15,009 46,589
-------- -------
$760,266 $46,589
======== =======
</TABLE>
On June 13, 1997, TEC completed a private offering (the "TEC Notes
Offering") of $475 million aggregate principal amount of its 11 1/2% Senior
Secured Notes due 2002 (the "Senior Secured Notes") and $1.13 billion aggregate
principal amount of its 13% Senior Secured Discount Notes due 2002 (the "Senior
Secured Discount Notes" and, together with the Senior Secured Notes, the "TEC
Notes") for net proceeds of approximately $1.3 billion. The TEC Notes are senior
obligations of TEC, secured by a lien on substantially all of its existing and
future assets, including intercompany loans made to TransTexas and TARC. The
indenture governing the TEC Notes (the "TEC Indenture") contains certain
restrictive covenants, including, among others, limitations on incurring
additional debt, asset sales, dividends and transactions with affiliates.
On June 13, 1997, with proceeds from the TEC Notes Offering, TEC made an
intercompany loan to TARC (the "TARC Intercompany Loan"). The TARC Intercompany
Loan (i) is in the original amount of $676 million, (ii) 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
(iii) is currently secured by a security interest in substantially all of TARC's
assets other than Inventory, Receivables and Equipment. The TARC Intercompany
Loan will mature on June 1, 2002. The agreement governing the TARC Intercompany
Loan (the "Intercompany Loan Agreement") contains certain restrictive covenants,
including, among others, limitations on incurring additional debt, asset sales,
dividends and transactions with affiliates. TARC used approximately $103 million
of the proceeds of the TARC Intercompany Loan to repay certain indebtedness,
including $36 million of senior secured notes of TARC that were issued in March
1997 and $66 million of advances and notes payable owed to an affiliate, and
used approximately $437 million to complete the TARC Notes Tender Offer.
Remaining proceeds will be used for the Capital Improvement Program and for
general corporate purposes. TEC allocated $30.8 million of debt issuance costs
to TARC which are reflected as a contribution of capital. Such costs are being
amortized over the term of the TARC Intercompany Loan using the interest method.
Upon the occurrence of a Change of Control (as defined), TEC will be required to
make an offer to purchase all of the outstanding 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 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 TARC Intercompany Loan, TEC may require TARC to pay a pro rata
share of the purchase price paid by TEC in an offer to purchase pursuant to a
Change of Control.
In July and September 1997, TEC advanced an aggregate of $46 million to
TARC. All of the advances are governed by the terms of a promissory note that is
due June 14, 2002 bearing interest at a rate that, when added to the interest
paid by TransTexas on the TransTexas Intercompany Loan, will equal the amount of
interest payable on the TEC Notes. As of January 31, 1998, the amount payable
pursuant to the advances was approximately $15 million.
35
<PAGE> 38
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES
Long-term deferred tax assets and liabilities are comprised of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
JANUARY 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Receivable from TransAmerican in lieu of federal net
operating loss carryforwards........................... $ 125,097 $ 72,268
Safe harbor leases........................................ 78,026 81,976
Other..................................................... 6,117 355
--------- ---------
Gross deferred tax assets.............................. 209,240 154,599
Deferred tax liabilities:
Depreciation.............................................. 3,954 4,331
--------- ---------
Net deferred tax assets..................................... 205,286 150,268
Valuation allowance......................................... (205,286) (150,268)
--------- ---------
$ -- $ --
========= =========
</TABLE>
A net deferred tax asset valuation allowance was recorded for each
respective period because it is unlikely that TARC will realize such deferred
tax assets. Changes in the net deferred tax asset valuation allowance were
primarily attributable to increases in tax loss carryforwards.
TNGC Holdings Corporation, TransAmerican, and its existing subsidiaries,
including TARC, TEC and TransTexas, entered into a tax allocation agreement (the
"Tax Allocation Agreement"), the general terms of which require TransAmerican
and all of its subsidiaries to file federal income tax returns as members of a
consolidated group to the extent permitted by law. Filing on a consolidated
basis allows income and tax of one member to be offset by losses and credits of
another and allows deferral of certain intercompany gains; however, each member
is severally liable for the consolidated federal income tax liability of the
consolidated group.
The Tax Allocation Agreement requires each of TransAmerican's subsidiaries
to pay to TransAmerican each year its allocable share of the federal income tax
liabilities of the consolidated group ("Allocable Share"). The Tax Allocation
Agreement provides for a reallocation of the group's consolidated federal income
tax liabilities among the members if the IRS or the courts ultimately
re-determine the group's regular tax or alternative minimum tax liability. 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 TARC, TEC or TransTexas, as the
case may be, where such compromise or settlement affects the determination of
the separate tax liability of that company.
Under the Tax Allocation Agreement, each subsidiary's Allocable Share for
each tax year will generally equal the amount of federal income tax it would
have owed had it filed a separate federal income tax return for each year except
that each subsidiary will be able to utilize net operating losses and credits of
TransAmerican and the other members of the consolidated group effectively to
defer payment of tax liabilities that it would have otherwise owed had it filed
a separate federal income tax return. Each subsidiary will essentially pay the
deferred taxes at the time TransAmerican (or the member whose losses or credits
are utilized by such subsidiary) begins generating taxable income or tax. This
will have the effect of deferring a portion of such subsidiary's tax liability
to future years. The parties to the Tax Allocation Agreement amended such
agreement in May 1997 to include additional affiliates as parties, and further
amended the Tax Allocation Agreement in connection with the transactions
consummated in June 1997 to allocate to TransAmerican, as among the parties, any
tax liability associated with the sale by TransTexas of its Lobo Trend
subsidiary.
36
<PAGE> 39
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On a separate return basis, TARC has incurred approximately $357.4 million
of regular tax net operating losses from inception through January 31, 1998.
TARC's regular tax net operating losses incurred from inception through January
31, 1998 would generally expire from 2004 through 2014. Under the Tax Allocation
Agreement, as long as TARC remains in the consolidated group for tax purposes,
TARC may receive benefits in the future for loss carryforwards in the form of
reduced current taxes payable to the extent (i) its losses incurred are
available for and utilized by TransAmerican and (ii) TransAmerican has the
ability to pay its taxes without contributions from TARC. At January 31, 1998,
TARC had generated NOL carryforwards of approximately $183.5 million which have
not been used by TransAmerican and which would expire in 2014.
A change of control or other event that results in deconsolidation of TARC
from TransAmerican's consolidated group for federal income tax purposes could
result in the acceleration of payment of a substantial amount of federal income
taxes by TransAmerican. The tax liability to TransAmerican that would result
from deconsolidation is estimated to be approximately $100 million at January
31, 1998. Each member of a consolidated group filing a consolidated federal
income tax return is severally liable for the consolidated federal income tax
liability of the consolidated group. There can be no assurance that
TransAmerican will have the ability to satisfy the above tax obligation at the
time due and, therefore, TARC or other members may be required to pay all or a
portion of the tax. A decision by TEC or TARC to sell TransTexas shares could
result in deconsolidation of TransTexas for tax purposes.
Total income tax expense (benefit) differs from amounts computed by
applying the statutory federal income tax rate to income (loss) before income
taxes as follows (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED YEAR
JANUARY 31, JANUARY 31, ENDED
-------------------------------- --------------------- JULY 31,
1998 1997 1996 1996 1995 1995
-------- ------- ----------- ------- ----------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Federal income tax expense
(benefit) at the
statutory rate........... $(39,203) $ 3,292 $(23,540) $(9,125) $(8,103) $(22,518)
Increase (decrease) in tax
resulting from:
Net operating losses
(utilized) not
utilizable............ 39,203 (3,292) 23,540 9,125 8,103 22,518
-------- ------- -------- ------- ------- --------
$ -- $ -- $ -- $ -- $ -- $ --
======== ======= ======== ======= ======= ========
</TABLE>
11. INVESTMENT IN TRANSTEXAS
TARC uses the equity method to account for its investment in TransTexas and
initially recorded this investment at TransAmerican's historical basis. During
1996, TARC's original interest of 20.3% decreased to 14.1% when TARC sold 4.55
million shares to unaffiliated third parties and recognized a gain of $56.2
million on the sale of TransTexas Stock. During 1997, TARC's interest decreased
to 3.4% when TransTexas repurchased approximately 12.6 million shares from TARC
and TEC for an aggregate purchase price of approximately $201 million. TARC
received $136.2 million of the purchase price, of which $124.5 million
(representing the excess of cash received over TARC's carrying value of the
stock sold) was recorded as a capital contribution. In April 1998, TARC
distributed its remaining shares of TransTexas common stock to TEC. The equity
in extraordinary loss of TransTexas for the year ended January 31, 1998
represents TARC's equity in a charge by TransTexas for the early retirement of
its $800 million 11 1/2% Senior Secured Notes due 2002 and an exchange offer by
TransTexas for its Subordinated Notes. The equity in extraordinary loss of
TransTexas for the year ended July 31, 1995, represents TARC's equity in a
charge by TransTexas for the early retirement of $500 million of its 10 1/2%
Senior Secured Notes due 2000 from the proceeds of the issuance by TransTexas in
June 1995 of $800 million in 11 1/2% Senior Secured Notes due 2002.
37
<PAGE> 40
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Summary financial information of TransTexas is as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
JANUARY 31,
----------------------
1998 1997
-------- ----------
<S> <C> <C>
ASSETS
Total current assets........................................ $ 82,714 $ 188,934
Property and equipment, net................................. 701,598 846,393
Other assets................................................ 32,323 17,825
-------- ----------
$816,635 $1,053,152
======== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Total current liabilities................................... $104,836 $ 117,348
Total noncurrent liabilities................................ 687,162 1,086,599
Total stockholders' equity (deficit)........................ 24,637 (150,795)
-------- ----------
$816,635 $1,053,152
======== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JANUARY 31, YEAR ENDED
--------------------------------- ---------------------- JULY 31,
1998 1997 1996 1996 1995 1995
-------- -------- ----------- -------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues.................. $723,271 $406,347 $291,338 $141,156 $162,517 $312,699
Operating costs and
expenses................ 193,171 219,068 229,284 101,908 133,833 261,209
-------- -------- -------- -------- -------- --------
Operating income........ 530,100 187,279 62,054 39,248 28,684 51,490
Other expense............. (68,187) (91,463) (77,174) (40,436) (29,059) (65,797)
Income tax (expense)
benefit................. (161,669) (12,491) 2,700 416 131 2,415
-------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item... 300,244 83,325 (12,420) (772) (244) (11,892)
Extraordinary item........ (72,043) -- (56,637) -- -- (56,637)
-------- -------- -------- -------- -------- --------
Net income (loss)....... $228,201 $ 83,325 $(69,057) $ (772) $ (244) $(68,529)
======== ======== ======== ======== ======== ========
</TABLE>
12. TRANSACTIONS WITH AFFILIATES
Pursuant to the stock transfer agreement dated February 23, 1995 (the
"Stock Transfer Agreement") among TransAmerican, TEC and TARC, TransAmerican
contributed to the capital of TEC (the "Stock Transfer") (i) all of the
outstanding capital stock of TARC, and (ii) 55 million shares of common stock of
TransTexas. TEC subsequently contributed 15 million of its shares of TransTexas
common stock to TARC.
Prior to the sale of the TARC Notes, TARC participated in TransAmerican's
centralized cash management program. Funds required by TARC for daily operations
and capital expenditures were advanced by TransAmerican. In October 1994,
TransAmerican sold 5.25 million shares of TransTexas common stock. TransAmerican
advanced approximately $50 million of the proceeds from these stock sales to
TARC, of which approximately $20 million was used by TARC to repay a portion of
the intercompany debt owed to TransAmerican, and the remaining $30 million of
the net proceeds was used for working capital and general corporate purposes.
TARC used approximately $30 million of the net proceeds of the sale of the TARC
Notes to repay additional intercompany debt to TransAmerican. TransAmerican
contributed to the capital of TARC (through TEC) all but $10 million of the
remainder of TARC's intercompany debt owed to TransAmerican. In April 1995, TARC
repaid the remaining $10 million of intercompany indebtedness owed to
TransAmerican. In August 1995, TARC received an advance of $3 million from
TransTexas, which TARC used to settle
38
<PAGE> 41
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
its remaining portion of certain litigation. In September 1995, TARC received an
advance of $1.7 million from TransAmerican, which TARC used to purchase
feedstock. In October 1995, TARC repaid these advances without interest.
Additionally in October 1995, TARC received an advance of approximately $4
million from TransAmerican for working capital which it repaid in June 1997.
In September 1995, TARC received an advance of $1 million from TransTexas,
which TARC used to purchase feedstock. This advance was repaid by TARC without
interest. In December 1995, TARC advanced $1 million to TransTexas. This advance
was repaid to TARC with interest in December 1995.
During 1995, TransAmerican acquired an office building which it
subsequently sold to TransTexas in February 1996 for $4 million. In February
1996, TransAmerican advanced $4 million of the proceeds from this sale to TARC
for working capital. TransTexas charges TARC approximately $61,000 in rent
annually, of which approximately $117,000 was payable to TransTexas at January
31, 1998.
In July 1996, TARC executed a promissory note to TransAmerican for up to
$25 million. The note bore interest at a rate of 15% per annum, payable
quarterly beginning October 31, 1996. On November 1, 1996, TARC executed an
additional $25 million promissory note to TransAmerican which bore interest at
15% per annum, payable quarterly beginning December 31, 1996 (together with the
first promissory note, the "TransAmerican Notes"). As of January 31, 1997, TARC
had approximately $44.4 million outstanding under the TransAmerican Notes. In
February 1997, the November 1996 promissory note was replaced with a $50 million
note bearing interest at an annual rate of 15% and which matures on July 31,
2002. All amounts outstanding under the TransAmerican Notes were repaid on June
13, 1997.
From August 1993 to June 1997, TransTexas provided general commercial legal
services and certain accounting services (including payroll, tax, and treasury
services) to TARC and TEC for a fee of $26,000 per month pursuant to a services
agreement. In June 1997, the services agreement was terminated.
On June 13, 1997, a new services agreement was entered into among
TransAmerican, TEC, TARC and TransTexas. Under the new services agreement,
TransTexas provides accounting, legal, administrative and other services to
TARC, TEC and TransAmerican and its affiliates. TransAmerican provides advisory
services to TransTexas, TARC and TEC. TARC will pay to TransTexas approximately
$300,000 per month for services rendered to, and for allocated expenses paid by
TransTexas on behalf of, TARC and TEC. TEC and its subsidiaries will pay $2.5
million in the aggregate per year to TransAmerican for advisory services and
benefits provided by TransAmerican. Pursuant to these agreements, TARC has
recognized $4.0 million in service agreement expenses during the year ended
January 31, 1998. As of January 31, 1998, $1.2 million and $1.6 million was
payable to TransTexas and TransAmerican, respectively, pursuant to the services
agreement.
Southeast Contractors, a subsidiary of TransAmerican, provides construction
personnel to TARC in connection with the Capital Improvement Program. These
construction workers are temporary employees, and the number and composition of
the workforce will vary throughout the Capital Improvement Program. Southeast
Contractors charges TARC for the direct costs it incurs (which consist solely of
employee payroll and benefits) plus administrative costs and fees of up to $2.0
million per year. Total labor costs charged by Southeast Contractors for the
years ended January 31, 1998 and 1997, the six months ended January 31, 1996 and
the year ended July 31, 1995 were $50.7 million, $14.1 million, $20.2 million
and $15.5 million, respectively, of which $5.3 million and $1.8 million was
payable at January 31, 1998 and 1997, respectively.
TARC purchases natural gas from TransTexas on an interruptible basis. The
total cost of natural gas purchased for the years ended January 31, 1998 and
1997, the six months ended January 31, 1996 and the year ended July 31, 1995 was
approximately $0.4 million, $2.7 million, $1.4 million and $2.5 million,
respectively. The payable to TransTexas for natural gas purchases at January 31,
1997 was $2.7 million.
In July and September 1997, TEC advanced an aggregate of $46 million to
TARC. All of the advances are governed by the terms of a promissory note that is
due June 14, 2002 bearing interest at a rate that, when
39
<PAGE> 42
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
added to the interest paid by TransTexas on the TransTexas Intercompany Loan,
will equal the amount of interest payable on the TEC Notes through December 15,
1997. Thereafter, the amount of fixed interest payable to TEC of $5.7 million
per year will be proportioned semi-annually between TARC and TransTexas based on
the average outstanding balance of TARC's note to TEC and the average
outstanding balance of all notes between TransTexas and TEC. As of January 31,
1998, the principal amount payable by TARC to TEC pursuant to the advances was
$15 million. During the year ended January 31, 1998, TARC recognized $3.1
million in interest expense pursuant to the advances of which approximately $0.2
million was payable to TEC at January 31, 1998. Included in the $3.1 million of
interest expense is approximately $0.3 million paid to TEC for advances made to
TransTexas during fiscal 1998.
During the year ended January 31, 1998, TEC contributed $13.5 million to
TARC for general corporate purposes pursuant to the Disbursement Agreement.
On December 30, 1997, TEC and TARC entered into an expense reimbursement
agreement pursuant to which TARC will reimburse TEC for certain administrative,
legal and accounting expenses and directors fees and will also reimburse TEC for
other expenses in an amount not to exceed $200,000 per year. Since December 30,
1997, no such expenses were reimbursed to TEC.
Blackburn & Henderson, a law firm of which Mr. Henderson, a director of
TARC and TEC, is a partner, provides legal and other services to TransAmerican
and its affiliates for an annual fee of $96,000 plus expenses.
40
<PAGE> 43
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
13. SUPPLEMENTAL CASH FLOW INFORMATION
The following information reflects TARC's cash paid for interest and
noncash investing and financing activities (in thousands of dollars):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JANUARY 31, YEAR ENDED
-------------------------------- --------------------- JULY 31,
1998 1997 1996 1996 1995 1995
------- -------- ----------- ------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Interest paid, net of amounts
capitalized..................... $37,238 $ 2,426 $ 1,365 $ 836 $ -- $ 1,282
Noncash financing and investing
activities:
Accretion on long-term debt
capitalized in property and
equipment.................... 74,716 49,109 29,306 18,186 -- 11,120
Accounts payable for property
and equipment................ 24,214 14,856 14,082 10,591 8,293 11,784
Debt issue costs from
affiliate.................... 30,768 -- -- -- -- --
Cost in excess of warrants
redeemed by affiliates....... 10,398 -- -- -- -- --
Capital lease and seller
financed obligations incurred
for property and equipment... 1,775 -- 2,544 1,643 66 967
Product financing
arrangements................. -- (37,206) 37,206 37,206 -- 27,671
Forgiveness of advances from
TransAmerican (including
$25.0 million for property
and equipment transferred
from TransAmerican at net
book value in 1994).......... -- -- 71,170 -- -- 71,170
Contribution of TransTexas
stock........................ -- -- 37,176 -- -- 37,176
Issuance of Warrants for
professional fees............ 3,503 -- -- -- -- --
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
EEOC. On September 30, 1997, the U.S. Equal Employment Opportunity
Commission ("EEOC") issued a Determination (the "Determination") as a result of
the Commissioner's Charge that had been filed in August 1995 against TARC and
Southeast Louisiana Contractors of Norco, Inc. ("Southeast Contractors")
pursuant to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
sec. 2000e et seq. ("Title VII"). In the Determination, the EEOC stated that it
found reasonable cause to believe that each of TARC and Southeast Contractors
had discriminated based on race and gender in its hiring and promotion
practices. Each violation of Title VII (for each individual allegedly
aggrieved), if proven, potentially could subject TARC and Southeast Contractors
to liability for (i) monetary damages for backpay and front pay in an
undetermined amount, and for compensatory damages and punitive damages in an
amount not to exceed $300,000 per plaintiff, (ii) injunctive relief, (iii)
attorney's fees and (iv) interest. During the period covered by the
Commissioner's Charge and the Determination, TARC and Southeast Contractors
estimate that they received a combined total of approximately 23,000 to 30,000
employment applications and hired (or rehired) a combined total of approximately
3,400 to 4,100 workers, although the total number of individuals who
41
<PAGE> 44
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ultimately are covered in any conciliation proposal or any subsequent lawsuit
may be higher. TARC and Southeast Contractors deny engaging in any unlawful
employment practices. TARC and Southeast Contractors intend vigorously to defend
against the allegations contained in the Commissioner's Charge and the findings
set forth in the Determination in any proceedings in state or federal court,
regardless of whether any such lawsuit is brought by the EEOC or any individual
or groups of individuals. If TARC or Southeast Contractors is found liable for
violations of Title VII based on the matters asserted in the Determination, TARC
can make no assurance that such liability would not have a material adverse
effect on its financial position, results of operations or cash flow.
Rineheart. On October 8, 1996, Carlton Gene Rineheart, et al., and as
representative of a class of persons similarly situated, filed suit against 84
individuals and corporations, including TARC, in the U.S. District Court, Middle
District of Louisiana alleging negligent and improper storage, handling,
treatment, and disposal of hazardous materials from 1976 to the present at two
sites in Iberville Parish, Louisiana. The suit claims damages for physical,
mental, and property damage in the communities of Bayou Sorrel, Bayou Pigeon and
Indian Village. TARC intends to vigorously defend this claim.
Shell Oil. On September 27, 1996, Shell Oil filed a third party suit
against TARC in the U.S. District Court, Eastern District of Louisiana for
contribution and/or indemnity relating to alleged environmental contamination of
Bayou Trapagnier and surrounding lands near Norco, Louisiana. In March 1997,
TARC obtained a voluntary dismissal from Shell. Shell proceeded to trial on the
main case and settled with the plaintiffs during trial by purchasing their land
for $5 million. On June 27, 1997, Shell amended its third party action to bring
TARC back into the case. However, TARC has not yet been served in the case. If
TARC is served, it will defend the case vigorously.
General. The litigation matters discussed above amount to significant
potential liability which, if adjudicated in a manner adverse to TARC in one
reporting period, could have a material adverse effect on TARC's financial
position, results of operations or cash flow for that period. TARC is also a
named defendant in other ordinary course, routine litigation incidental to its
business. Although the outcome of these lawsuits cannot be predicted with
certainty, TARC does not expect these matters to have a material adverse effect
on its financial position, results of operations or cash flow.
Environmental Matters
Compliance Matters. TARC is subject to federal, state and local laws,
regulations and ordinances ("Pollution Control Laws"), which regulate activities
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous wastes. TARC believes that it is now, and has included
in the Capital Improvement Program sufficient capital additions to remain, in
substantial compliance with applicable Pollution Control Laws. However,
Pollution Control Laws that may be enacted in the future, as well as
increasingly strict enforcement of existing Pollution Control Laws, may require
TARC to make additional capital expenditures in order to comply with such laws
and regulations. To ensure continuing compliance, TARC has made environmental
compliance and permitting issues an integral part of its refinery's start-up
plans and has budgeted for such capital expenditures in the Capital Improvement
Program. However, there is no assurance that TARC will remain in compliance with
environmental regulations.
TARC uses (and in the past has used) certain materials, and generates (and
in the past has generated) certain substances or wastes, that are or may be
deemed hazardous substances or wastes. In the past, the refinery has been the
subject of certain environmental enforcement actions, and has incurred certain
fines, as a result of certain of TARC's operations. TARC also was previously
subject to enforcement proceedings relating to its prior production of leaded
gasoline and air emissions. TARC believes that, with minor exception, all of
these past matters were resolved prior to or in connection with the resolution
of the bankruptcy proceedings of its predecessor in interest, TransAmerican, or
are no longer applicable to TARC's operations. As a result,
42
<PAGE> 45
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
TARC believes that such matters will not have a material adverse effect on
TARC's future financial position, results of operations or cash flow.
In September 1997, TARC purchased a tank storage facility located adjacent
to the refinery for a cash purchase price of $40 million (which does not include
a $3.1 million liability recorded for environmental remediation, as discussed
below). Environmental investigations conducted by the previous owner of the
facilities have indicated soil and groundwater contamination in several areas on
the property. As a result, the former owner submitted to the Louisiana
Department of Environmental Quality (the "LDEQ") plans for the remediation of
any significant indicated contamination in such areas. TARC has analyzed these
investigations and has carried out further Phase II Environmental Assessments to
verify their results. TARC intends to incorporate any required remediation into
its ongoing work at the refinery. In connection with the purchase of the
facilities, TARC agreed to indemnify the seller for all cleanup costs and
certain other damages resulting from contamination of the property, and created
a $5 million escrow account to fund required remediation costs and
indemnification claims by the seller. As a result of TARC's Phase II
Environmental Assessment, TARC believes that the amount in escrow should be
sufficient to fund the remediation costs associated with identified
contamination; however, because the LDEQ has not yet approved certain of the
remediation plans, there can be no assurance that the funds set aside in the
escrow account will be sufficient to pay all required remediation costs. As of
January 31, 1998, TARC has recognized a liability of $3.1 million for this
contingency.
Requirements Under the Federal Clean Air Act. The National Emission
Standards for Hazardous Air Pollutants for Benzene Waste Operations (the
"Benzene Waste NESHAPS"), promulgated in January 1993 pursuant to the Clean Air
Act, regulate benzene emissions from numerous industries, including petroleum
refineries. The Benzene Waste NESHAPS require all existing, new, modified, or
reconstructed sources to reduce benzene emissions to a level that will provide
an ample margin of safety to protect public health. TARC will be required to
comply with the Benzene Waste NESHAPS as its refinery operations start up. TARC
believes that compliance with the Benzene Waste NESHAPS will not have a material
adverse effect on TARC's financial position, results of operations or cash flow.
Until the refinery is in full operation, however, there can be no assurance that
the regulations will not have such an effect.
In addition, the EPA promulgated National Emission Standards for Hazardous
Air Pollutants for Hazardous Organics (the "Hazardous Organic NESHAPS")
regulations for petroleum refineries under the Clean Air Act in 1995, and
subsequently has amended such regulations. These regulations set Maximum
Achievable Control Technology ("MACT") standards for petroleum refineries. The
Louisiana Department of Environmental Quality (the "LDEQ") has incorporated MACT
standards into TARC's air permits under federal and state air pollution
prevention laws. TARC believes that compliance with the Hazardous Organics
NESHAPS will not have a material adverse effect on TARC's financial position,
results of operations or cash flow. Until the refinery is in full operation,
however, there can be no assurance that the regulations will not have such an
effect.
The EPA has promulgated federal regulations pursuant to the Clean Air Act
to control fuels and fuel additives (the "Gasoline Standards") that could have a
material adverse effect on TARC. Under these regulations, only reformulated
gasoline can be sold in certain domestic geographic areas in which the EPA has
mandated or approved its use. Reformulated gasoline must contain a minimum
amount of oxygen, have a lower vapor pressure, and have reduced sulfur, olefins,
benzene and aromatics compared to the average 1990 gasoline. The EPA recently
promulgated final National Ambient Air Quality Standards ("NAAQS") that revise
the standards for particulate matter and ozone. The number and extent of the
areas subject to reformulated gasoline standards may increase in the future
after the NAAQS are implemented. Conventional gasoline may be used in all other
domestic markets; however, a refiner's post-1994 average conventional gasoline
must not be more polluting than it was in 1990. With limited exceptions, to
determine its compliance as of January 1, 1995, a refiner must compare its
post-1994 and 1990 average values of controlled fuel
43
<PAGE> 46
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
parameters and emissions. The Gasoline Standards recognize that many gasoline
refiners may not be able to develop an individual 1990 baseline for a number of
reasons, including, for example, lack of adequate data or the absence or limited
scope of operations in 1990. Under such circumstances, the refiner must use a
statutory baseline reflecting the 1990 industry average. The EPA has authority,
upon a showing of extenuating circumstances by a refiner, to grant an individual
adjusted baseline or other appropriate regulatory relief to that refiner.
TARC filed a petition with the EPA requesting an individual baseline
adjustment or other appropriate regulatory relief based on extenuating
circumstances. The extenuating circumstances upon which TARC relied in its
petition include the fact that the refinery was not in operation in 1990 (and
thus there is no 1990 average for purposes of the necessary comparison) and the
fact that the start-up of the refinery is to occur on a phased-in basis. The EPA
has denied TARC's request for an individual baseline adjustment and other
regulatory relief. TARC will continue to pursue regulatory relief with the EPA.
However, there can be no assurance that regulatory relief will be granted. There
can be no assurance that any action taken by the EPA will not have a material
adverse effect on TARC's future financial position, results of operations or
cash flow.
Title V of the Clean Air Act requires states to implement an Operating
Permit Program that codifies all federally enforceable limitations that are
applicable to a particular source. The EPA has approved Louisiana's Title V
Operating Permit Program. The Title V Operating Permit is necessary for TARC to
produce at projected levels upon completion of the Capital Improvement Program.
TARC has submitted its Title V Operating Permit Application and the LDEQ has
designated the application as being administratively complete. However, the LDEQ
has not responded further regarding the status of TARC's Title V Operating
Permit. TARC believes that its application will be approved. However, there can
be no assurance that it will be approved as submitted or that additional
expenditures required pursuant to Title V Operating Permit obligations will not
have a material adverse effect on TARC's financial position, results of
operations or cash flow.
Cleanup Matters. TARC also is subject to federal, state and local laws,
regulations and ordinances that impose liability for the costs of clean up
related to, and certain damages resulting from, past spills, disposals or other
releases of hazardous substances ("Hazardous Substance Cleanup Laws"). Over the
past several years, TARC has been, and to a limited extent continues to be,
engaged in environmental cleanup or remedial work relating to or arising out of
operations or activities at the refinery. In addition, TARC has been engaged in
upgrading its solid waste facilities, including the closure of several waste
management units. Similar to numerous other industrial sites in the state, the
refinery has been listed by the LDEQ on the Federal Comprehensive Environmental
Response, Compensation and Liability Information System, as a result of TARC's
prior waste management activities (as discussed below).
In 1991, the EPA performed a facility assessment at the refinery pursuant
to the Federal Resource Conservation and Recovery Act ("RCRA"). The EPA
performed a follow up assessment in March 1996, but has not yet issued a report
of its investigations. In July 1996, the EPA and the LDEQ agreed that the LDEQ
would serve as the lead agency with respect to the investigation and remediation
of areas of concern identified in the investigations. TARC, under a voluntary
initiative approved by the LDEQ, submitted a work plan to the LDEQ to determine
which areas may require further investigation and remediation. TARC submitted
further information in January 1998 which was requested by the LDEQ. Based on
the workplan submitted and additional requests by the LDEQ, TARC believes that
any further action will not have a material adverse effect on its financial
position, results of operations or cash flow.
TARC has been identified as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended ("CERCLA" or "Superfund"), for the cleanup of contamination
from hazardous substances at three Superfund sites (i.e. sites on the National
Priorities List ("NPL")) to which it has been alleged that TARC, or its
predecessors, sent hazardous substances in the past. CERCLA requires cleanup of
sites from which there has been a "release" or
44
<PAGE> 47
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
threatened release of "hazardous substances" (as such terms are defined under
CERCLA). CERCLA requires the EPA to include sites needing long-term study and
cleanup on the NPL based on their potential effect on public health or the
environment. CERCLA authorizes the EPA to take any necessary response actions at
NPL sites and, in certain circumstances, to order PRPs liable for the release to
take such actions. PRPs are broadly defined under CERCLA to include past and
present owners and operators of a site, as well as generators and transporters
of wastes to a site from which hazardous substances are released.
The EPA may seek reimbursement of expenditures of federal funds from PRPs
under Superfund. Courts have interpreted CERCLA to impose strict, joint and
several liability upon all persons liable for the entire amount of necessary
cleanup costs. As a practical matter, at sites where there are multiple PRPs for
a cleanup, the costs of cleanup typically are allocated according to a
volumetric or other standard among the parties. CERCLA also provides that
responsible parties generally may recover a portion of the costs of cleaning up
a site from other responsible parties. Thus, if one party is required to clean
up an entire site, that party can seek contribution or recovery of such costs
from other responsible parties. A number of states have laws similar to
Superfund, pursuant to which cleanup obligations, or the costs thereof, also may
be imposed.
At one Superfund site, TARC has submitted information to the EPA indicating
that it should have no liability for this matter, and negotiations with the EPA
in this regard are continuing. With respect to the remaining two sites, TARC's
liability for each such matter has not been determined, and TARC anticipates
that it may incur costs related to the cleanup (and possibly including
additional costs arising in connection with any recovery or other actions
brought pursuant or relating to such matters) at each such site. After a review
of the data available to TARC regarding the basis of TARC's alleged liability at
each site, and based on various factors, which depend on the circumstances of
the particular Superfund site (including, for example, the relationship of TARC
to each such site, the volume of wastes TARC is alleged to have contributed to
each such site in comparison to other PRPs without giving effect to the ability
of any other PRPs to contribute to or pay for any liabilities incurred, and the
range of likely cleanup costs at each such site), TARC believes that its
ultimate environmental liabilities will not be significant; however, it is not
possible to determine the ultimate environmental liabilities, if any, that may
arise from the matters discussed above.
Purchase Commitments
TARC has various purchase commitments for materials, supplies and services
incidental to the ordinary course of business and for the Capital Improvement
Program. As of January 31, 1998, TARC had commitments for refinery construction
and maintenance of approximately $83.3 million. TARC is acting as general
contractor and can generally cancel or postpone capital projects.
Price Management Activities
TARC enters into futures contracts, options on future, swap agreements and
forward sales agreements with the intent to protect against a portion of the
price risk associated with price declines from holding inventory of feedstocks
and refined products or fixed price purchase commitments. At January 31, 1998
and 1997, TARC had no significant positions in open futures contracts, options
on futures, swap agreements or forward sales agreements. A net trading gain of
approximately $2.3 million was reflected in other income (expense) for the year
ended July 31, 1995. These transactions did not qualify for hedge accounting
treatment under the guidelines of SFAS 80; therefore, gains or losses associated
with these futures contracts have not been deferred.
Processing Agreements
In April 1996, TARC entered into a processing agreement with a third party
to process feedstocks. Under the terms of the agreement, the processing fee
earned from the third party is based on the margin earned by the third party, if
any, after deducting all of its related costs such as feedstock acquisition,
hedging,
45
<PAGE> 48
TRANSAMERICAN REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
transportation, processing and inspections plus a commission for each barrel
processed. As of January 31, 1998, TARC has processed 6.4 million barrels of
feedstocks under this agreement. TARC also entered into processing agreements
with this third party to process approximately 1.1 million barrels of the third
party's feedstocks for a fixed price per barrel. For the years ended January 31,
1998 and 1997, TARC recorded income (loss) from processing agreements of $1.4
million and $(7.1) million, respectively. As of January 31, 1998, TARC was
storing approximately 0.7 million barrels of feedstock and intermediate or
refined products pursuant to these processing agreements. Included in the 0.7
million barrels of product stored at the refinery as of January 31, 1998, is
approximately 0.6 million barrels of feedstock owned by a third party related to
a purchase commitment entered into in April 1997. For the year ended January 31,
1998, TARC incurred a loss of approximately $7.8 million related to this
purchase commitment and remains subject to market risk for these barrels.
Operating Leases
As of January 31, 1998, TARC has long-term leases covering land and other
property and equipment. Rental expense was approximately $2.2 million, $4.2
million, $1.9 million and $4 million, respectively, for the years ended January
31, 1998 and 1997, the six months ended January 31, 1996 and the year ended July
31, 1995. Future minimum rental payments required under operating leases that
have initial or remaining noncancellable lease terms in excess of one year as of
January 31, 1998, are as follows (in thousands of dollars):
<TABLE>
<S> <C>
1999........................................................ $ 309
2000........................................................ 309
2001........................................................ 281
2002........................................................ 258
2003........................................................ 200
Later years................................................. 1,163
------
$2,520
======
</TABLE>
46
<PAGE> 49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
TARC's directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME OFFICE AGE
---- ------ ---
<S> <C> <C>
John R. Stanley......... Director, Chairman of the Board, President and
Chief Executive Officer 59
R. Glenn McGinnis....... Vice President of Manufacturing 49
Gary L. Karr............ Vice President of Refining 49
John R. Stanley, Jr. ... Vice President of Administration 36
Ed Donahue.............. Vice President and Secretary 47
Donald B. Henderson..... Director 48
Thomas B. McDade........ Director 74
</TABLE>
Set forth below is a description of the backgrounds of the directors and
executive officers of TARC.
John R. Stanley has been a director and Chief Executive Officer of TARC
since September 1987 and a director and Chief Executive Officer of TEC since
July 1994. Mr. Stanley is the founder, Chairman of the Board, Chief Executive
Officer, and sole stockholder of TNGC Holdings Corporation, which is the sole
stockholder of TransAmerican. He has operated TransAmerican since 1958. Mr.
Stanley is the father of John R. Stanley, Jr.
R. Glenn McGinnis has been the Vice President of Manufacturing of TARC
since July 1995. Prior to joining TARC, Mr. McGinnis held senior refining and
supply positions in Canada with Imperial Oil Limited, an affiliate of Exxon
Corporation. Mr. McGinnis was with Imperial Oil Limited for 23 years.
Gary L. Karr has been the Vice President of Refining of TARC since January
1994 and served as Refinery Manager for approximately eight years prior thereto.
Mr. Karr has been with TransAmerican or a subsidiary of TransAmerican since 1971
in various positions.
John R. Stanley, Jr. has served as Vice President of Administration of TARC
since October 1995. From May 1992 until October 1995, he served as Manager of
Audit and Security for TARC. Mr. Stanley is the son of John R. Stanley.
Edwin B. Donahue has served as Vice President and Secretary of TARC since
February 1997. Mr. Donahue also serves as Vice President, Chief Financial
Officer and Secretary of TransTexas and TEC and as Vice President and Secretary
of TransAmerican. Mr. Donahue has been employed in various positions with
TransAmerican for over 21 years.
Donald B. Henderson has been a director of TARC and of TEC since July 1994.
Mr. Henderson is a partner in the law firm of Blackburn & Henderson. From 1972
to 1978, Mr. Henderson was a member of the Texas House of Representatives. Mr.
Henderson was a member of the Texas Senate from 1982 to 1996. Mr. Henderson
served as a director of TransAmerican from 1985 until his resignation in
February 1995. In April 1998, Mr. Henderson was charged with intoxication
assault in connection with a traffic accident. Mr. Henderson has pleaded
innocent and intends to vigorously defend these charges.
Thomas B. McDade has been a director of TARC and of TEC since July 1994. He
is also a director of TransTexas. Mr. McDade is primarily engaged in managing
his personal investments and in providing consulting services in Houston, Texas.
Mr. McDade served as a director of TransAmerican from 1985 until his resignation
in February 1995. Prior to 1989, he served as a consultant to Texas Commerce
Bancshares, Inc. and prior to July 1985, he served as Vice Chairman and Director
of Texas Commerce Bancshares, Inc. and
47
<PAGE> 50
Vice Chairman and Advisory Director of Texas Commerce Bank. From 1985 to 1995,
Mr. McDade served as a director and trustee of eleven registered investment
companies for which John Hancock Funds now serves as investment advisor in
Boston, Massachusetts. Mr. McDade is a former director of Houston Industries,
Inc. and Houston Lighting & Power Company. He is also a former member of the
Board of Managers of the Harris County Hospital District and former Chairman of
the State Securities Board of Texas. Mr. McDade serves as a director of Group
Maintenance America Corp.
COMMITTEES OF THE BOARD OF DIRECTORS
TARC has an Audit Committee and a Compensation Committee. The Audit
Committee is composed of Messrs. Henderson and McDade. The purpose of the Audit
Committee is to review the scope of the independent auditors' examinations of
TARC's financial statements and review their reports.
The Compensation Committee is composed of Messrs. Henderson and McDade. The
purpose of the Compensation Committee is to determine the nature and amount of
compensation of TARC's executive officers.
DIRECTOR COMPENSATION
Each director, other than John R. Stanley, receives an annual director's
fee of $75,000, plus $750 for each board and committee meeting attended (other
than committee meetings held on the same day as board meetings).
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the fiscal
years ended January 31, 1998 and 1997, the six months ended January 31, 1996,
and the fiscal year ended July 31, 1995 to TARC's Chief Executive Officer and
each other executive officer of TARC whose total annual salary and bonus
exceeded $100,000 in the fiscal year ended January 31, 1998 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------
FISCAL OTHER ANNUAL
NAME AND PRINCIPAL POSITION IN TARC YEAR SALARY COMPENSATION(A)
----------------------------------- ------ -------- ---------------
<S> <C> <C> <C>
John R. Stanley (b).............................. 1998 $400,483 $4,346
Chief Executive Officer 1997 397,117 5,170
1996* 175,001 807
1995 369,521 4,500
R. Glenn McGinnis................................ 1998 $235,038 $ 950
Vice President of Manufacturing 1997 233,654 727
1996* 116,937 --
1995 9,904 --
Gary L. Karr..................................... 1998 $145,904 $4,377
Vice President of Refining 1997 140,192 3,348
1996* 67,500 311
1995 140,192 2,310
John R. Stanley, Jr.............................. 1998 $114,461 $3,376
Vice President of Administration 1997 117,308 3,519
1996* 63,750 1,913
1995 93,693 2,259
</TABLE>
48
<PAGE> 51
- ---------------
* Six months ended January 31, 1996 ("Transition Period")
(a) Reflects the amount contributed under the Savings Plan (as defined below).
Certain of TARC's executive officers receive personal benefits in addition
to salary and cash bonuses. The aggregate amount of the personal benefits,
however, does not exceed the lesser of $50,000 or 10% of the total of the
annual salary and bonus reported for the named executive officer and
accordingly has been excluded from the table.
(b) All amounts shown were paid by TransTexas.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
TARC's compensation committee is composed of Messrs. McDade and Henderson.
During the year ended January 31, 1998, none of the members of the compensation
committee was an officer or employee of TARC. Blackburn & Henderson, a law firm
of which Mr. Henderson is a partner, provides legal and other services to
TransAmerican and its affiliates for an annual fee of $96,000 plus expenses. The
TEC Notes Indenture prohibits TEC and its subsidiaries from paying compensation
to Mr. Stanley in excess of $1.0 million per year, in the aggregate, from TEC
and TransTexas and, following completion of Phase II, $1.0 million per year from
TARC.
SAVINGS PLAN
TransAmerican maintains a long-term savings plan (the "Savings Plan") in
which eligible employees of TARC and certain of its affiliates may elect to
participate. Each employee becomes eligible to participate in the Savings Plan
on January 1 or July 1 following the completion of one year of service with TARC
or its participating affiliates and attainment of age 21. The Savings Plan is
intended to constitute a qualified plan under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and contains a salary reduction
arrangement described in Section 401(k) of the Code.
Each participant may elect to reduce his compensation by a percentage equal
to 2% to 15% and TARC will contribute that amount to the Savings Plan on a
pre-tax basis on behalf of the participant. The Code limits the annual amount
that a participant may elect to have contributed on his behalf on a pre-tax
basis to the Savings Plan. For 1998, this limit is $10,000. TARC presently makes
a matching contribution in an amount equal to 10%, 20% or 50% of the amount
elected to be contributed by each participant on a pre-tax basis, up to a
maximum of 3% of each participant's compensation, depending on whether the
employee has been a participant in the Savings Plan for one year, two years or
three years. Each participant also may elect to contribute up to 10% of his
compensation to the Savings Plan on an after-tax basis. The Code imposes
nondiscrimination tests on contributions made to the Savings Plan pursuant to
participant elections and on TARC's matching contributions, and limits amounts
which may be allocated to a participant's Savings Plan account each year. In
order to satisfy the nondiscrimination tests, contributions made on behalf of
certain highly compensated employees (as defined in the Code) may be limited.
Contributions made to the Savings Plan pursuant to participant elections and
matching contributions are at all times 100% vested. Contributions to the
Savings Plan are invested, according to specified investment options selected by
the participants, in investment funds maintained by the trustee of the Savings
Plan. Generally, a participant's vested benefits will be distributed from the
Savings Plan as soon as administratively practicable following a participant's
retirement, death, disability or other termination of employment. In addition, a
participant may elect to withdraw his after-tax contributions from the Savings
Plan prior to his termination of employment, and subject to certain strict
limitations and exceptions, the Savings Plan provides for withdrawals of a
participant's pre-tax contributions prior to a participant's termination of
employment in the event of the participant's severe financial hardship or
attainment of age 59 1/2. The Savings Plan may be amended or terminated by the
Board of Directors of TransAmerican. As of January 31, 1998, approximately 178
employees of TARC were eligible to participate in the Savings Plan, including
the Named Executive Officers.
49
<PAGE> 52
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
TEC owns 30 million shares (100%) of TARC's outstanding common stock. TEC's
address is 1300 North Sam Houston Parkway East, Suite 200, Houston, Texas 77032.
Pursuant to the TARC Notes Indenture, all shares of TARC's common stock were
pledged as of January 31, 1998 as collateral and were held by the trustee under
the TARC Notes Indenture, First Union National Bank. On April 17, 1998, these
shares of TARC common stock were released from the security interest under the
TARC Notes Indenture in connection with the defeasance of the TARC Notes and are
currently pledged as security for payment of the TEC Notes.
A foreclosure by the holders of the TEC Notes on the shares of TARC's
common stock, under certain circumstances, constitutes a "change of control" of
TEC under the TEC Notes Indenture, which allows the holders thereof to require
TEC to repurchase the TEC Notes at a price equal to 101% of the principal amount
thereof plus accrued and unpaid interest.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the stock transfer agreement dated February 23, 1995 (the
"Stock Transfer Agreement") among TransAmerican, TEC and TARC, TransAmerican
contributed to the capital of TEC (the "Stock Transfer") (i) all of the
outstanding capital stock of TARC, and (ii) 55 million shares of common stock of
TransTexas. TEC subsequently contributed 15 million of its shares of TransTexas
common stock to TARC.
Prior to the sale of the TARC Notes, TARC participated in TransAmerican's
centralized cash management program. Funds required by TARC for daily operations
and capital expenditures were advanced by TransAmerican. In October 1994,
TransAmerican sold 5.25 million shares of TransTexas common stock. TransAmerican
advanced approximately $50 million of the proceeds from these stock sales to
TARC, of which approximately $20 million was used by TARC to repay a portion of
the intercompany debt owed to TransAmerican, and the remaining $30 million of
the net proceeds was used for working capital and general corporate purposes.
TARC used approximately $30 million of the net proceeds of the sale of the TARC
Notes to repay additional intercompany debt to TransAmerican. TransAmerican
contributed to the capital of TARC (through TEC) all but $10 million of the
remainder of TARC's intercompany debt owed to TransAmerican. In April 1995, TARC
repaid the remaining $10 million of intercompany indebtedness owed to
TransAmerican. In August 1995, TARC received an advance of $3 million from
TransTexas, which TARC used to settle its remaining portion of certain
litigation. In September 1995, TARC received an advance of $1.7 million from
TransAmerican, which TARC used to purchase feedstock. In October 1995, TARC
repaid these advances without interest. Additionally in October 1995, TARC
received an advance of approximately $4 million from TransAmerican for working
capital which it repaid in June 1997.
In September 1995, TARC received an advance of $1 million from TransTexas,
which TARC used to purchase feedstock. This advance was repaid by TARC without
interest. In December 1995, TARC advanced $1 million to TransTexas. This advance
was repaid to TARC with interest in December 1995.
During 1995, TransAmerican acquired an office building which it
subsequently sold to TransTexas in February 1996 for $4 million. In February
1996, TransAmerican advanced $4 million of the proceeds from this sale to TARC
for working capital. TransTexas charges TARC approximately $61,000 in rent
annually, of which approximately $117,000 was payable to TransTexas at January
31, 1998.
In July 1996, TARC executed a promissory note to TransAmerican for up to
$25 million. The note bore interest at a rate of 15% per annum, payable
quarterly beginning October 31, 1996. On November 1, 1996, TARC executed an
additional $25 million promissory note to TransAmerican which bore interest at
15% per annum, payable quarterly beginning December 31, 1996 (together with the
first promissory note, the "TransAmerican Notes"). As of January 31, 1997, TARC
had approximately $44.4 million outstanding under the TransAmerican Notes. In
February 1997, the November 1996 promissory note was replaced with a $50 million
note bearing interest at an annual rate of 15% and which matures on July 31,
2002. All amounts outstanding under the TransAmerican Notes were repaid on June
13, 1997.
50
<PAGE> 53
From August 1993 to June 1997, TransTexas provided general commercial legal
services and certain accounting services (including payroll, tax, and treasury
services) to TARC and TEC for a fee of $26,000 per month pursuant to a services
agreement. In June 1997, the services agreement was terminated.
On June 13, 1997, a new services agreement was entered into among
TransAmerican, TEC, TARC and TransTexas. Under the new services agreement,
TransTexas provides accounting, legal, administrative and other services to
TARC, TEC and TransAmerican and its affiliates. TransAmerican provides advisory
services to TransTexas, TARC and TEC. TARC will pay to TransTexas approximately
$300,000 per month for services rendered to, and for allocated expenses paid by
TransTexas on behalf of, TARC and TEC. TEC and its subsidiaries will pay $2.5
million in the aggregate per year to TransAmerican for advisory services and
benefits provided by TransAmerican. Pursuant to these agreements, TARC has
recognized $4.0 million in service agreement expenses during the year ended
January 31, 1998. As of January 31, 1998, $1.2 million and $1.6 million was
payable to TransTexas and TransAmerican, respectively, pursuant to the services
agreement.
Southeast Contractors, a subsidiary of TransAmerican, provides construction
personnel to TARC in connection with the Capital Improvement Program. These
construction workers are temporary employees, and the number and composition of
the workforce will vary throughout the Capital Improvement Program. Southeast
Contractors charges TARC for the direct costs it incurs (which consist solely of
employee payroll and benefits) plus administrative costs and fees of up to $2.0
million per year. Total labor costs charged by Southeast Contractors for the
years ended January 31, 1998 and 1997, the six months ended January 31, 1996 and
the year ended July 31, 1995 were $50.7 million, $14.1 million, $20.2 million
and $15.5 million, respectively, of which $5.3 million and $1.8 million was
payable at January 31, 1998 and 1997, respectively.
TARC purchases natural gas from TransTexas on an interruptible basis. The
total cost of natural gas purchased for the years ended January 31, 1998 and
1997, the six months ended January 31, 1996 and the year ended July 31, 1995 was
approximately $0.4 million, $2.7 million, $1.4 million and $2.5 million,
respectively. The payable to TransTexas for natural gas purchases at January 31,
1997 was $2.7 million.
In July and September 1997, TEC advanced an aggregate of $46 million to
TARC. All of the advances are governed by the terms of a promissory note that is
due June 14, 2002 bearing interest at a rate that, when added to the interest
paid by TransTexas on the TransTexas Intercompany Loan, will equal the amount of
interest payable on the TEC Notes through December 15, 1997. Thereafter, the
amount of fixed interest payable to TEC of $5.7 million per year will be
proportioned semi-annually between TARC and TransTexas based on the average
outstanding balance of TARC's note to TEC and the average outstanding balance of
all notes between TransTexas and TEC. As of January 31, 1998, the principal
amount payable by TARC to TEC pursuant to the advances was $15 million. During
the year ended January 31, 1998, TARC recognized $3.1 million in interest
expense pursuant to the advances of which approximately $0.2 million was payable
to TEC at January 31, 1998. Included in the $3.1 million of interest expense is
approximately $0.3 million paid to TEC for advances made to TransTexas during
fiscal 1998.
During the year ended January 31, 1998, TEC contributed $13.5 million to
TARC for general corporate purposes pursuant to the Disbursement Agreement.
On December 30, 1997, TEC and TARC entered into an expense reimbursement
agreement pursuant to which TARC will reimburse TEC for certain administrative,
legal and accounting expenses and directors fees and will also reimburse TEC for
other expenses in an amount not to exceed $200,000 per year. Since December 30,
1997, no such expenses were reimbursed to TEC.
Blackburn & Henderson, a law firm of which Mr. Henderson, a director of
TARC and TEC, is a partner, provides legal and other services to TransAmerican
and its affiliates for which he is paid an annual fee of $96,000 plus expenses.
TNGC Holdings Corporation, TransAmerican, and its existing subsidiaries,
including TARC, TEC and TransTexas, entered into a tax allocation agreement (the
"Tax Allocation Agreement"), the general terms of which require TransAmerican
and all of its subsidiaries to file federal income tax returns as members of a
consolidated group to the extent permitted by law. Filing on a consolidated
basis allows income and tax of one member to be offset by losses and credits of
another and allows deferral of certain intercompany gains;
51
<PAGE> 54
however, each member is severally liable for the consolidated federal income tax
liability of the consolidated group.
The Tax Allocation Agreement requires each of TransAmerican's subsidiaries
to pay to TransAmerican each year its allocable share of the federal income tax
liabilities of the consolidated group ("Allocable Share"). The Tax Allocation
Agreement provides for a reallocation of the group's consolidated federal income
tax liabilities among the members if the IRS or the courts ultimately
re-determine the group's regular tax or alternative minimum tax liability. 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 TARC, TEC or TransTexas, as the
case may be, where such compromise or settlement affects the determination of
the separate tax liability of that company.
Under the Tax Allocation Agreement, each subsidiary's Allocable Share for
each tax year will generally equal the amount of federal income tax it would
have owed had it filed a separate federal income tax return for each year except
that each subsidiary will be able to utilize net operating losses and credits of
TransAmerican and the other members of the consolidated group effectively to
defer payment of tax liabilities that it would have otherwise owed had it filed
a separate federal income tax return. Each subsidiary will essentially pay the
deferred taxes at the time TransAmerican (or the member whose losses or credits
are utilized by such subsidiary) begins generating taxable income or tax. This
will have the effect of deferring a portion of such subsidiary's tax liability
to future years. The parties to the Tax Allocation Agreement amended such
agreement in connection with the Lobo Sale to include additional affiliates as
parties, and further amended the Tax Allocation Agreement in connection with the
transactions consummated in June 1997 to allocate to TransAmerican, as among the
parties, any tax liability associated with the Lobo Sale.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(1) Report of Independent Accountants........................... 20
Balance Sheet............................................... 21
Statement of Operations..................................... 22
Statement of Stockholder's Equity........................... 23
Statement of Cash Flows..................................... 24
Notes to Financial Statements............................... 25
</TABLE>
(2) All schedules have been omitted because the information is either not
required or is set forth in the financial statements or the notes
thereto.
(3) Exhibits
<TABLE>
<C> <S>
2.1 -- Stock Transfer Agreement dated as of February 23, 1995,
between TARC, TEC and TransAmerican (filed as an exhibit
to TARC's and TEC's Current Report on Form 8-K dated
March 23, 1995, and incorporated herein by reference).
3.1 -- Articles of Incorporation of TARC (filed as an exhibit to
TARC's and TEC's Registration Statement on Form S-1 [No.
33-82200], and incorporated herein by reference).
3.2 -- By-laws of TARC (filed as an exhibit to TARC's and TEC's
Registration Statement on Form S-1 [No. 33-82200], and
incorporated herein by reference).
</TABLE>
52
<PAGE> 55
<TABLE>
<C> <S>
4.1 -- Indenture dated as of February 15, 1995, between TARC,
First Fidelity Bank, National Association, as Trustee and
TEC, with respect to the Guaranteed First Mortgage
Discount Notes and the Guaranteed First Mortgage Notes
(together, the "Notes"), including the forms of Notes as
exhibits (filed as an exhibit to TARC's and TEC's Current
Report on Form 8-K dated February 23, 1995, and
incorporated herein by reference).
4.2 -- Warrant Agreement dated as of February 23, 1995, among
the Company, TEC and First Fidelity Bank, National
Association, as Warrant Trustee, with respect to the
Common Stock Purchase Warrants including the form of
Warrant as an exhibit (filed as an exhibit to TARC's and
TEC's Current Report on Form 8-K dated February 23, 1995,
and incorporated herein by reference).
4.3 -- Pledge Agreement dated as of February 23, 1995, from TARC
to First Fidelity Bank, National Association, as Trustee
(filed as an exhibit to TARC's and TEC's Current Report
on Form 8-K dated February 23, 1995, and incorporated
herein by reference).
4.4 -- Security Agreement dated as of February 23, 1995, from
TARC to First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to TARC's and TEC's Current
Report on Form 8-K dated February 23, 1995, and
incorporated herein by reference).
4.5 -- Cash Collateral and Disbursement Agreement dated as of
February 23, 1995, among TARC, First Fidelity Bank,
National Association, as Trustee, First Fidelity Bank,
N.A., as Disbursement Agent, and Baker & O'Brien, Inc.,
as Construction Supervisor (filed as an exhibit to TARC's
and TEC's Current Report on Form 8-K dated February 23,
1995, and incorporated herein by reference).
4.6 -- Mortgage, Assignment of Leases and Rents, Security
Agreement and Financing Statement from TARC in favor of
First Fidelity Bank, National Association, as Trustee
(filed as an exhibit to TARC's and TEC's Current Report
on Form 8-K dated February 23, 1995, and incorporated
herein by reference).
4.7 -- Registration Rights Agreement dated as of February 23,
1995, between TransTexas, TARC, and TEC (filed as an
exhibit to TARC's and TEC's Current Report on Form 8-K
dated February 23, 1995, and incorporated herein by
reference).
4.8 -- First Supplemental Indenture dated as of February 24,
1997 among TARC, TEC and First Union National Bank, f/k/a
First Fidelity Bank, N.A. (filed as an exhibit to TARC's
Annual Report on Form 10-K for the year ended January 31,
1997, and incorporated herein by reference).
4.9 -- Indenture dated as of March 14, 1997, between TARC and
First Union National Bank, as Trustee, with respect to
the $36 million Senior Secured Notes due 1998, including
the form of Note as an exhibit (filed as an exhibit to
TARC's Annual Report on Form 10-K for the year ended
January 31, 1997, and incorporated herein by reference).
4.10 -- Pledge Agreement dated as of March 14, 1997, from TARC to
First Union National Bank, as Trustee (filed as an
exhibit to TARC's Annual Report on Form 10-K for the year
ended January 31, 1997, and incorporated herein by
reference).
4.11 -- Security Agreement dated as of March 14, 1997, from TARC
to First Union National Bank, as Trustee (filed as an
exhibit to TARC's Annual Report on Form 10-K for the year
ended January 31, 1997, and incorporated herein by
reference).
</TABLE>
53
<PAGE> 56
<TABLE>
<C> <S>
4.12 -- Cash Collateral and Disbursement Agreement dated as of
March 14, 1997, between TARC and First Union National
Bank, as Trustee and Disbursement Agent (filed as an
exhibit to TARC's Annual Report on Form 10-K for the year
ended January 31, 1997, and incorporated herein by
reference).
4.13 -- First Amendment to Cash Collateral and Disbursement
Agreement dated as of April 3, 1997, between TARC and
First Union National Bank, as Trustee and Disbursement
Agent (filed as an exhibit to TARC's Annual Report on
Form 10-K for the year ended January 31, 1997, and
incorporated herein by reference).
4.14 -- Second Supplemental Indenture dated June 13, 1997 between
TARC, as issuer, TransAmerican Energy Corporation, as
guarantor, and First Union National Bank, as trustee
(filed as an exhibit to TARC's current report on Form 8-K
dated June 13, 1997, and incorporated herein by
reference).
4.15 -- Loan Agreement dated June 13, 1997 between TARC and
TransAmerican Energy Corporation (filed as an exhibit to
TARC's current report on Form 8-K dated June 13, 1997,
and incorporated herein by reference).
4.16 -- Security and Pledge Agreement dated June 13, 1997 by TARC
in favor of TransAmerican Energy Corporation (filed as an
exhibit to TARC's current report on Form 8-K dated June
13, 1997, and incorporated herein by reference).
4.17 -- Disbursement Agreement dated June 13, 1997 among TARC,
TransAmerican Energy Corporation, Firstar Bank of
Minnesota, N.A., as disbursement agent and trustee, and
Baker & O'Brien, Inc., as construction supervisor (filed
as an exhibit to TARC's current report on Form 8-K dated
June 13, 1997, and incorporated herein by reference).
4.18 -- Form of Mortgage dated June 13, 1997 between TARC and
TransAmerican Energy Corporation (filed as an exhibit to
TARC's quarterly report on Form 10-Q for the quarter
ended July 31, 1997, and incorporated herein by
reference).
*4.19 -- First Amendment dated December 30, 1997 to Loan Agreement
between TARC and TEC.
*4.20 -- First Amendment dated December 30, 1997 to Disbursement
Agreement among TARC, TEC, Firstar Bank of Minnesota,
N.A. and Baker & O'Brien.
*4.21 -- Indenture dated December 30, 1997 between TARC and First
Union National Bank, as trustee, with respect to the $200
million Series A Senior Subordinated Notes, including the
form of Note as an exhibit.
*4.22 -- Warrant Agreement dated December 30, 1997 between TARC
and First Union National Bank, as Warrant Agent, with
respect to 175,000 common stock purchase warrants (the
"December 1997 Warrants"), including the form of warrant
as an exhibit.
*4.23 -- Registration Rights Agreement dated December 30, 1997
between TARC and the holders of the Series A Senior
Subordinated Notes.
*4.24 -- Securityholders' and Registration Rights Agreement dated
December 30, 1997 between TARC, Jefferies & Company,
Inc., as the Purchaser, and the holders of the December
1997 Warrants.
*4.25 -- Third Supplemental Indenture dated January 16, 1998
between TARC, TEC and First Union National Bank.
*4.26 -- Irrevocable Trust and Security Agreement dated January
16, 1998 between TARC and First Union National Bank.
*4.27 -- Indenture dated March 16, 1998 between TARC and First
Union National Bank, as trustee, with respect to the $25
million Series C Senior Subordinated Notes, including the
form of Note as an exhibit.
</TABLE>
54
<PAGE> 57
<TABLE>
<C> <S>
*4.28 -- Warrant Agreement dated March 16, 1998 between TARC and
First Union National Bank, as Warrant Agent, with respect
to 25,000 common stock purchase warrants (the "March 1998
Warrants"), including the form of warrant as an exhibit.
*4.29 -- Registration Rights Agreement dated March 16, 1998
between TARC and the holders of the Series C Senior
Subordinated Notes.
*4.30 -- Securityholders' and Registration Rights Agreement dated
March 16, 1998 between TARC, Jefferies & Company, Inc.,
as the Purchaser, and the holders of the March 1998
Warrants.
*4.31 -- Note Purchase Agreement dated December 10, 1997 between
TARC and Merrill Lynch Corporate Bond Fund, Inc. -- High
Income Portfolio.
10.1 -- Services Agreement dated August 24, 1993, by and among
TARC, TEC, TransTexas and TransAmerican, as amended
(filed as an exhibit to TARC's and TEC's Registration
Statement on Form S-1 [No. 33-82200], and incorporated
herein by reference).
10.2 -- Tax Allocation Agreement dated August 24, 1993, by and
among TransAmerican, TEC, TARC, TransTexas and the other
subsidiaries of TransAmerican, as amended (filed as an
exhibit to TARC's and TEC's Registration Statement on
Form S-1 [No. 33-82200], and incorporated herein by
reference).
10.3 -- Indemnification Agreement by and between TARC and each of
its directors (filed as an exhibit to TARC's and TEC's
Registration Statement on Form S-1 [No. 33-82200], and
incorporated herein by reference).
10.4 -- Interruptible Gas Sales Terms and Conditions dated
between TARC and TransTexas, as amended (filed as an
exhibit to TARC's and TEC's Registration Statement on
Form S-1 [No. 33-82200], and incorporated herein by
reference).
10.5 -- Intercompany Note dated as of August 12, 1994, executed
by TARC for the benefit of TransAmerican (filed as an
exhibit to TARC's and TEC's Registration Statement on
Form S-1 [No. 33-82200], and incorporated herein by
reference).
10.6 -- Processing Agreement dated March 20, 1996 by and between
TARC and J. Aron & Company (filed as an exhibit to TARC's
Form 10-K for the transition period ended January 31,
1996, and incorporated herein by reference).
10.7 -- Employment Agreement dated June 12, 1995, between TARC
and R. Glenn McGinnis (filed as an exhibit to TARC's Form
10-K for the transition period ended January 31, 1996,
and incorporated herein by reference).
10.8 -- Processing Agreement dated April 22, 1996 between TARC
and Glencore Ltd. (filed as an exhibit to TARC's Form
10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
10.9 -- Services Agreement dated June 13, 1997 by and among TNGC
Holdings Corporation, TransAmerican Natural Gas
Corporation, TransAmerican Energy Corporation, TransTexas
Gas Corporation, TransTexas Drilling Services, Inc. and
TARC (filed as an exhibit to TARC's quarterly report on
Form 10-Q for the quarter ended July 31, 1997, and
incorporated herein by reference).
10.10 -- Asset Purchase Agreement dated September 19, 1997 between
GATX Terminals Corporation and TARC (filed as an exhibit
to TARC's quarterly report on Form 10-Q for the quarter
ended October 31, 1997, and incorporated herein by
reference).
</TABLE>
55
<PAGE> 58
<TABLE>
<C> <S>
21.1 -- Schedule of Subsidiaries (filed as an exhibit to TARC's
and TEC's Registration Statement on Form S-1 [No.
33-82200], and incorporated herein by reference).
*27.1 -- Financial Data Schedule.
*27.2 -- Restated Financial Data Schedule.
99.1 -- Financial Statements of TransTexas dated January 31, 1998
(filed as part of TransTexas' Form 10-K for the year
ended January 31, 1998, and incorporated herein by
reference).
</TABLE>
- ---------------
* Filed herewith.
(b) REPORTS ON FORM 8-K
TARC did not file any current reports on Form 8-K during the three months
ended January 31, 1998.
56
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on April 30, 1998.
TRANSAMERICAN REFINING CORPORATION
By: /s/ JOHN R. STANLEY
-------------------------------------
John R. Stanley, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated on April 30, 1998.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ JOHN R. STANLEY Director, Chairman of the Board, President
- ----------------------------------------------------- and Chief Executive Officer (Principal
John R. Stanley Executive Officer)
/s/ DONALD B. HENDERSON Director
- -----------------------------------------------------
Donald B. Henderson
/s/ THOMAS B. MCDADE Director
- -----------------------------------------------------
Thomas B. McDade
/s/ EDWIN B. DONAHUE Vice President and Secretary (Principal
- ----------------------------------------------------- Financial Officer and Accounting Officer)
Edwin B. Donahue
</TABLE>
57
<PAGE> 60
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
2.1 -- Stock Transfer Agreement dated as of February 23, 1995,
between TARC, TEC and TransAmerican (filed as an exhibit
to TARC's and TEC's Current Report on Form 8-K dated
March 23, 1995, and incorporated herein by reference).
3.1 -- Articles of Incorporation of TARC (filed as an exhibit to
TARC's and TEC's Registration Statement on Form S-1 [No.
33-82200], and incorporated herein by reference).
3.2 -- By-laws of TARC (filed as an exhibit to TARC's and TEC's
Registration Statement on Form S-1 [No. 33-82200], and
incorporated herein by reference).
4.1 -- Indenture dated as of February 15, 1995, between TARC,
First Fidelity Bank, National Association, as Trustee and
TEC, with respect to the Guaranteed First Mortgage
Discount Notes and the Guaranteed First Mortgage Notes
(together, the "Notes"), including the forms of Notes as
exhibits (filed as an exhibit to TARC's and TEC's Current
Report on Form 8-K dated February 23, 1995, and
incorporated herein by reference).
4.2 -- Warrant Agreement dated as of February 23, 1995, among
the Company, TEC and First Fidelity Bank, National
Association, as Warrant Trustee, with respect to the
Common Stock Purchase Warrants including the form of
Warrant as an exhibit (filed as an exhibit to TARC's and
TEC's Current Report on Form 8-K dated February 23, 1995,
and incorporated herein by reference).
4.3 -- Pledge Agreement dated as of February 23, 1995, from TARC
to First Fidelity Bank, National Association, as Trustee
(filed as an exhibit to TARC's and TEC's Current Report
on Form 8-K dated February 23, 1995, and incorporated
herein by reference).
4.4 -- Security Agreement dated as of February 23, 1995, from
TARC to First Fidelity Bank, National Association, as
Trustee (filed as an exhibit to TARC's and TEC's Current
Report on Form 8-K dated February 23, 1995, and
incorporated herein by reference).
4.5 -- Cash Collateral and Disbursement Agreement dated as of
February 23, 1995, among TARC, First Fidelity Bank,
National Association, as Trustee, First Fidelity Bank,
N.A., as Disbursement Agent, and Baker & O'Brien, Inc.,
as Construction Supervisor (filed as an exhibit to TARC's
and TEC's Current Report on Form 8-K dated February 23,
1995, and incorporated herein by reference).
4.6 -- Mortgage, Assignment of Leases and Rents, Security
Agreement and Financing Statement from TARC in favor of
First Fidelity Bank, National Association, as Trustee
(filed as an exhibit to TARC's and TEC's Current Report
on Form 8-K dated February 23, 1995, and incorporated
herein by reference).
4.7 -- Registration Rights Agreement dated as of February 23,
1995, between TransTexas, TARC, and TEC (filed as an
exhibit to TARC's and TEC's Current Report on Form 8-K
dated February 23, 1995, and incorporated herein by
reference).
4.8 -- First Supplemental Indenture dated as of February 24,
1997 among TARC, TEC and First Union National Bank, f/k/a
First Fidelity Bank, N.A. (filed as an exhibit to TARC's
Annual Report on Form 10-K for the year ended January 31,
1997, and incorporated herein by reference).
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
4.9 -- Indenture dated as of March 14, 1997, between TARC and
First Union National Bank, as Trustee, with respect to
the $36 million Senior Secured Notes due 1998, including
the form of Note as an exhibit (filed as an exhibit to
TARC's Annual Report on Form 10-K for the year ended
January 31, 1997, and incorporated herein by reference).
4.10 -- Pledge Agreement dated as of March 14, 1997, from TARC to
First Union National Bank, as Trustee (filed as an
exhibit to TARC's Annual Report on Form 10-K for the year
ended January 31, 1997, and incorporated herein by
reference).
4.11 -- Security Agreement dated as of March 14, 1997, from TARC
to First Union National Bank, as Trustee (filed as an
exhibit to TARC's Annual Report on Form 10-K for the year
ended January 31, 1997, and incorporated herein by
reference).
4.12 -- Cash Collateral and Disbursement Agreement dated as of
March 14, 1997, between TARC and First Union National
Bank, as Trustee and Disbursement Agent (filed as an
exhibit to TARC's Annual Report on Form 10-K for the year
ended January 31, 1997, and incorporated herein by
reference).
4.13 -- First Amendment to Cash Collateral and Disbursement
Agreement dated as of April 3, 1997, between TARC and
First Union National Bank, as Trustee and Disbursement
Agent (filed as an exhibit to TARC's Annual Report on
Form 10-K for the year ended January 31, 1997, and
incorporated herein by reference).
4.14 -- Second Supplemental Indenture dated June 13, 1997 between
TARC, as issuer, TransAmerican Energy Corporation, as
guarantor, and First Union National Bank, as trustee
(filed as an exhibit to TARC's current report on Form 8-K
dated June 13, 1997, and incorporated herein by
reference).
4.15 -- Loan Agreement dated June 13, 1997 between TARC and
TransAmerican Energy Corporation (filed as an exhibit to
TARC's current report on Form 8-K dated June 13, 1997,
and incorporated herein by reference).
4.16 -- Security and Pledge Agreement dated June 13, 1997 by TARC
in favor of TransAmerican Energy Corporation (filed as an
exhibit to TARC's current report on Form 8-K dated June
13, 1997, and incorporated herein by reference).
4.17 -- Disbursement Agreement dated June 13, 1997 among TARC,
TransAmerican Energy Corporation, Firstar Bank of
Minnesota, N.A., as disbursement agent and trustee, and
Baker & O'Brien, Inc., as construction supervisor (filed
as an exhibit to TARC's current report on Form 8-K dated
June 13, 1997, and incorporated herein by reference).
4.18 -- Form of Mortgage dated June 13, 1997 between TARC and
TransAmerican Energy Corporation (filed as an exhibit to
TARC's quarterly report on Form 10-Q for the quarter
ended July 31, 1997, and incorporated herein by
reference).
*4.19 -- First Amendment dated December 30, 1997 to Loan Agreement
between TARC and TEC.
*4.20 -- First Amendment dated December 30, 1997 to Disbursement
Agreement among TARC, TEC, Firstar Bank of Minnesota,
N.A. and Baker & O'Brien.
*4.21 -- Indenture dated December 30, 1997 between TARC and First
Union National Bank, as trustee, with respect to the $200
million Series A Senior Subordinated Notes, including the
form of Note as an exhibit.
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
*4.22 -- Warrant Agreement dated December 30, 1997 between TARC
and First Union National Bank, as Warrant Agent, with
respect to 175,000 common stock purchase warrants (the
"December 1997 Warrants"), including the form of warrant
as an exhibit.
*4.23 -- Registration Rights Agreement dated December 30, 1997
between TARC and the holders of the Series A Senior
Subordinated Notes.
*4.24 -- Securityholders' and Registration Rights Agreement dated
December 30, 1997 between TARC, Jefferies & Company,
Inc., as the Purchaser, and the holders of the December
1997 Warrants.
*4.25 -- Third Supplemental Indenture dated January 16, 1998
between TARC, TEC and First Union National Bank.
*4.26 -- Irrevocable Trust and Security Agreement dated January
16, 1998 between TARC and First Union National Bank.
*4.27 -- Indenture dated March 16, 1998 between TARC and First
Union National Bank, as trustee, with respect to the $25
million Series C Senior Subordinated Notes, including the
form of Note as an exhibit.
*4.28 -- Warrant Agreement dated March 16, 1998 between TARC and
First Union National Bank, as Warrant Agent, with respect
to 25,000 common stock purchase warrants (the "March 1998
Warrants"), including the form of warrant as an exhibit.
*4.29 -- Registration Rights Agreement dated March 16, 1998
between TARC and the holders of the Series C Senior
Subordinated Notes.
*4.30 -- Securityholders' and Registration Rights Agreement dated
March 16, 1998 between TARC, Jefferies & Company, Inc.,
as the Purchaser, and the holders of the March 1998
Warrants.
*4.31 -- Note Purchase Agreement dated December 10, 1997 between
TARC and Merrill Lynch Corporate Bond Fund, Inc. -- High
Income Portfolio.
10.1 -- Services Agreement dated August 24, 1993, by and among
TARC, TEC, TransTexas and TransAmerican, as amended
(filed as an exhibit to TARC's and TEC's Registration
Statement on Form S-1 [No. 33-82200], and incorporated
herein by reference).
10.2 -- Tax Allocation Agreement dated August 24, 1993, by and
among TransAmerican, TEC, TARC, TransTexas and the other
subsidiaries of TransAmerican, as amended (filed as an
exhibit to TARC's and TEC's Registration Statement on
Form S-1 [No. 33-82200], and incorporated herein by
reference).
10.3 -- Indemnification Agreement by and between TARC and each of
its directors (filed as an exhibit to TARC's and TEC's
Registration Statement on Form S-1 [No. 33-82200], and
incorporated herein by reference).
10.4 -- Interruptible Gas Sales Terms and Conditions dated
between TARC and TransTexas, as amended (filed as an
exhibit to TARC's and TEC's Registration Statement on
Form S-1 [No. 33-82200], and incorporated herein by
reference).
10.5 -- Intercompany Note dated as of August 12, 1994, executed
by TARC for the benefit of TransAmerican (filed as an
exhibit to TARC's and TEC's Registration Statement on
Form S-1 [No. 33-82200], and incorporated herein by
reference).
10.6 -- Processing Agreement dated March 20, 1996 by and between
TARC and J. Aron & Company (filed as an exhibit to TARC's
Form 10-K for the transition period ended January 31,
1996, and incorporated herein by reference).
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
10.7 -- Employment Agreement dated June 12, 1995, between TARC
and R. Glenn McGinnis (filed as an exhibit to TARC's Form
10-K for the transition period ended January 31, 1996,
and incorporated herein by reference).
10.8 -- Processing Agreement dated April 22, 1996 between TARC
and Glencore Ltd. (filed as an exhibit to TARC's Form
10-Q for the quarter ended April 30, 1996, and
incorporated herein by reference).
10.9 -- Services Agreement dated June 13, 1997 by and among TNGC
Holdings Corporation, TransAmerican Natural Gas
Corporation, TransAmerican Energy Corporation, TransTexas
Gas Corporation, TransTexas Drilling Services, Inc. and
TARC (filed as an exhibit to TARC's quarterly report on
Form 10-Q for the quarter ended July 31, 1997, and
incorporated herein by reference).
10.10 -- Asset Purchase Agreement dated September 19, 1997 between
GATX Terminals Corporation and TARC (filed as an exhibit
to TARC's quarterly report on Form 10-Q for the quarter
ended October 31, 1997, and incorporated herein by
reference).
21.1 -- Schedule of Subsidiaries (filed as an exhibit to TARC's
and TEC's Registration Statement on Form S-1 [No.
33-82200], and incorporated herein by reference).
*27.1 -- Financial Data Schedule.
*27.2 -- Restated Financial Data Schedule.
99.1 -- Financial Statements of TransTexas dated January 31, 1998
(filed as part of TransTexas' Form 10-K for the year
ended January 31, 1998, and incorporated herein by
reference).
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 4.19
- --------------------------------------------------------------------------------
TRANSAMERICAN REFINING CORPORATION
------------------------------
FIRST AMENDMENT TO LOAN AGREEMENT
Dated as of December 30, 1997
------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
This First Amendment to Loan Agreement (this "First Amendment") is made
as of December 30, 1997, by and between TransAmerican Energy Corporation, a
Delaware corporation ("TEC"), and TransAmerican Refining Corporation, a Texas
corporation ("TARC").
WHEREAS, TEC and Firstar Bank of Minnesota, N.A., as Trustee, have
entered into an Indenture dated as of June 13, 1997 (the "Indenture"), pursuant
to which TEC issued $475,000,000 aggregate principal amount of its 11 1/2%
Senior Secured Notes due 2002 and $1,130,000,000 aggregate principal amount of
its 13% Senior Secured Discount Notes due 2002 (collectively, the "Notes"); and
WHEREAS, TEC and TARC have entered into a Loan Agreement dated as of
June 13, 1997 (the "TARC Intercompany Loan Agreement"), pursuant to which TEC
agreed to loan to TARC an aggregate of $675,648,920 out of the proceeds of the
issuance of the Notes; and
WHEREAS, TEC and TARC have agreed to an amendment to the TARC
Intercompany Loan Agreement as hereinafter set forth (the "Proposed
Amendment"); and
WHEREAS, pursuant to Section 9.2 of the Indenture, the holders of not
less than 66-2/3% in aggregate Value (as defined in the Indenture) of the Notes
have consented to the Proposed Amendment to the TARC Intercompany Loan
Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this First
Amendment hereby agree as follows:
ARTICLE I
AMENDMENT TO THE TARC INTERCOMPANY LOAN AGREEMENT
Section 1.01. Amendment to Section 1.1. The following definition in
Section 1.1 of the TARC Intercompany Loan Agreement is hereby amended to read
in its entirety as follows:
"Indenture" shall mean that certain Indenture dated as of the
date hereof between the Lender and the Indenture Trustee, as
supplemented or amended from time to time.
ARTICLE II
MISCELLANEOUS
Section 2.01. Ratification and Confirmation. As amended and modified
by this First Amendment, the terms and provisions of the TARC Intercompany Loan
Agreement are hereby ratified and confirmed and shall continue in full force
and effect.
Section 2.02. Reference to TARC Intercompany Loan Agreement. The TARC
Intercompany Loan Agreement, and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms of
the TARC Intercompany Loan Agreement, are hereby amended so that any reference
therein to the TARC Intercompany Loan Agreement shall mean a reference to the
TARC Intercompany Loan Agreement as amended hereby.
<PAGE> 3
Section 2.03. Counterparts. This First Amendment may be executed in
one or more counterparts, each of which when executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.
Section 2.04. Headings. The headings, captions and arrangements used
in this First Amendment are for convenience only and shall not affect the
interpretation of this First Amendment.
Section 2.05. Governing Law. THIS FIRST AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date of first written above.
TRANSAMERICAN REFINING CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
TRANSAMERICAN ENERGY CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
2
<PAGE> 1
EXHIBIT 4.20
- --------------------------------------------------------------------------------
TRANSAMERICAN REFINING CORPORATION
------------------------
FIRST AMENDMENT TO DISBURSEMENT AGREEMENT
Dated as of December 30, 1997
--------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
This First Amendment to Disbursement Agreement (this "First Amendment")
is made as of December 30, 1997, by and between TransAmerican Energy
Corporation, a Delaware corporation ("TEC"), TransAmerican Refining Corporation,
a Texas corporation ("TARC"), Firstar Bank of Minnesota, N.A. (the "Trustee"),
Firstar Bank of Minnesota, N.A., as security intermediary and disbursement agent
(the "Disbursement Agent"), and Baker & O'Brien, Inc.
WHEREAS, TEC and the Trustee have entered into an Indenture dated as of
June 13, 1997 (the "Indenture"), pursuant to which TEC issued $475,000,000
aggregate principal amount of its 11 1/2% Senior Secured Notes due 2002 and
$1,130,000,000 aggregate principal amount of its 13% Senior Secured Discount
Notes due 2002 (collectively, the "Notes"); and
WHEREAS, TEC and TARC have entered into a Loan Agreement dated as of
June 13, 1997 (the "TARC Intercompany Loan Agreement"), pursuant to which TEC
agreed to lend to TARC an aggregate of $675,648,920 out of the proceeds of the
issuance of the Notes; and
WHEREAS, in connection with the TARC Intercompany Loan Agreement, TEC,
TARC, the Trustee, the Disbursement Agent, and Baker & O'Brien, Inc., as
construction supervisor (the "Construction Supervisor"), have entered into a
Disbursement Agreement dated as of June 13, 1997 (the "TARC Disbursement
Agreement"); and
WHEREAS, TEC, TARC, the Trustee, the Disbursement Agent and the
Construction Supervisor have agreed to certain amendments to the TARC
Disbursement Agreement as hereinafter set forth (the "Proposed Amendments"); and
WHEREAS, pursuant to Section 9.2 of the Indenture, the holders of not
less than 66-2/3% in aggregate Value (as defined in the Indenture) of the Notes
have consented to the Proposed Amendments to the TARC Disbursement Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this First
Amendment hereby agree as follows:
ARTICLE I
AMENDMENTS TO TARC DISBURSEMENT AGREEMENT
Section 1.01. Amended Definitions. The following definitions in Section
1.1 of the TARC Disbursement Agreement are hereby amended to read in their
respective entireties as follows:
"Accounts" means the TARC Disbursement Account, the TEC
Disbursement Account, the Contingency Reserve Account, the Feedstock
Reserve Account, the TARC Feedstock Reserve Account, the Operating
Reserve Account and the Interest Accumulation Account.
"Reserve Accounts" means the Contingency Reserve Account, the
Feedstock Reserve Account, the Operating Reserve Account and the TARC
Feedstock Reserve Account.
<PAGE> 3
"TARC Accounts" means the TARC Disbursement Account, the TARC
Feedstock Reserve Account and the Interest Accumulation Account.
"TARC Feedstock Reserve Account" has the meaning given to such
term in Section 4.2(c).
Section 1.02. Section 4.1 of the TARC Disbursement Agreement.
Section 4.1(c) of the TARC Disbursement Agreement is hereby amended to read in
its entirety as follows:
(c) TEC shall maintain with the Disbursement Agent a
segregated subaccount of the TEC Disbursement Account (the "Feedstock
Reserve Account") in the name of TEC but indicating the lien of the
Trustee. Funds shall be released from the Feedstock Reserve Account
only in accordance with the provisions of Article V. Upon the
establishment of the TARC Feedstock Reserve Account, this Feedstock
Reserve Account shall be closed and any funds therein shall be
disbursed as provided in Section 5.3(b).
Section 1.03. Section 4.2 of the TARC Disbursement Agreement. Section
4.2 of the TARC Disbursement Agreement is hereby amended by adding the following
clause after clause (b):
(c) Upon the issuance by TARC of subordinated notes with
proceeds to TARC of at least $100 million, TARC shall open and
thereafter maintain with the Disbursement Agent a separate custodial
account (the "TARC Feedstock Reserve Account") under the sole dominion
and control of the Trustee, in the name of TARC but indicating the lien
of the Trustee, as assignee. Funds shall be released from the TARC
Feedstock Reserve Account only in accordance with the provisions of
Article V.
Section 1.04. Section 4.3 of the TARC Disbursement Agreement. Section
4.3 of the TARC Disbursement Agreement is hereby amended by adding the following
clause after clause (d):
(e) With respect to any deposits into the TARC Disbursement
Account on or after December 29, 1997, (i) the first $69 million shall
remain in the TARC Disbursement Account until disbursed, without
reservation of such funds to any other account and (ii) any additional
funds deposited (up to $50 million) shall be reserved to the TARC
Feedstock Reserve Account.
Section 1.05. Section 4.4 of the TARC Disbursement Agreement.
(a) Section 4.4(a) of the TARC Disbursement Agreement is
hereby amended to read in its entirety as follows:
(a) Initially, $25,500,000 of the amount deposited in
the TEC Disbursement Account shall be reserved in the
Operating Reserve Account. Upon any additional deposits to the
TEC Disbursement Account pursuant to the provisions of Section
4.3(a), the amount of such additional deposits shall be
reserved in the Contingency Reserve Account until the
aggregate amount reserved therein equals the Minimum
Contingency Reserve Amount.
2
<PAGE> 4
(b) Section 4.4 of the TARC Disbursement Agreement is hereby
further amended by adding the following clause after clause (b):
(c) Upon the creation of the TARC Feedstock Reserve
Account pursuant to Section 4.2(c), $10,176,272 of the amounts
then on deposit in the TEC Disbursement Account shall be
disbursed and immediately deposited into the Contingency
Reserve Account.
Section 1.06. Section 5.3 of the TARC Disbursement Agreement.
(a) Section 5.3(b) of the TARC Disbursement Agreement is
hereby amended to read in its entirety as follows:
(b) (i) Upon the creation of the TARC Feedstock
Reserve Account pursuant to Section 4.2(c) above, all funds in
the Feedstock Reserve Account, if any, shall be disbursed and
immediately deposited into the TARC Disbursement Account, and
(ii) disbursements of funds specified in a Disbursement
Certificate for the purchase of feedstock to be used in the
start up and subsequent operation of the Delayed Coking Unit
and/or Phase I ("Feedstock Disbursements") shall be made out
of the Feedstock Reserve Account or the TARC Feedstock Reserve
Account, as the case may be; provided, that the Construction
Supervisor shall have previously delivered either a Coking
Unit Completion Notice or a Phase I Completion Notice to the
Disbursement Agent.
(b) Section 5.3(c) of the TARC Disbursement Agreement is
hereby amended to read in its entirety as follows:
(c) Notwithstanding any provision hereof to the
contrary (i) on the first Business Day after the initial
deposit of funds into the TARC Disbursement Account, the
Disbursement Agent shall make a disbursement (the "Initial
Disbursement") to TARC in the amount of $32,000,000 from the
TARC Disbursement Account; provided, that the Disbursement
Agent has received a certificate of a duly authorized officer
of TARC certifying that at least $25,000,000 of the Initial
Disbursement shall be applied towards the construction of the
Project and that the remainder of the Initial Disbursement
shall be applied towards the payment of outstanding accounts
payable and (ii) on the first Business Day subsequent to a
deposit into the TARC Disbursement Account in excess of
$8,000,000 (which deposit is after December 29, 1997), the
Disbursement Agent shall make a disbursement to TARC in the
amount of $8,000,000 from the TARC Disbursement Account;
provided, that the Disbursement Agent has received a
certificate of a duly authorized officer of TARC certifying
that all of such disbursement shall be applied towards the
construction of the Project.
3
<PAGE> 5
(c) Section 5.3 of the TARC Disbursement Agreement is hereby
further amended by adding the following clause after clause (h):
(i) Notwithstanding any provision hereof to the
contrary, on the first Business Day after delivery of a Phase
I Completion Notice to the Disbursement Agent and TEC, the
Disbursement Agent shall liquidate all investments in the
Operating Reserve Account and release all amounts remaining on
deposit in the Operating Reserve Account to TARC in accordance
with written instructions provided by TARC.
ARTICLE II
MISCELLANEOUS
Section 2.01. Ratification and Confirmation. As amended and modified by
this First Amendment, the terms and provisions of the TARC Disbursement
Agreement are hereby ratified and confirmed and shall continue in full force and
effect.
Section 2.02. Reference to TARC Disbursement Agreement. The TARC
Disbursement Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms of the
TARC Disbursement Agreement, are hereby amended so that any reference therein to
the TARC Disbursement Agreement shall mean a reference to the TARC Disbursement
Agreement as amended hereby.
Section 2.03. Counterparts. This First Amendment may be executed in one
or more counterparts, each of which when executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the same
instrument.
Section 2.04. Headings. The headings, captions and arrangements used in
this First Amendment are for convenience only and shall not affect the
interpretation of this First Amendment.
Section 2.05. Governing Law. THIS FIRST AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 2.06. Certificate and Opinion as to Conditions Precedent.
Simultaneously with and as a condition to the execution of this First Amendment,
TEC is delivering to the Trustee:
(a) an Officers' Certificate in the form attached hereto as
Exhibit A; and
(b) an Opinion of Counsel covering the matters described in
Exhibit B attached hereto.
4
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date of first written above.
TRANSAMERICAN REFINING CORPORATION
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
TRANSAMERICAN ENERGY CORPORATION
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
FIRSTAR BANK OF MINNESOTA, N.A.,
as Disbursement Agent
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
FIRSTAR BANK OF MINNESOTA, N.A.,
as Trustee
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
BAKER & O'BRIEN, INC.,
as Construction Supervisor
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
5
<PAGE> 1
EXHIBIT 4.21
================================================================================
$200,000,000
16% Senior Subordinated Notes due 2003
INDENTURE
between
TRANSAMERICAN REFINING CORPORATION,
as Issuer
and
First Union National Bank
as Trustee
Dated as of December 30, 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) ............................................................................. 13.03
(c) ............................................................................. 13.03
313(a) ............................................................................. 7.06
(b)(1)............................................................................ 7.06
(b)(2)............................................................................ 7.06
(c) ............................................................................. 7.06; 13.02
(d) ............................................................................. 7.06
314(a) ............................................................................. 4.08; 13.02
(b) ............................................................................. 12.03(b)
(c)(1)............................................................................ 2.02; 7.02;
13.04
(c)(2)............................................................................ 7.02; 13.04
(c)(3)............................................................................ N.A.
(d) ............................................................................ 12.03(b);
12.04(b)
(e) ............................................................................. 13.05
(f) ............................................................................. N.A.
315(a) ............................................................................. 7.01(b)
(b) ............................................................................. 7.05; 13.02
(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) ............................................................................. 13.01
</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............................................22
Section 1.3 Rules of Construction........................................................23
ARTICLE II THE NOTES......................................................................................23
Section 2.1 Form and Dating..............................................................23
Section 2.2 Execution and Authentication.................................................24
Section 2.3 Registrar and Paying Agent...................................................25
Section 2.4 Paying Agent to Hold Assets in Trust.........................................25
Section 2.5 Noteholder Lists.............................................................25
Section 2.6 Transfer and Exchange........................................................25
Section 2.7 Replacement Notes............................................................29
Section 2.8 Outstanding Notes............................................................29
Section 2.9 Treasury Notes...............................................................29
Section 2.10 Temporary Notes..............................................................29
Section 2.11 Cancellation.................................................................30
Section 2.12 Defaulted Interest...........................................................30
Section 2.13 Computation of Interest......................................................31
Section 2.14 Legends......................................................................31
Section 2.15 Separation of Notes and Warrants.............................................32
ARTICLE III REDEMPTION.....................................................................................32
Section 3.1 Right of Redemption..........................................................32
Section 3.2 Notices to Trustee...........................................................32
Section 3.3 Selection of Notes to Be Redeemed............................................32
Section 3.4 Notice of Redemption.........................................................33
Section 3.5 Effect of Notice of Redemption...............................................34
Section 3.6 Deposit of Redemption Price..................................................34
Section 3.7 Notes Redeemed in Part.......................................................34
ARTICLE IV COVENANTS......................................................................................35
Section 4.1 Payment of Notes.............................................................35
Section 4.2 Maintenance of Office or Agency..............................................35
Section 4.3 Limitation on Restricted Payments............................................35
Section 4.4 Corporate Existence..........................................................36
Section 4.5 Payment of Taxes and Other Claims............................................36
Section 4.6 Maintenance of Properties and Insurance......................................36
Section 4.7 Compliance Certificate; Notice of Default....................................37
Section 4.8 SEC Reports..................................................................37
Section 4.9 Limitation on Status as Investment Company
or Public Utility Company....................................................38
Section 4.10 Limitation on Transactions with Related Persons..............................38
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 4.11 Limitation on Incurrences of Additional Debt
and Issuances of Disqualified Capital Stock..................................39
Section 4.12 Limitations on Restricting Subsidiary Dividends..............................41
Section 4.13 Liens........................................................................41
Section 4.14 Limitation on Asset Sales....................................................42
Section 4.15 Waiver of Stay, Extension or Usury Laws......................................44
Section 4.16 Guarantee by Subsidiaries....................................................45
Section 4.17 Intentionally Omitted........................................................46
Section 4.18 Limitations on Line of Business..............................................46
Section 4.19 Separate Existence and Formalities...........................................46
Section 4.20 Accounts Receivable Subsidiary...............................................46
Section 4.21 Limitation on Ranking of Future Debt.........................................47
Section 4.22 Maintenance of Interest Reserve Account......................................47
Section 4.23 Restriction on Sale and Issuance of Subsidiary Stock.........................49
Section 4.24 [Intentionally Omitted]......................................................49
ARTICLE V SUCCESSOR CORPORATION..........................................................................49
Section 5.1 When the Company May Merge, Etc..............................................49
Section 5.2 Successor Corporation Substituted............................................50
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES.................................................................51
Section 6.1 Events of Default............................................................51
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment......................52
Section 6.3 Collection of Indebtedness and Suits for Enforcement by Trustee..............53
Section 6.4 Trustee May File Proofs of Claim.............................................54
Section 6.5 Trustee May Enforce Claims Without Possession of Notes.......................54
Section 6.6 Priorities...................................................................55
Section 6.7 Limitation on Suits..........................................................55
Section 6.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest.........................................................55
Section 6.9 Rights and Remedies Cumulative...............................................56
Section 6.10 Delay or Omission Not Waiver.................................................56
Section 6.11 Control by Holders...........................................................56
Section 6.12 Waiver of Past Default.......................................................56
Section 6.13 Undertaking for Costs........................................................56
Section 6.14 Restoration of Rights and Remedies...........................................57
ARTICLE VII TRUSTEE........................................................................................57
Section 7.1 Duties of Trustee............................................................57
Section 7.2 Rights of Trustee............................................................58
Section 7.3 Individual Rights of Trustee.................................................59
Section 7.4 Trustee's Disclaimer.........................................................59
Section 7.5 Notice of Default............................................................59
Section 7.6 Reports by Trustee to Holders................................................59
Section 7.7 Compensation and Indemnity...................................................59
Section 7.8 Replacement of Trustee.......................................................60
Section 7.9 Successor Trustee by Merger, Etc.............................................61
Section 7.10 Eligibility; Disqualification................................................61
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 7.11 Preferential Collection of Claims against Company............................61
Section 7.12 No Bond......................................................................61
Section 7.13 Condition to Action..........................................................61
Section 7.14 Investment...................................................................61
ARTICLE VIII SATISFACTION AND DISCHARGE.....................................................................61
Section 8.1 Satisfaction, Discharge of the Indenture and
Defeasance of the Notes......................................................61
Section 8.2 Termination of Obligations Upon Cancellation of the Notes....................63
Section 8.3 Survival of Certain Obligations..............................................63
Section 8.4 Acknowledgment of Discharge by Trustee.......................................63
Section 8.5 Application of Trust Assets..................................................63
Section 8.6 Repayment to the Company.....................................................63
Section 8.7 Reinstatement................................................................64
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS............................................................64
Section 9.1 Supplemental Indentures Without Consent of Holders...........................64
Section 9.2 Amendments, Supplemental Indentures and Waivers
with Consent of Holders......................................................64
Section 9.3 Compliance with TIA..........................................................66
Section 9.4 Revocation and Effect of Consents............................................66
Section 9.5 Notation on or Exchange of Notes.............................................66
Section 9.6 Trustee to Sign Amendments, Etc..............................................66
ARTICLE X MEETINGS OF NOTEHOLDERS........................................................................67
Section 10.1 Purposes for Which Meetings May Be Called....................................67
Section 10.2 Manner of Calling Meetings...................................................67
Section 10.3 Call of Meetings by Company or Holders.......................................67
Section 10.4 Who May Attend and Vote at Meetings..........................................68
Section 10.5 Regulations May Be Made by Trustee; Conduct
of the Meeting; Voting Rights; Adjournment...................................68
Section 10.6 Voting at the Meeting and Record to Be Kept..................................68
Section 10.7 Exercise of Rights of Trustee or Noteholders May
Not Be Hindered or Delayed by Call of Meeting................................69
ARTICLE XI RIGHT TO REQUIRE REPURCHASE....................................................................69
Section 11.1 Repurchase of Notes at Option of the Holder
Upon Change of Control.......................................................69
ARTICLE XII SUBORDINATION..................................................................................71
Section 12.1 Notes Subordinated to Senior Indebtedness....................................71
Section 12.2 No Payment on Securities in Certain Circumstances............................71
Section 12.3 Notes Subordinated to Prior Payment of All Senior
Debt on Dissolution, Liquidation or Reorganization...........................72
Section 12.4 Securityholders to Be Subrogated to Rights of Holders
of Senior Debt...............................................................72
Section 12.5 Obligations of the Company Unconditional.....................................73
Section 12.6 Trustee Entitled to Assume Payments Not Prohibited
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C> <C>
in Absence of Notice.........................................................73
Section 12.7 Application by Trustee of Assets Deposited with It...........................73
Section 12.8 Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Debt.....................................74
Section 12.9 Holders of Notes Authorize Trustee to Effectuate
Subordination of Securities..................................................74
Section 12.10 Right of Trustee to Hold Senior Debt.........................................74
Section 12.11 Article XII Not to Prevent Events of Default.................................75
Section 12.12 No Fiduciary Duty of Trustee to Holders of Senior Debt.......................75
ARTICLE XIII MISCELLANEOUS..................................................................................75
Section 13.1 TIA Controls.................................................................75
Section 13.2 Notices......................................................................75
Section 13.3 Communications by Holders with Other Holders.................................76
Section 13.4 Certificate and Opinion as to Conditions Precedent...........................76
Section 13.5 Statements Required in Certificate or Opinion................................76
Section 13.6 Rules by Trustee, Paying Agent, Registrar....................................76
Section 13.7 Legal Holidays...............................................................77
Section 13.8 Governing Law................................................................77
Section 13.9 No Adverse Interpretation of Other Agreements................................77
Section 13.10 No Recourse against Others...................................................77
Section 13.11 Successors...................................................................77
Section 13.12 Duplicate Originals..........................................................77
Section 13.13 Severability.................................................................77
Section 13.14 Table of Contents, Headings, Etc.............................................78
SIGNATURES.......................................................................................................79
</TABLE>
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Unit
Exhibit C - Certificate of Transferor
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of this Indenture.
iv
<PAGE> 7
INDENTURE, dated as of December 30, 1997, among TRANSAMERICAN REFINING
CORPORATION, a Texas corporation (the "Company"), and FIRST UNION NATIONAL BANK,
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 16% Senior
Subordinated Notes due 2003:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Accounts Receivable Subsidiary" means a subsidiary of TEC designated
as an Accounts Receivable Subsidiary for the purpose of financing the accounts
receivable of the Company.
"Accounts Receivable Subsidiary Notes" means the notes to be issued by
the Accounts Receivable Subsidiary for the purchase of accounts receivable.
"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 Net Assets" of a Guarantor means the lesser of (a) the amount
by which the Guarantor's property, at a fair valuation, exceeds the sum of its
debts (including unliquidated or contingent debts), (b) the amount by which the
present fair salable value of the Guarantor's assets exceeds the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured, (c) the amount by which the Guarantor's assets
exceed the maximum amount that would constitute unreasonably small capital for
its business or (d) the amount by which the Guarantor's assets exceed the amount
that such Guarantor should reasonably retain to pay its debts (including
unliquidated or contingent debts) as they mature.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director or controlling shareholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 5% or more of the
voting power of the voting
<PAGE> 8
common equity of such Person (on a fully diluted basis) or of warrants or other
rights to acquire such equity (regardless of whether presently exercisable).
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Alkylation Unit" means the alkylation unit being constructed as part
of the Capital Improvement Program.
"Appraisal" means, when used with respect to the valuation of any
property, an appraisal prepared by an Appraiser as to the Appraised Value of
such property.
"Appraised Value" means, with respect to any property at any date, the
then current fair market value of such property as set forth in the most recent
Appraisal.
"Appraiser" means an independent appraiser of national recognition
qualified to appraise the property appraised.
"Asset Sale" means any direct or indirect conveyance, sale, transfer or
other disposition (including through damage or destruction for which Insurance
Proceeds are paid or by condemnation), in one transaction or a series of related
transactions, of any of the properties, businesses or assets of the Company or
any Subsidiary of the Company, whether owned on the Issue Date or thereafter
acquired; provided, however, that "Asset Sale" shall not include (i) any
disposition of Receivables, Inventory or Equipment, or (ii) 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.
"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 interest borne by the Notes) 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.
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<PAGE> 9
"Capital Improvement Program" means the expansion and improvement
program at the Company as described in the Registration Statement on Form S-4,
as amended, of TEC under the heading "Business of TARC--Capital Improvement
Program" and including both Phase I and Phase II.
"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 or 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
Investors Service, Inc. or Standard & Poor's Corporation, Inc., 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), (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) above or an Eligible Institution, 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,
including deposits denominated in foreign currency, with any Eligible
Institution; provided that all such deposits do not exceed $10,000,000 in the
aggregate at any one time, and (i) demand or fully insured time deposits used in
the ordinary course of business with commercial banks insured by the Federal
Deposit Insurance Corporation.
"CATOFIN(R) Unit" means certain real property currently owned by the
Company as more specifically defined in the security documents relating to the
TEC Notes, together with all personal property of the Company now or hereinafter
located on such real property but only to the extent that such property is part
of a refining unit designed to produce propane and butane mono-olefins using the
CATOFIN(R) process.
"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 Section 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
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<PAGE> 10
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-days 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."
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"Common Stock" means the Company's common stock, $0.01 par value.
"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 or the retirement of any Debt or
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
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<PAGE> 11
period, unless such Person or any of its 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.
"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 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 Subsidiary of such Person other
than with respect to Debt of such Person or a Subsidiary of such Person shall be
deemed to be the interest expense attributable to the item guaranteed.
"Consolidated Net Income" of any Person for any period means the net
income (loss) of such Person and its consolidated Subsidiaries for such period,
determined in accordance with GAAP, excluding (without duplication) (i) all
extraordinary, unusual and nonrecurring gains, (ii) the net income, if positive,
of any other Person, other than a consolidated Subsidiary, in which such Person
or any of its consolidated Subsidiaries has an interest, except to the extent of
the amount of any dividends or distributions actually paid in cash to such
Person or a consolidated Subsidiary of such Person during such period, but not
in excess of such Person's pro rata share of such other Person's aggregate net
income earned during such period or earned during the immediately preceding
period and not distributed during such period, (iii) the net income, if
positive, of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition and (iv) the net income, if
positive, of any Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions is not at the time permitted by
5
<PAGE> 12
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule, or governmental regulation applicable to such
Subsidiary.
"Consolidated Net Tangible Assets" means, as of any date, the total
assets of the Company and its Subsidiaries on a consolidated basis as of such
date (less applicable reserves and other items properly deductible from total
assets) and after deduction therefrom: (i) total liabilities and total capital
items as of such date except the following: items constituting Debt,
paid-in-capital and retained earnings, provisions for deferred income taxes and
deferred gains, and reserves which are not reserves for any contingencies not
allocated to any particular purpose; (ii) good will, trade names, trademarks,
patents, unamortized debt discount and expense, and other intangible assets; and
(iii) all Investments other than Permitted Investments.
"Construction Supervisor" means Baker & O'Brien, Inc., as construction
supervisor of the Capital Improvement Program or any successor construction
supervisor appointed pursuant to the Disbursement Agreement.
"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 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 or (f) the Attributable Debt associated with any Sale and Leaseback
Transaction; (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) other than for endorsements, with recourse, of negotiable instruments
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.
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<PAGE> 13
"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.
"Definitive Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A, and that do not include the information called for
by footnotes 1 and 2 thereof.
"Delayed Coking Unit" means the delayed coking unit being constructed
as part of the Capital Improvement Program.
"Depository" means the Person specified in Section 2.3 hereof as the
Depository with respect to the Notes issuable in global form, until a successor
shall have been appointed and become such pursuant to the applicable provision
of this Indenture, and, thereafter, "Depository" shall mean or include such
successor.
"Disbursement Agreement" means the Disbursement Agreement, among TEC,
the Company, the disbursement agent named therein and the Construction
Supervisor, as amended pursuant to the terms thereof.
"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 June 30, 2003.
"DTC" means The Depository Trust Company.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500,000,000 and that is rated "A"
(or higher) according to Moody's Investors Service, Inc. or Standard & Poor's
Corporation, Inc. at the time as of which any investment or rollover therein is
made.
"Equipment" means and includes all of the Company's or any of its
Subsidiaries' now owned or hereafter acquired Vehicles, rolling stock and
related equipment and other assets accounted for as equipment by such Person in
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.
"Equity Offering" of any Person means any Public Equity Offering or any
private placement of any Capital Stock of such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Event of Default" shall have the meaning specified in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
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<PAGE> 14
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Series B Notes for
Series A Notes.
"Expense Reimbursement Agreement" means an express reimbursement
agreement pursuant to which the Company will reimburse certain expenses of TEC,
including, without limitation, registration expenses under state and federal
securities laws, franchise taxes, directors' fees and litigation support
expenses.
"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 Offering Circular.
"Gas Purchase Agreement" means the Interruptible Gas Sales Terms and
Conditions between the Company and TransTexas, 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.
"Global Note" means a Note in the form of the Note attached hereto as
Exhibit A and that contains the paragraph referred to in footnote 1 and the
additional schedule referred to in footnote 2.
"Guarantor" means each of the Company's future Subsidiaries that
becomes a guarantor of the Notes and the Company's obligations under this
Indenture in compliance with the provisions of this Indenture.
"Guarantor Senior Debt" means all Debt of a Guarantor created,
incurred, assumed or guaranteed by any Guarantor (and all renewals, extensions,
increases or refundings thereof) (including the principal of, interest on and
fees, premiums, expenses (including costs of collection), indemnities and other
amounts payable in connection with such Debt, and including any
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
Guarantee. Notwithstanding the foregoing, Guarantor Senior Debt does not include
any Debt of the Guarantor to the Company or any Subsidiary or any Unrestricted
Subsidiary.
"HDS Unit" means the hydrodesulfurization unit being constructed as
part of the Capital Improvement Program.
"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.
"Insurance Proceeds" means the interest in and to all proceeds (net of
costs of collection, including attorney's fees) which now or hereafter may be
paid under any insurance policies now or hereafter obtained by or on behalf of
the Company, TARC, TransTexas, or any Guarantor in connection with any assets
thereof, together with interest payable thereon and the right to collect and
receive the same, including, without limitation, proceeds of casualty insurance,
title insurance, business interruption insurance and any other insurance now or
hereafter maintained with respect to such assets.
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<PAGE> 15
"Intercompany Loan Redemption" means the redemption by the Company of
all or a portion of the principal amount then outstanding under the TARC
Intercompany Loan together with all accrued and unpaid interest, if any, to and
including the redemption date.
"Interest Payment Date" means the stated due date of an installment of
interest on the Notes.
"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 feedstocks, refined products, chemicals
and catalysts, other supplies and storeroom items and similar items accounted
for as inventory by the Company 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.
"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 if 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 Notes under this
Indenture.
"Junior Security" means any Qualified Capital Stock and any Debt of the
Company or a Guarantor, as applicable, that is subordinated in right of payment
to the Notes or the Guarantees, as applicable, and has no scheduled installment
of principal due, by redemption, sinking fund payment or otherwise, on or prior
to the Stated Maturity of the Notes.
"Legal Holiday" shall have the meaning provided in Section 13.7.
"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).
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<PAGE> 16
"Liquidated Damages" has the meaning provided in the Registration
Rights Agreement relating to the Notes.
"Material Subsidiary" means any Subsidiary of the Company which, as of
the relevant date of determination, would be a "significant subsidiary" as
defined in Reg. ss. 230.405 promulgated pursuant to the Securities Act as in
effect on the Issue Date, assuming the Company is the "registrant" referred to
in such definition, except that the 10% amounts referred to in such definition
shall be deemed to be 5%.
"Maturity Date," when used with respect to any Note, means the date on
which the principal of such Note 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.
"Mechanical Completion" means with respect to the Capital Improvement
Program, Phase I, Phase II or any specified unit or component thereof,
sufficient completion of the construction of the Capital Improvement Program,
Phase I, Phase II or any specified unit or component, as the case may be, in
accordance with the Plans, so that the Capital Improvement Program, Phase I,
Phase II or such unit or component, as the case may be, can be operated for its
intended purpose.
"Naphtha Pretreater" means the naphtha pretreater being constructed as
part of the Capital Improvement Program.
"Net Cash Proceeds" means, with respect to any Asset Sale of any
Person, an amount equal to the cash proceeds received (including any cash
proceeds received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, and
excluding any other consideration until such time as such consideration is
converted into cash) therefrom, in each case net of all legal, title and
recording tax expenses, commissions and other fees and expenses incurred, and
all federal, state or local taxes required to be accrued as a liability as a
consequence of such Asset Sale, and in each case net of all Debt secured by such
assets, in accordance with the terms of any Lien upon or with respect to such
assets, or which must, by its terms or in order to obtain a necessary consent to
such Asset Sale to prevent a default or event of default under Senior Debt or by
applicable law, be repaid out of the proceeds from such Asset Sale and that is
actually so repaid.
"Net Debt" of a Person means such Person's outstanding Debt to the
extent recorded in accordance with GAAP, less cash and Cash Equivalents of such
Person, in each case as measured on a consolidated basis and as of the last day
of the measuring period.
"Net Proceeds" means (a) in the case of any sale by a Person of
Qualified Capital Stock, the aggregate net cash proceeds received by such Person
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 such Person for
or into shares of Qualified Capital Stock of such Person, the net book value of
such outstanding securities as adjusted on the books of such Person or Debt of
such Person 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 such
Person 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 such Person in connection therewith, in each case,
insofar as such payments or expenses are incident to such exchange, exercise,
conversion, or surrender).
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<PAGE> 17
"Net Working Capital" of any Person means (i) all current assets of
such Person and its consolidated Subsidiaries, minus (ii) all current
liabilities of such Person and its consolidated Subsidiaries other than the
current portion of long term 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 on 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 105 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 stockholder's 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.
"NNM" means the Nasdaq National Market.
"Non-Recourse Debt" of any Accounts Receivable Subsidiary means Debt of
such Accounts Receivable Subsidiary that (a) is not guaranteed by the Company or
any of its Subsidiaries (other than a guaranty by the Company limited in
recourse to the stock of the Accounts Receivable Subsidiary), (b) is not
recourse to and does not obligate the Company or any of its Subsidiaries (other
than as described in clause (a) above), and (c) does not subject any assets of
the Company (other than Capital Stock of such Accounts Receivable Subsidiary) or
any of its Subsidiaries, to the payment thereof.
"Noteholder" means the Person in whose name a Note is registered on the
Registrar's book.
"Note Redemption" means a redemption of Notes by the Company pursuant
to the redemption provisions of this Indenture.
"Note Repurchase" means a purchase of Notes by the Company, other than
pursuant to a Note Redemption or a Change of Control Offer; provided that all
Notes purchased are delivered to the Trustee for cancellation promptly upon
their receipt by the Company.
"Notes" means the 16% Series A Senior Subordinated Notes due 2003 and
the 16% Series B Senior Subordinated Notes due 2003, in each case as
supplemented from time to time in accordance with the terms hereof, issued under
this Indenture.
"NYSE" means the New York Stock Exchange.
"Obligation" means any principal, premium, interest, penalties, fees,
reimbursements, damages, indemnification and other liabilities relating to
obligations of the Company or any Guarantor under the Notes or the Indenture,
including any liquidated damages pursuant to the registration rights agreement
relating to the Notes.
"Offer Price" shall have the meaning specified in Section 4.14.
"Offer to Purchase" means any offer made by the Company to Holders of
the Securities required by Section 4.14."
"Offering Circular" means the offering circular dated as of December
23, 1997 pursuant to which the Notes were offered.
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<PAGE> 18
"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 or by an Officer and an Assistant Secretary
of the Company and otherwise complying with the requirements of Sections 13.4
and 13.5.
"Old TARC Warrants" means the Common Stock Purchase Warrants of the
Company issued on February 23, 1995.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
13.4 and 13.5. Unless otherwise required by the Trustee, the counsel may be
outside counsel to the Company.
"Pari Passu Debt" means any other Debt of the Company that specifically
provides that such Indebtedness is to rank pari passu with the Notes in right of
payment.
"Paying Agent" shall have the meaning specified in Section 2.3.
"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 TARC Entities as part of
their normal business operations as a risk-management strategy or hedge against
adverse changes in the prices of natural gas, feedstock or refined products;
provided, that at the time of such transaction (i) the counter party to any such
transaction is an Eligible Institution or a Person that has an Investment Grade
Rating or has an issue of debt securities or preferred stock outstanding with an
Investment Grade Rating or (ii) such counter party's obligation pursuant to such
transaction is unconditionally guaranteed in full by, or secured by a letter of
credit issued by, 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.
"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 a Related Business; (iv) Swap Obligations; (v) the
receipt of Capital Stock in lieu of cash in connection with the settlement of
litigation; (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 million in the aggregate outstanding at any time; (vii) margin
deposits in connection with Permitted Hedging Transactions; (viii) an Investment
in one or more Unrestricted Subsidiaries of the Company in an aggregate amount
not in excess of $10,000,000 (net of returns on investment) plus the assets
comprising the CATOFIN(R) Unit owned by the Company as of the date hereof, less
the amount of any Unrestricted Non-Recourse Debt outstanding of the Company or
any of its Subsidiaries; (ix) deposits permitted by the definition of Permitted
Liens or any extension, renewal, or replacement of any of them, (x) Investments
in Accounts Receivables Notes by TARC in an Accounts Receivable Subsidiary in
amounts not to exceed the greater of $20 million or 20% of the TARC Borrowing
Base at any one time (xi) Investments by the
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<PAGE> 19
Company in a reincorporation subsidiary in connection with the initial
capitalization thereof and not to exceed $1,000, (xii) Investments by the
Company or any of its wholly owned Subsidiaries in an aggregate amount not to
exceed $250,000, for the purpose of facilitating a redemption, repurchase or
other retirement for value of the Old TARC Warrants or the conversion of the Old
TARC Warrants into the right to receive cash, (xiii) a guaranty by a Subsidiary
of the Company permitted under clause (h) of Section 4.111; (xiv) deposits
permitted by of the definition of "Permitted Liens" or any extension, renewal,
or replacement of any of them; (xv) other Investments not in excess of $5
million at any time outstanding, (xvi) loans made (X) 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 (Y) to refinance loans, together with accrued
interest thereon made pursuant to this clause, in each case not in excess of $3
million in the aggregate outstanding at any one time and (xvii) money market
mutual or similar funds having assets in excess of $100,000,000.
"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 or any of its
Subsidiaries in accordance with GAAP; (b) statutory Liens of landlords,
carriers, warehousemen, mechanics, materialmen, repairmen, mineral interest
owners, or other like Liens arising by operation of law in the ordinary course
of business provided that (i) the underlying obligations are not overdue for a
period of more than 60 days, or (ii) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect thereto
are maintained on the books of the Company or any of its Subsidiaries in
accordance with GAAP; (c) deposits of cash or Cash Equivalents to secure (i) the
performance of bids, trade contracts (other than borrowed money), leases,
statutory obligations, surety 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 issued to secure such performance
or other obligations) in an aggregate amount outstanding at any one time not in
excess of $5 million or (ii) appeal or supersedeas bonds (or to secure
reimbursement obligations or letters of credit in support of such bonds); (d)
easements, servitudes, 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 any of the TARC Entities) or materially interfere
with the ordinary conduct of the business of any of the TARC Entities including
without limitation, any easement or servitude granted in connection with the
financing of the Storage Assets; (e) 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; (f) Liens securing
Debt or other obligations not in excess of $3 million; (g) pledges or deposits
made in the ordinary course of business in connection with worker's
compensation, unemployment insurance, other types of social security
legislation, property insurance and liability insurance; (h) Liens on Equipment,
Receivables and Inventory; (i) Liens on the assets of any entity existing at the
time such assets are acquired by any of the TARC Entities, 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
any of the TARC Entities and (ii) do not extend to any other assets of any of
the TARC Entities; (j) Liens (including extensions and renewals thereof) on real
or personal property, acquired after the Issue Date ("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 improvement or construction)
of the item 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
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<PAGE> 20
not exceed 100% of such cost plus reasonable financing fees and other associated
reasonable out-of-pocket expenses and (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; (k) leases or subleases granted to others
that do not materially interfere with the ordinary course of business of any of
the TARC Entities, taken as a whole; (l) Liens on the assets of one of the TARC
Entities in favor of another TARC Entity; (m) Liens securing reimbursement
obligations with respect to letters of credit that encumber documents relating
to such letters of credit and the products and proceeds thereof; provided, that,
such reimbursement obligations are not matured for a period of over 60 days; (n)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(o) Liens encumbering customary initial deposits and margin deposits securing
Swap Obligations or Permitted Hedging Transactions; (p) Liens on cash deposits
to secure reimbursement obligations with respect to letters of credit after the
Delayed Coking Unit is completed; (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 Lien (exclusive of the
stock of the applicable Unrestricted Subsidiary) shall not exceed the amount of
allowed Unrestricted Non-Recourse Debt of the Company; (r) Liens on the proceeds
of any property subject to a Permitted Lien and Liens on the proceeds of any
Debt Incurred in accordance with the provisions hereof, or on deposit accounts
containing any such proceeds; (s) Liens imposed in connection with Debt incurred
pursuant to clause (f) of Section 4.11; provided, that such liens, if not
Permitted Liens, do not extend to property other than the Storage Assets, the
proceeds of financing related to the Storage Assets or deposit accounts
containing such proceeds; and (t) any extension, renewal or replacement of the
Liens created pursuant to any of clauses (a) through (g), (i) through (s) or (u)
provided that such Liens would have otherwise been permitted under such clauses,
and provided further that the Liens, permitted by this clause (t) do not secure
any additional Debt or encumber any additional property; (u) Liens that secure
Senior Debt; and (v) Liens on any property of the Company (or any agreement to
grant such Liens) securing the Notes.
"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.
"Phase I "has the meaning given to it in the Registration Statement on
Form S-4, as amended, of TEC under the heading "Business of TARC--Capital
Improvement Program."
"Phase I Completion Date" means the date on which the Construction
Supervisor issues a written notice (the "Phase I Completion Notice") to the
Company and the Disbursement Agent certifying that (a) the process units and
supporting facilities included in the definition of "Phase I" have reached
Mechanical Completion in accordance with the Plans, and (b) for a period of at
least 15 consecutive days, the Company's refinery has sustained (i) the
successful performance of the Delayed Coking Unit, the HDS Unit and the Sulfur
Recovery System, (ii) an average feedstock throughput level of at least 150,000
barrels per day, and (iii) no net production of vacuum tower bottoms when using
as input a combined feedstock slate with an average API Gravity of 22 degrees or
less.
"Phase II" has the meaning given to it in the Registration Statement on
Form S-4, as amended, of TEC under the heading "Business of TARC--Capital
Improvement Program."
"Phase II Completion Date" means the date on which the Construction
Supervisor issues a written notice (the "Phase II Completion Notice") to the
Company and the Disbursement Agent certifying that (a) the process units and
supporting facilities included in the definition of "Phase II" have reached
Mechanical Completion in accordance with the Plans, and (b) for a period of at
least 72 uninterrupted hours, the
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<PAGE> 21
Company's refinery has sustained (i) the successful performance of all of the
Phase I facilities plus the Fluid Catalytic Cracking (FCC) Unit, the FCC Flue
Gas Scrubber and the Alkylation Unit, (ii) an average feedstock throughput level
of at least 180,000 barrels per day, and (iii) average production yields
(measured as the liquid volume percent of feedstock throughput) of refined
products with a specific gravity of gasoline or lighter of at least 40% and of
middle distillates or lighter of at least 70%, when using a combined Crude Unit
feedstock slate with an average API Gravity of 22 degrees or less.
"Plans" means (a) the plans and specifications prepared by or on behalf
of the Company as used in the Disbursement Agreement, which describe and show
the proposed expansion and modification of the Company's refinery and (b) a
budget prepared by or on behalf of the Company as used in the Disbursement
Agreement.
"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.
"principal amount" when used with respect to a Note means the principal
amount of such Note as indicated on the face of such Note.
"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 any Person pursuant to an effective registration
statement filed with the SEC pursuant to the Securities Act.
"Publicly Traded Stock" means, with respect to any Person, Capital
Stock of such Person that is registered under Section 12 of the Exchange Act and
actively traded on the New York Stock Exchange or American Stock Exchange or
quoted in the National Association of Securities Dealers Automated Quotation
System (National Market System).
"QIB" shall mean "qualified institutional buyer" as defined in Rule
144A.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Rating Agency" means Standard & Poor's Ratings Group (or any successor
thereto) and Moody's Investors Service, Inc. (or any successor thereto) or, if
either of them shall have ceased to be a "nationally recognized statistical
rating organization" (as defined in Rule 436 under the Act) or shall have ceased
to make
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<PAGE> 22
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.
"Record Date" means a Record Date specified in the Notes regardless of
whether such Record Date is a Business Day.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption pursuant to this Indenture and
Paragraph 5 in the forms of Note attached hereto as Exhibit A.
"Redemption Price" when used with respect to any Note to be redeemed,
means the redemption price for such redemption pursuant to Paragraph 5 in the
forms 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 this
Indenture.
"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreements" means the Registration Rights
Agreements in connection with the registration under federal securities laws of
the Notes.
"Related Business" means the business of (i) processing, blending,
terminalling, storing, marketing (other than through operating retail gasoline
stations), refining, or distilling crude oil, condensate, natural gas liquids,
petroleum blendstocks or refined products thereof and (ii) after the Phase II
Completion Date, the exploration for, acquisition of, development of,
production, transportation and gathering of crude oil, natural gas, condensate
and natural gas liquids from outside of the United States and retail marketing
of refined petroleum products.
"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
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<PAGE> 23
Person (on a fully diluted basis) or of warrants or other rights to acquire such
equity (whether or not presently exercisable).
"Restricted Investment" means any direct or indirect Investment by the
Company or any Subsidiary of the Company other than a Permitted Investment.
"Restricted Notes" means the Notes required to bear the legends set
forth in Exhibit A hereto.
"Restricted Payment" means, with respect to any Person, (i) any
Restricted Investment, (ii) any dividend or other distribution on shares of
Capital Stock of such Person or any Subsidiary of such Person, (iii) any payment
on account of the purchase, redemption, or other acquisition or retirement for
value of any shares of Capital Stock of such Person, 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 Pari
Passu Debt or Subordinated 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 Pari Passu Debt or
Subordinated 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 from any of its Subsidiaries,
(iii) any defeasance, redemption, repurchase, or other acquisition or retirement
for value, in whole or in part, of any Pari Passu Debt or Subordinated 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
Services Agreement, the Expense Reimbursement Agreement, the Office Leases, the
Transfer Agreement or the Tax Allocation Agreement, (v) any redemption,
repurchase or other retirement for value of the Old TARC Warrants by the
Company, including any premium paid thereon, (vi) the redemption, purchase,
retirement or other acquisition of any Debt including any premium paid thereon,
with the proceeds of any refinancing Debt permitted to be incurred pursuant to
clause (o) of the covenant described herein under the heading "Limitation on the
Incurrences of Additional Debt and Issuances of Disqualified Capital Stock,"
(vii) the purchase by the Company of shares of Capital Stock of the Company,
TransTexas or TTXD in connection with each of its employee benefit plans,
including without limitation any employee stock ownership plans or any employee
stock option plans, in an aggregate amount not to exceed 7% of the aggregate
market value of the voting stock held by nonaffiliates of the issuer measured
from the date of the first such purchase, (viii) distributions of common stock
of TransTexas to TEC, and (ix) any dividend or other distribution on the Capital
Stock of any Subsidiary of the Company.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.
"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.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
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<PAGE> 24
"Senior Debt" means, all Debt of the Company, including, without
limitation, the TARC Discount Notes, the TARC Mortgage Notes, the TARC Working
Capital Note and the TARC 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..
"Services Agreement" means the Services Agreement among TNGC Holdings
and its 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.
"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 June 30,
2003.
"Storage Assets" means the following assets existing or under
construction in or near the Company's refinery: (i) the Prospect Road tank farm
and other tanks; (ii) certain dock improvements; (iii) the dock vapor recovery
system; (iv) the coke handling system; (v) the refinery waste water treatment
facility; (vi) tankage for liquefied petroleum gas and (vii) the assets adjacent
to the refinery purchased on September 19, 1997.
"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 Notes is paid in full and (ii) is subordinate and junior in
right of payment to the Notes in the event of a 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 (i) for the purposes of
the Indenture provisions "Subsidiary Guarantees," and "Limitation on
Transactions with Related Persons" a joint venture an investment in which would
constitute a Permitted Investment, provided that, for purposes of the covenant
described herein under the heading "Limitation on Transactions with Related
Persons," such investment is not with a Related Person other than 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 or (ii) any Unrestricted Subsidiary of such Person.
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<PAGE> 25
"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,
and any successor corporation pursuant to the terms of the provision described
under Article V.
"TARC Borrowing Base" means, as of any date, an amount equal to the sum
of (a) 90% 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) 85% 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 TARC Borrowing
Base.
"TARC Discount Notes" means the Guaranteed First Mortgage Discount
Notes due 2002 issued by TARC and guaranteed by TEC.
"TARC Entities" means TARC and each of its Subsidiaries.
"TARC Intercompany Loan" means the senior secured promissory note from
the Company to TEC in the fully accreted principal amount of $920,000,000 upon
substantially the terms described in the Registration Statement on Form S-4, as
amended, of TEC under the heading "Description of Existing Indebtedness--TARC
Intercompany Loan."
"TARC Mortgage Notes" means the Guaranteed First Mortgage Notes due
2002 issued by TARC and guaranteed by TEC.
"TARC Working Capital Note" means the promissory note from the Company
to TEC dated as of July 31, 1997.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated as
of August 24, 1993, among TNGC Holdings Corporation, the Company , TEC and other
subsidiaries of TNGC Holdings Corporation 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 TEC Indenture.
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<PAGE> 26
"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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
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, TransTexas Transmission Corporation, 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" means TransTexas Gas Corporation, a Delaware corporation.
"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.
"TTXD" means TransTexas Drilling Services, Inc., a Delaware corporation
or a newly formed corporation which is initially a wholly owned Subsidiary of
TransTexas formed for the purpose of receiving certain drilling assets of
TransTexas.
"Units" means the Units consisting of $175,000,000 aggregate principal
amount of Notes and 2,335,245 Warrants, issued by the Company. Each Unit
consists of one Note in the principal amount of $1000 and one Warrant to
purchase 13.344257 shares of the Company's common stock, par value $.01 per
share.
"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 clause (ii) below) 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 clause (ii) below) 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 the Indenture) and (ii) guarantees of the Debt of
Unrestricted Subsidiaries of such Person; provided, that the aggregate of all
Debt of such Person 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 20% of
TARC's Consolidated EBITDA since the Phase II
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Completion Date in the case of TARC plus in the case of clause (ii) of this
definition of Unrestricted Non-Recourse Debt, 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 described under 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 described under 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 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.
"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.
"Value" means, as of any date, the outstanding principal amount of the
Notes, plus all accrued and unpaid interest thereon.
"Vehicles" means all trucks, automobiles, trailers and other vehicles
covered by a certificate of title.
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"Voting Stock" means Capital Stock of a Person having generally the
right to vote in the election of directors of such Person.
"Warrant" means any one of the warrants to purchase shares of Common
Stock issued by the Company pursuant to the Warrant Agreement, other than the
warrants issued by the Company to Jefferies & Company, Inc. pursuant to the
Solicitation Agent Agreement, dated as of December 22, 1997, among the Company,
TEC and Jefferies & Company, Inc.
"Warrant Agent" means First Union National Bank, in its capacity as
Warrant Agent under the Warrant Agreement, and any successor thereto.
"Warrant Agreement" means the Warrant Agreement, dated the Closing
Date, by and between the Company and the Warrant Agent.
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 Notes.
"indenture securityholder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Notes means the Company and any other obligor on the
Notes.
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 accor dance 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 NOTES
Section 2.1 Form and Dating. Subject to Section 2.15, the Notes and the
Trustee's certificate of authentication, in respect thereof, shall be
substantially in the form of Exhibit A, the terms of which are incorporated in
and made a part of this Indenture. The Notes 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 Notes and any notation, legend or
endorsement on them. Any such notations, legends or endorsements not contained
in the forms of Note attached as Exhibit A hereto shall be delivered in writing
to the Trustee. Each Note shall be dated the date of its authentication.
The terms and provisions contained in the forms of Note 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 this Indenture,
this Indenture controls.
The Notes will be issued (i) in global form (the "Global Note"),
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 2 thereto) and (ii) in definitive form (the
"Definitive Notes"), substantially in the form of Exhibit A attached hereto
(excluding the text referred to in footnotes 1 and 2 thereto). The Global Note
shall represent the aggregate amount of outstanding Notes from time to time
endorsed thereon; provided, that the aggregate amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the Global
Note to reflect the amount of any increase or decrease in the amount of
outstanding Notes represented thereby shall be made by the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
Section 2.2 Execution and Authentication. Two Officers shall sign, or
one Officer shall sign and one Officer or any Assistant Secretary shall attest
to, the Notes or the Units, as the case may be, for the Company by manual or
facsimile signature. The Company's seal shall be impressed, affixed, imprinted
or reproduced on the Notes or Units, as the case may be, and may be in facsimile
form.
If an Officer whose signature is on a Note or Unit, as the case may be,
was an Officer at the time of such execution but no longer holds that office at
the time the Trustee authenticates the Note or Unit, as the case may be, the
Note or Unit, as the case may be, shall be valid nevertheless and the Company
shall nevertheless be bound by the terms of the Notes or Units, as the case may
be and this Indenture.
A Note or Warrant, as the case may be, shall not be valid until an
authorized signatory of the Trustee manually signs the certificate of
authentication on the Note or Unit, as the case may be, but such signature
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shall be conclusive evidence that the Note or Unit, as the case may be, has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Notes or Units, as the case may be, for
original issue in the aggregate principal amount of up to an amount that will
result in proceeds to the Company of $200,000,000, upon a written order of the
Company in the form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of Notes or Units, as the case may be, to be authenticated
and the date on which the Notes or Units, as the case may be, are to be
authenticated. The aggregate principal amount of Notes or Units, as the case may
be, outstanding at any time may not exceed an amount that will result in
proceeds to the Company of $200,000,000, 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 Notes or Units, as the case may be, in substitution
of Notes or Units, as the case may be, originally issued to reflect any name
change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes or Units, as the case may be. Unless otherwise
provided in the appointment, an authenticating agent may authenticate Notes or
Units, as the case may be, 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.
Notes 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 Notes 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 Notes may be presented for payment ("Paying Agent").
Notices and demands to or upon the Company in respect of the Notes may be served
as is provided in Section 13.2. The Company or any Affiliate of the Company 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, neither the Company nor any Affiliate of
the Company shall act as Paying Agent. The Registrar shall keep a register of
the Notes 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.
The Company initially appoints DTC to act as Depository with respect to
the Global Notes. The Trustee shall act as custodian for the Depository with
respect to the Global Notes.
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 Notes (whether such assets have been distributed to it by the Company or any
other obligor on the Notes), and shall notify the Trustee in writing of any
Default in making any such payment. If the Company or any Affiliate
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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 any Affiliate of
the Company) shall have no further liability for such assets.
Section 2.5 Noteholder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee on or before the third Business Day preceding each
Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee reasonably may
require of the names and addresses of Holders.
Section 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request (1) to register the
transfer of the Definitive Notes or (2) to exchange such Definitive Notes for an
equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, that the Definitive
Notes so presented (A) have been duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing; and (B) in the case
of a Restricted Note, such request shall be accompanied by the following
additional documents:
(i) if such Restricted Note is being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without trans fer, a certification to that effect (in substantially the
form of Exhibit C attached hereto); or
(ii) if such Restricted Note is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective registration
statement under the Securities Act, a certification to that effect (in
substantially the form of Exhibit C attached hereto); or
(iii) if such Restricted Note is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially the
form of Exhibit C attached hereto) and an opinion of counsel reasonably
acceptable to the Company and the Registrar to the effect that such
transfer is in compliance with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a Global
Note. A Definitive Note may be exchanged for a beneficial interest in a Global
Note only upon receipt by the Trustee of a Definitive Note, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
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(i) written instructions directing the Trustee to make an
endorsement on the Global Note to reflect an increase in the aggregate
principal amount of the Notes represented by the Global Note, and
(ii) if such Definitive Note is a Restricted Note, a
certification (in substantially the form of Exhibit C attached hereto)
to the effect that such Definitive Note is being transferred to a QIB
in accordance with Rule 144A;
in which case the Trustee shall cancel such Definitive Note and cause the
aggregate principal amount of Notes represented by the Global Note to be
increased accordingly. If no Global Note is then outstanding, the Company shall
issue and the Trustee shall authenticate a new Global Note in the appropriate
principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depository in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a Definitive
Note. Upon receipt by the Trustee of written transfer instructions (or such
other form of instructions as is customary for the Depository), from the
Depository (or its nominee) on behalf of any Person having a beneficial interest
in a Global Note, the Trustee shall, in accordance with the standing
instructions and procedures existing between the Depository and the Trustee,
cause the aggregate principal amount of Global Notes to be reduced accordingly
and, following such reduction, the Company shall execute and the Trustee shall
authenticate and make available for delivery to the transferee a Definitive Note
in the appropriate principal amount; provided, that in the case of a Restricted
Note, such instructions shall be accompanied by the following additional
documents:
(i) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial owner, a
certification to that effect (in substantially the form of Exhibit C
attached hereto); or
(ii) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect (in substantially the form of Exhibit C attached hereto);
or
(iii) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially the
form of Exhibit C attached hereto) and, if the Trustee deems it
appropriate, an opinion of counsel reasonably acceptable to the Company
and to the Registrar to the effect that such transfer is in compliance
with the Securities Act.
Definitive Notes issued in exchange for a beneficial interest in a
Global Note shall be registered in such names and in such authorized
denominations as the Depository shall instruct the Trustee.
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(e) Transfer and Exchange of Global Notes. Notwithstanding any other
provision of this Indenture, the Global Note may not be transferred as a whole
except by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository; provided, that if:
(i) the Depository notifies the Company that the Depository
is unwilling or unable to continue as Depository and a successor
Depository is not appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of Definitive Notes
under this Indenture,
then the Company shall execute and the Trustee shall authenticate and make
available for delivery, Definitive Notes in an aggregate principal amount equal
to the aggregate principal amount of the Global Note in exchange for such Global
Note.
(f) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in the Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the Global Note shall be
returned to or retained and cancelled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in the Global Note is exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the aggregate principal
amount of Notes represented by such Global Note shall be reduced accordingly and
an endorsement shall be made on such Global Note by the Trustee to reflect such
reduction.
(g) General Provisions Relating to Transfers and Exchanges of Notes. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Definitive Notes and Global Notes at the
Registrar's request. All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes shall
be legal, valid and binding obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Definitive
Notes or Global Notes surrendered upon such registration of transfer or
exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange (without transfer to another person) pursuant to Sections
2.10, 3.1, 4.14, 4.21, 4.24, Article XI and 9.5 of this Indenture).
The Company shall not be required to (i) issue, register the transfer
of or exchange Notes during a period beginning at the opening of business 15
days before the day of any selection of Notes for redemption under Section 3.2
hereof and ending at the close of business on the day of selection; or (ii)
register the transfer of or exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part; or (iii) register the transfer of or exchange a Note between a record date
and the next succeeding interest payment date.
Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of
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such Note for all purposes, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary.
(h) Exchange of Series A Notes for Series B Notes. The Series A Notes
may be exchanged for Series B Notes pursuant to the terms of the Exchange Offer.
The Trustee and Registrar shall make the exchange as follows:
The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(A) upon issuance of the Series B Notes, the transactions
contemplated by the Exchange Offer have been consummated; and
(B) the principal amount of Series A Notes properly tendered in
the Exchange Offer that are represented by a Global Note and
the principal amount of Series A Notes properly tendered in
the Exchange Offer that are represented by Definitive Notes,
the name of each Holder of such Definitive Notes, the
principal amount at maturity properly tendered in the Exchange
Offer by each such Holder and the name and address to which
Definitive Notes for Series B Notes shall be registered and
sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate and (ii) an
Opinion of Counsel (x) to the effect that the Series B Notes have been
registered under Section 5 of the Securities Act and this Indenture has been
qualified under the TIA and (y) with respect to the matters set forth in Section
6 of the Registration Rights Agreement, shall authenticate (A) a Global Note for
Series B Notes in an aggregate principal amount equal to the aggregate principal
amount of Series A Notes represented by a Global Note indicated in such
Officers' Certificate as having been properly tendered and (B) Definitive Notes
representing Series B Notes registered in the names of, and in the principal
amounts indicated in such Officers' Certificate.
If the principal amount at maturity of the Global Note for the Series B
Notes is less than the principal amount at maturity of the Global Note for the
Series A Notes, the Trustee shall make an endorsement on such Global Note for
Series A Notes indicating a reduction in the principal amount at maturity
represented thereby.
The Trustee shall deliver such Definitive Notes for Series B Notes to
the Holders thereof as indicated in such Officers' Certificate.
Section 2.7 Replacement Notes. If a mutilated Note is surrendered to
the Trustee or if the Holder of a Note claims and submits an affidavit or other
evidence, satisfactory to the Company and Trustee, to the Trustee to the effect
that the Note has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Note 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 Note is replaced. The
Company and the Trustee may charge such Holder for its reasonable, out-of-pocket
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company.
Section 2.8 Outstanding Notes. Notes outstanding at any time are all
the Notes that have been authenticated by the Trustee except those cancelled by
it, those delivered to it for cancellation, those
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reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section 2.8
as not outstanding. A Note does not cease to be outstanding because the Company
or an Affiliate of the Company holds the Note, except as provided in Section
2.9.
If a Note is replaced pursuant to Section 2.7 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note 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 Notes payable on that date, then on and after that date such Notes cease
to be outstanding and interest on them ceases to accrue.
Section 2.9 Treasury Notes. In determining whether the Holders of the
required Value of Notes have concurred in any direction, amendment, supplement,
waiver or consent, Notes owned by the Company and Affiliates of the Company
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 Notes that the Trustee knows or has reason
to know are so owned shall be disregarded.
Section 2.10 Temporary Notes. Until definitive Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company reasonably and in good faith considers
appropriate for temporary Notes. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes. Until so exchanged, the temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as permanent Notes
authenticated and delivered hereunder.
Section 2.11 Cancellation. The Company at any time may deliver Notes to
the Trustee for cancellation. The Registrar and the Paying Agent shall forward
to the Trustee any Notes 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 any Affiliate of the Company, and no one else,
shall cancel and, at the written direction of the Company, shall dispose of all
Notes surrendered for transfer, exchange, payment or cancellation. Subject to
Section 2.7, the Company may not issue new Notes to replace Notes it has paid or
delivered to the Trustee for cancellation. No Notes shall be authenticated in
lieu of or in exchange for any Notes cancelled as provided in this Section 2.11,
except as expressly permitted in the forms of Note and as permitted by this
Indenture.
Section 2.12 Defaulted Interest. Interest on any outstanding 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 outstanding Note 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:
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(1) The Company may elect to make payment of any Defaulted Interest to
the persons in whose names the Notes (or their respective predecessor Notes) 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 Note and the date of the proposed payment, and at
the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the persons entitled to such Defaulted Interest as
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 set forth upon the registry books of the Company 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 Notes (or their respective predecessor Notes) 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 Notes 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 Note
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Note shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Note.
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.
Section 2.14 Legends.
(a) Except as permitted by subsections (b) or (c) hereof, each Note
shall bear legends relating to restrictions on transfer pursuant to the
securities laws in substantially the form set forth on Exhibit A or Exhibit B
attached hereto, as applicable.
(b) Upon any sale or transfer of a Restricted Note (including any
Restricted Note represented by a Global Note) pursuant to Rule 144 under the
Securities Act or pursuant to an effective registration statement under the
Securities Act:
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(i) in the case of any Restricted Note that is a
Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Restrict ed Note for a Definitive
Note that does not bear the legends required by subsection
(a) above; and
(ii) in the case of any Restricted Note represented
by a Global Note, such Restricted Note shall not be required
to bear the legends required by subsection (a) above, but
shall continue to be subject to the provisions of Section
2.6(c) or (k), as applicable, hereof; provided, that with
respect to any request for an exchange of a Restricted Note
that is represented by a Global Note for a Definitive Note
that does not bear the legends required by subsection (a)
above, which request is made in reliance upon Rule 144, the
Holder thereof shall certify in writing to the Registrar that
such request is being made pursuant to Rule 144.
(c) The Company shall issue and the Trustee shall authenticate Series B
Notes in exchange for Series A Notes accepted for exchange in the Exchange
Offer. The Series B Notes shall not bear the legends required by subsection (a)
above unless the Holder of such Series B Notes is either (A) a broker-dealer who
purchased such Series B Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act, (B) a
Person participating in the distribution of the Series B Notes or Series B or
(C) a Person who is an affiliate (as defined in Rule 144A) of the Company.
Section 2.15 Separation of Notes and Warrants. The Notes and
the Warrants that comprise the Units shall not be separately transferable until
the earlier of (i) one year from the date hereof, (ii) commencement of the
Exchange Offer and (iii) such other date as may be determined by Jefferies &
Company, Inc.
The Units and the beneficial interest in the Notes and the Warrants
that comprise the Units shall be evidenced only by one or more certificates in
substantially the form of Exhibit B hereto, the terms of which are incorporated
in and made a part of this Indenture. The terms of the Warrants are governed by
the Warrant Agreement and are subject to the terms and provisions contained
therein. If any Units are presented for registration of transfer or exchange in
accordance with the terms of this Indenture and the Warrant Agreement, or if the
Warrants evidenced thereby are exercised, the Company shall cause the Trustee,
the Registrar or the Warrant Agent, as appropriate, to issue certificates
evidencing the Notes and the Warrants (to the extent unexercised) in lieu of
such Units. In accordance with the Warrant Agreement, fractional Warrants will
not be issued upon separation of the Notes and Warrants, but in lieu thereof, a
cash adjustment will be paid.
The provisions of Section 2.1 through 2.14, to the extent applicable to
the Notes, shall also apply to the Notes evidenced by any Units.
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ARTICLE III
REDEMPTION
Section 3.1 Right of Redemption. Redemption of Notes, as permitted or
required by any provision of this Indenture, shall be made in accordance with
such provision and this Article III. The Company may redeem at its election, at
any time on or after the Issue Date, any or all of the Notes in cash at the
applicable Redemption Prices specified in Paragraph 5 of the forms of Note
attached as Exhibit A hereto, set forth therein under the caption "Optional
Redemption," including accrued and unpaid interest, if any, to the Redemption
Date.
Section 3.2 Notices to Trustee. If the Company elects to redeem Notes
pursuant to Paragraph 5 of the Notes, it shall notify the Trustee in writing of
the Redemption Date and the principal amount of Notes 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 Notes to Be Redeemed. If less than all of the
Notes are to be redeemed pursuant to Paragraph 5 thereof, the Trustee shall
select the Notes to be redeemed pro rata, by lot or in such other manner as in
its sole discretion it deems appropriate and fair, and in such manner as
complies with any applicable legal and stock exchange requirements.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption and shall promptly notify the Company in
writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the principal amount thereof to be redeemed.
Notes in denominations of $1,000 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 Notes that have denominations larger than $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes 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 Notes
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. 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 conditions determined by the Company in its sole discretion. Each
notice for redemption shall identify the Notes 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 the amount of accrued
and unpaid interest to be paid upon such redemption;
(3) the name, address and telephone number of
the Paying Agent;
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(4) that Notes 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 Notes called
for redemption ceases to accrue and/or the original
issue discount ceases to accrete on Notes called for
redemption on and after the Redemption Date and the
only remaining right of the Holders of such Notes is
to receive payment of the Redemption Price, including
accrued and unpaid interest, upon surrender to the
Paying Agent of the Notes called for redemption and
to be redeemed;
(6) if any Note is being redeemed in part, the portion of
the principal amount, equal to $1,000 or any integral
multiple thereof, of such Note that will not be
redeemed and that, after the Redemption Date, and
upon surrender of such Note, a new Note or Notes in
aggregate principal amount equal to the unredeemed
portion thereof will be issued;
(7) if less than all the Notes are to be redeemed, the
identification of the particular Notes (or portion
thereof) to be redeemed, as well as the aggregate
principal amount of such Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding
after such partial redemption;
(8) the CUSIP number of the Notes to be redeemed; and
(9) that the notice is being sent pursuant to
this Section 3.4 and pursuant to the re
demption provisions of Paragraph 5 of the
Notes.
Section 3.5 Effect of Notice of Redemption. Once notice of redemption
is mailed in accordance with Section 3.4, Notes called for redemption become due
and payable on the Redemption Date and at the Redemption Price, including
accrued and unpaid interest; provided, however, that 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 conditions determined by the Company in its sole discretion. Upon
surrender to the Trustee or Paying Agent, such Notes 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
through the date of redemption shall be payable to the Holder of the redeemed
Notes registered on the relevant Record Date; and provided, further, that if a
Redemption Date is a Legal Holiday, payment shall be made on the next succeeding
Business Day and no interest shall accrue for the period from such Redemption
Date to such succeeding Business Day.
Upon compliance by the Company with the provisions of this Article III,
including but not limited to Section 3.6, 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 Notes called for
redemption will cease to accrue, and/or the original issue discount will cease
to accrete on the Notes called for redemption, on and after the Redemption Date,
regardless of whether such Notes are presented for payment.
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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 Notes to be redeemed on
such Redemption Date (other than Notes or portions thereof called for redemption
on that date that have been delivered by the Company to the Trustee for
cancellation). The Paying Agent shall promptly return to the Company any U.S.
Legal Tender so deposited which is not required for that purpose upon the
written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III, interest on the Notes to be redeemed will cease
to accrue on the applicable Redemption Date, and/or the original issue discount
will cease to accrete on the Notes to be redeemed on the applicable Redemption
Date, regardless of whether such Notes are presented for payment.
Notwithstanding anything herein to the contrary, if any Note surrendered for
redemption in the manner provided in the Notes 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 Note.
Section 3.7 Notes Redeemed in Part. Upon surrender of a Note 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 Note or
Notes equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE IV
COVENANTS
Section 4.1 Payment of Notes. The Company shall pay the principal of
and interest on the outstanding Notes on the dates and in the manner provided in
the Notes to the Trustee at its New York agent's office unless otherwise
instructed in writing by the Trustee. An installment of principal of or interest
on the Notes 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. The Company shall pay any and all amounts, including without
limitation, Liquidated Damages, if any, on the dates and in the manner required
under the Registration Rights Agreement.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Notes 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 Notes.
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 Notes may be presented or surrendered for payment, where Notes may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes 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
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office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 13.2.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan in the City of New York, New York, for such purposes. The Company
shall give prior written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the corporate trust office of the
Trustee in the Borough of Manhattan in the City of New York, New York, as such
office of the Company.
Section 4.3 Limitation on Restricted Payments. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, make
any dividend or other distribution on shares of Capital Stock of the Company or
any Subsidiary of the Company or make any payment on account of the purchase,
redemption, or other acquisition or retirement for value of any such shares of
Capital Stock unless such dividends, distributions, or payments are made in cash
or Capital Stock or a combination thereof. In addition, the Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, make
any Restricted Payment; provided, however, that the Company may make a
Restricted Payment if, at the time or after giving effect thereto on a pro forma
basis no Default or Event of Default would occur or be continuing, and:
(a) the Company's Consolidated Fixed Charge Coverage
Ratio exceeds 2.25 to 1; and
(b) the aggregate amount of all Restricted Payments made by
all of the TARC Entities, including such proposed Restricted Payment and all
payments that may be made pursuant to the proviso at the end of this sentence
(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, would not exceed an amount equal to (x) 50% of Adjusted Consolidated
Net Income of the Company accrued for the period (taken as one accounting
period) from 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 for which financial statements are available (or, if the Company's
Adjusted Consolidated Net Income for such period is a deficit, then minus 100%
of such deficit), plus (y) the aggregate Net Proceeds received by the Company
from the issuance or sale (other than to a Subsidiary of the Company) of its
Qualified Capital Stock from and after the Issue Date and on or prior to the
date of such Restricted Payment, minus (z) 100% of the amount of any
write-downs, write-offs, other negative revaluations, and other negative
extraordinary charges not otherwise reflected in the Company's Adjusted
Consolidated Net Income during such period; and
provided, that 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,
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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; 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.
Section 4.6 Maintenance of Properties and Insurance.
(a) Each of the Company and its Subsidiaries 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) Each of the Company and its Subsidiaries shall provide, or shall
cause to be provided, for itself and each of its Subsidiaries, 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 business of such Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as is customary, in its reasonable, good faith
opinion, and adequate and appropriate for the conduct of its business and the
business of its Subsidiaries in a prudent manner for companies engaged in a
similar business.
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 (excluding those obligations addressed
by Section 12.3) 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
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to believe that the Company or any Subsidiary of the Company was not in
compliance with the provisions set forth in Section 4.3, 4.11 or 4.14.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, immediately upon becoming aware of any Default or Event
of Default under this Indenture, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto. The Trustee shall not be deemed to have knowledge of
a Default or an Event of Default unless one of its trust officers receives
notice of the Default giving rise thereto from the Company or any of the
Holders.
(d) The Company shall deliver to the Trustee an Officers' Certificate
specifying any changes in the composition of the Board of Directors of the
Company or any of its Subsidiaries or of any amendment to the charter or bylaws
of the Company or any of its Subsidiaries. The Officers' Certificate shall
include a description in reasonable detail of such amendment or change and an
explanation why such amendment or change does not constitute a Default or Event
of Default.
Section 4.8 SEC Reports. The Company shall deliver to the Trustee and
each Holder, within 15 days after it files the same with the SEC, copies of all
reports and information (or copies of such portions of any of the foregoing as
the SEC may by rules and regulations prescribe), if any, which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. The Company shall include in all such reports and information a summary of
the status of the Company's Capital Improvement Program, including a description
of sources of funds available for the completion of the Capital Improvements
Program. The Company agrees to continue to be subject to and comply with the
filing and reporting requirements of the Commission as long as any of the Notes
are outstanding.
Concurrently with the reports delivered pursuant to the preceding
paragraph, the Company shall deliver to the Trustee and to each Holder annual
and quarterly financial statements with appropriate footnotes of the Company and
its Subsidiaries, all prepared and presented in a manner substantially
consistent with those of the Company required by the preceding paragraph. The
Company shall also comply with the other provisions of TIA ss. 314(a).
So long as is required for an offer or sale of the Notes to qualify for
an exemption under Rule 144A, the Company shall, upon request, provide the
information required by clause (d)(4) thereunder to each Holder and to each
beneficial owner and prospective purchaser of Notes identified by any Holder of
Restricted Notes.
Section 4.9 Limitation on Status as Investment Company or Public
Utility Company. The Company shall not, and shall not permit any of its
Subsidiaries to, become an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or a "holding company," or "public
utility company" (as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended) or otherwise become subject to regulation under
the Investment Company Act or the Public Utility Holding Company Act.
Section 4.10 Limitation on Transactions with Related Persons.
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, enter directly or indirectly into, or permit to exist, any transaction or
series of related transactions with any Related Person (including, without
limitation: (i) the sale, lease, transfer or other disposition of properties,
assets or
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securities to such Related Person, (ii) the purchase or lease of any property,
assets or securities from such Related Person, (iii) an Investment in such
Related Person (excluding Investments permitted to be made pursuant to clauses
(iii), (vi), (viii), (x), (xi), (xii), and (xvi) of the definition of "Permitted
Investment"), 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", (B) transactions made in
good faith, the terms of which are (x) fair and reasonable to the Company or
such Subsidiary, as the case may be, and (y) at least as favorable as the terms
which could be obtained by the Company or such Subsidiary, as the case may be,
in a comparable transaction made on an arm's length basis with Persons who are
not Related Persons, (C) transactions between the Company and any of its Wholly
Owned Subsidiaries or transactions between Wholly Owned Subsidiaries of the
Company, (D) transactions pursuant to the Services Agreement, the Transfer
Agreement, the Tax Allocation Agreement, the Gas Purchase Agreement, the Expense
Reimbursement Agreement, the TARC Intercompany Loan and related security
documents, and the Registration Rights Agreement (E) the lease of office space
to the Company or an Affiliate of the Company by TransAmerican or an Affiliate
of TransAmerican, provided that payments thereunder do not exceed in the
aggregate $200,000 per year, (F) any employee compensation arrangement in an
amount which together with the amount of all other cash compensation paid to
such employee by the Company and its Subsidiaries does not provide for cash
compensation in excess of $5,000,000 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, (G) loans
to the Company which are permitted to be Incurred pursuant to the terms of
Section 4.11; (H) the amounts payable by the TEC and its Subsidiaries to
Southeast Contractors for employee services provided to the Company not
exceeding the actual costs to Southeast Contractors of the employees, which
costs consist solely of payroll and employee benefits, plus related
administrative costs and an administrative fee, not exceeding $2,000,000 per
year in the aggregate; and (I) the Company and its Subsidiaries may pay a
management fee to TransAmerican in an amount not to exceed $2,500,000 per year.
(b) Without limiting the foregoing, except for sales of accounts
receivable to an Accounts Receivable Subsidiary in accordance with Section 4.20,
(i) with respect to any Related Person Transaction or series of Related Person
Transactions (other than any Related Person Transaction described in clause (A)
(with respect to Permitted Restricted Payments by virtue of clauses (i), (ii),
(iv), (vii), (ix), (x) or (xi) of the proviso contained in the definition of
"Restricted Payments"), (C), (D), (E), 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 which could be obtained by
the Company or such Subsidiary, as the case may be, on an arm's length basis
with Persons who are not Related Persons, and (ii) with respect to any Related
Person Transaction or series of related Person Transactions (other than any
Related Person Transaction described in clause (A) (with respect to permitted
Restricted Payments by virtue of clauses (i), (ii), (iv), (vii), (ix), (x) or
(xi) of the proviso contained in the definition of "Restricted Payments") (C),
(D), (E) 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.
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Section 4.11 Limitation on Incurrences of Additional Debt and Issuances
of Disqualified Capital Stock. Except as set forth in this Section 4.11, from
and after the Issue Date, the Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, or
otherwise become liable for, contingently or otherwise (to "Incur" or, as
appropriate, an "Incurrence"), any Debt or issue any Disqualified Capital Stock,
except : (a) Debt evidenced by the Notes and the Guarantees in an aggregate
amount not to exceed $200 million in proceeds to the Company less the aggregate
amount of proceeds to the Company pursuant to Debt incurred under clause (p)
below; (b) Debt evidenced by the TARC Intercompany Loan and any other Debt at
any time owing by any of the TARC Entities to TEC in an aggregate outstanding
principal amount, when added to the then outstanding principal amount of the
TARC Intercompany Loan and any other Debt incurred pursuant to this clause (b)
or pursuant to clause (o) below to replace, extend, renew or refund Debt
incurred pursuant to this clause (b), at any one time outstanding not in excess
of $920 million less any amount repaid pursuant to paragraph (c) (i) of the
covenant described herein under Section 4.14 hereof; (c) Subordinated Debt of
the Company solely to any wholly owned Subsidiary of the Company, or Debt of any
wholly owned Subsidiary of the Company solely to the Company or to any wholly
owned Subsidiary of the Company; (d) Debt of the Company outstanding at any time
in an aggregate principal amount not to exceed the greater of (x) $100 million
or (y) the TARC Borrowing Base, less, in each case, the amount of any Debt of an
Accounts Receivable Subsidiary (other than Debt owed to the Company); (e) Debt
in an aggregate principal amount not to exceed at any one time $50 million; (f)
Debt secured by the Storage Assets in an aggregate amount outstanding at any one
time not to exceed $115 million; (g) Debt secured by a Permitted Lien that meets
the requirements of clause (c), (g), (m), (o) and (r) of the definition of
"Permitted Liens," to the extent that such Liens would give rise to Debt under
clauses (i), (ii), or (iii) of the definition of "Debt;" (h) Any guaranty of
Debt incurred pursuant to clauses (d), (e), (g) or (n) hereof which guaranty
shall not be included in the determination of the amount of Debt which may be
Incurred pursuant to (d), (e), (g) or (n) hereof; (i) Swap Obligations of the
Company; (j) Unrestricted Non-Recourse Debt of the Company; (k) Debt evidenced
by the TARC Mortgage Notes; (l) letters of credit and reimbursement obligations
relating thereto to the extent collateralized by cash or Cash Equivalents; (m)
Debt evidenced by the TARC Discount Notes; (n) Debt of TARC or any of its
Subsidiaries owed to TEC which is loaned pursuant to terms of the fourth
paragraph of either of the covenants contained under the headings "--Excess
Cash" and "--Additional Interest Excess Cash Offer" under the TEC Indenture in
the aggregate not in excess of $50 million; (o) the Company may Incur Debt as an
extension, renewal, replacement, or refunding of any of the Debt permitted to be
Incurred by clauses (b), (p) or (r) hereof, or this clause (o) (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 (o) may not exceed the lesser of (x) the principal
amount of the Debt being extended, renewed, replaced, or refunded plus
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 and (2) 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; (p) Pari Passu
Debt or Subordinated Debt of the Company with initial net proceeds to the
Company not in excess of $25 million in the aggregate less the aggregate amount
of proceeds to the Company pursuant to Debt incurred under clause (a) above
after the Issue Date; (q) Debt secured by Liens permitted pursuant to clauses
(h) and (j) of Permitted Liens, in an aggregate principal amount not to exceed
$35 million; (r) Debt of the Company Incurred in connection with the
acquisition, construction or improvement of a CATOFIN(R) Unit not in excess of
20% of the Company's Consolidated EBITDA accrued for the period (taken as one
accounting period) commencing with the first full fiscal quarter that commenced
after the Phase I Completion Date, to and including the fiscal quarter ended
immediately prior to the date of such calculation, provided, that, no such Debt
may be Incurred unless (i) the Phase II Completion Date has occurred or (ii) the
Construction
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Supervisor shall have provided the Trustee with written certification that,
based upon its bi-monthly evaluation of the Capital Improvement Program, the
amounts remaining in the disbursement accounts to complete Phase II are
sufficient to complete Phase II in accordance with the Plans approved by the
Construction Supervisor, and (s) Debt of the Company owed to TEC that does not
in the aggregate exceed $50 million principal amount outstanding at any one
time.
For the purpose 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 (o) above so as to refinance or
refund such Debt Incurred pursuant to such clause and any subsequent
refinancings or refundings thereof.
Notwithstanding the foregoing provisions of this covenant, (a) the
Company may Incur Senior Debt and the Company 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, and (ii) immediately after giving effect to the Consolidated
Fixed Charges in respect of such Debt being Incurred or such Disqualified
Capital Stock being issued and the application of the proceeds therefrom to the
extent used to reduce Debt or Disqualified Capital Stock, on a pro forma basis,
the Consolidated Fixed Charge Coverage Ratio of the Company for the Reference
Period is greater than 2.25 to l, and (b) the Company may Incur Subordinated
Debt if, at the time such Subordinated Debt is incurred, (i) no Default or Event
of Default shall have occurred and be continuing at the time or immediately
after giving effect to such transaction on a pro forma basis, and (ii)
immediately after giving effect to the Consolidated Fixed Charges in respect of
such Subordinated Debt being incurred and the application of the proceeds
therefrom to the extent used to reduce Debt, on a pro forma basis, the
Consolidated Fixed Charge Coverage Ratio of the Company for the Reference Period
is greater than 2.0 to I.
Debt Incurred and Disqualified Capital Stock issued by any Person that
is not a Subsidiary of the Company as the case may be, which Debt or
Disqualified Capital Stock is outstanding at the time such Person becomes a
Subsidiary of, or is merged into, or consolidated with the Company or one of its
Subsidiaries, as the case may be, shall be deemed to have been Incurred or
issued, as the case may be, at the time such Person becomes a Subsidiary of, or
is merged into, or consolidated with or one of its Subsidiaries.
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 or the Subsidiary in question 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.
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,
except encumbrances and restrictions existing under this Indenture and 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
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acquisition and are not applicable to any Person or property, other than the
Person or any property of the Person so acquired. Notwithstanding anything
contained herein to the contrary, the Company may not create an encumbrance or
restriction on their ability to pay premium, if any, principal of, or interest
on, the TARC Intercompany Loan.
Section 4.13 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 respective property or assets, whether now owned or hereafter
acquired, 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 or the Subsidiary in question shall have
the right to determine in its sole discretion the category of Permitted Lien to
which such Lien applies, shall not be required to include such Lien in more than
one of such categories, and may elect to apportion such Lien between or among
any two or more categories otherwise applicable. The Company covenants to grant
to the Trustee on behalf of the Holders a Lien on the assets of the Company
currently subject to a Lien in favor of TEC; provided, that the Company shall
not be required to grant such Lien until the TARC Intercompany Loan has been
paid in full and has not been refinanced, refunded or replaced with the proceeds
of Other Debt ("Other Debt"), which Other Debt has a lower cost of capital to
TARC than the TARC Intercompany Loan and the principal amount of such Other Debt
(or, if such Other Debt is issued with original issue discount, the original
issue amount of such Other Debt) is equal to or less than the original issue
price of, plus amortization of the original issue discount on, the TARC
Intercompany Loan at the time of the incurrence of such Other Debt.
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:
(i) the Company (or its Subsidiaries, as the case may be)
receives consideration at the time of such sale or other disposition at
least equal to the fair market value thereof (as determined in good
faith by the Company's Board of Directors and evidenced by a board
resolution in the case of any Asset Sales or series of related Asset
Sales having a fair market value of $15 million or more);
(ii) at least 85% of the proceeds received by the Company (or
its Subsidiaries, as the case may be) from each such Asset Sale
consists of (A) cash, (B) Cash Equivalents, (C) Publicly Traded Stock
or (D) any combination of the foregoing; provided, however, that (l)
the amount of (x) any liabilities (as shown on the Company's or such
Subsidiary's most recent balance sheet or in the notes thereto) of the
Company or such Subsidiary (other than liabilities that are by their
terms expressly subordinated to the Notes or any guarantee thereof)
that are assumed by the transferee of any such assets and (y) any notes
or other obligations received by the Company or any such Subsidiary
from such transferee that, within 90 days following the closing of such
sale or disposition, are converted by the Company or such Subsidiary
into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision and (2) the aggregate fair market
value (as determined in good faith by the Board of Directors of the
Company, evidenced by a board resolution) of all consideration of the
type specified in clause (C) above received by the Company and its
Subsidiaries from all Asset Sales after the Issue Date shall not exceed
15% of Consolidated Net Tangible Assets at the time of such Asset Sale;
and
(iii) the Net Cash Proceeds received by the Company (or its
Subsidiaries, as the case may be) from such Asset Sales are applied in
accordance with subsection (c) below.
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(b) Notwithstanding the foregoing limitations on Asset Sales and
restrictions on the use of Net Cash Proceeds therefrom:
(A) The Company or any Guarantor may convey, sell, lease,
transfer, or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Company or any Guarantor;
(B) the Company and its Subsidiaries may engage in Asset Sales
in the ordinary course of business;
(C) the Company and its Subsidiaries may engage in Asset Sales
not otherwise permitted in clauses (A), (B) or (D) through (K) of this
sentence provided that the aggregate proceeds from all such Asset Sales
do not exceed $10 million in any twelve-month period;
(D) the Company and its Subsidiaries may engage in Asset Sales
pursuant to and in accordance with the provisions described under
Article V hereof;
(E) the Company and its Subsidiaries may sell, assign, lease,
license, transfer, abandon or otherwise dispose of (a) damaged, worn
out, unserviceable or other obsolete property in the ordinary course of
business or (b) other property no longer necessary for the proper
conduct of their business;
(F) The Company and its Subsidiaries may sell accounts
receivable to an Accounts Receivable Subsidiary in accordance with the
provisions described under Section 4.20;
(G) The Company and its Subsidiaries may convey, sell,
transfer or otherwise dispose of crude oil and refined products in the
ordinary course of business;
(H) The Company and its Subsidiaries may engage in Asset Sales
(a) the Net Cash Proceeds of which are used for (i) payment of cash
interest on the Notes or (ii) a one-time payment of cash interest on
the TARC 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 assets
transferred pursuant to clauses (b) and (c) above from and after the
Issue Date does not exceed $25,000,000;
(I) The Company may transfer the Storage Assets in connection
with the financing thereof pursuant to clause (f) of the covenant
described herein under Section 4.11 hereof;
(J) The Company and its Subsidiaries may dispose of assets of
the Company or its Subsidiaries in exchange for capital assets that (i)
are for use in a Related Business and (ii) have an aggregate fair
market value which, when added to the fair market value of any cash,
Cash Equivalents or Publicly Traded Stock received by the Company or
any of its Subsidiaries in exchange for such capital assets, is equal
to or greater than the aggregate fair market value of the property and
assets being disposed of, provided, however, that (A) in no event may
the Company and its Subsidiaries, in any 12-month period, dispose of
assets pursuant to this paragraph having an aggregate fair market value
of in excess of $10 million;
(K) The Company may sell common stock of TransTexas
to TransTexas; and
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(L) Unless otherwise required by the foregoing clauses (A)
through (K), the proceeds of any Asset Sale permitted thereby shall be
used by the Company or its Subsidiaries for purposes not otherwise
prohibited by the Indenture.
(c) The Company may, within 360 days following the receipt of Net Cash
Proceeds from any Asset Sale, apply an amount equal to such Net Cash Proceeds
to: (i) the repayment of Senior Debt of the Company or any Guarantor that
results in a permanent reduction in the principal amount of such Senior Debt in
an amount equal to the principal amount so repaid or (ii) make Capital
Expenditures for use in a Related Business or (iii) make cash payments in the
ordinary course of business that are not otherwise prohibited by the Indenture,
provided that the aggregate amount so used from and after the Issue Date does
not exceed $20,000,000 (without duplication of amounts used for Capital
Expenditures in clause (ii) above).
If, upon completion of the 360-day period (the "Trigger Date"), an
amount equal to any portion of the Net Cash Proceeds of any Asset Sale shall not
have been applied by the Company as described in clauses (i), (ii) or (iii) of
the preceding paragraph and such amount together with an amount equal to any
remaining net cash proceeds from any prior Asset Sale (such aggregate
constituting "Excess Proceeds"), exceeds $10 million, then the Company shall
make an offer (the "Offer to Purchase") to purchase from all Holders of the
Notes and holders of any then outstanding Pari Passu Debt required to be
repurchased or repaid on a permanent basis in connection with an Asset Sale, an
aggregate principal amount of Notes and any then outstanding Pari Passu Debt
equal to such Excess Proceeds as follows:
(l) the Company shall make an offer to purchase from all
Holders of the Notes in accordance with the procedures set forth in the
Indenture the maximum principal amount (expressed as a multiple of
$1000) of Notes that may be purchased out of an amount (the "Offer
Amount") equal to the product of such Excess Proceeds multiplied by a
fraction, the numerator of which is the outstanding principal amount of
the Notes and the denominator of which is the sum of the outstanding
principal amount of the Notes and such Pari Passu Debt, if any and (ii)
to the extent required by such Pari Passu Debt and provided there is a
permanent reduction in the principal amount of such Pari Passu Debt and
a corresponding permanent reduction in the Company's ability to incur
Pari Passu Debt or Subordinated Debt, the Company shall make an offer
to purchase such Pari Passu Debt (the "Pari Passu Offer') in an amount
(the "Pari Passu Debt Amount") equal to the excess of the Excess
Proceeds over the Offer Amount.
(2) The offer price for the Notes shall be payable in cash in
an amount equal to 100% of the principal amount of the Notes tendered
pursuant to an Offer to Purchase, plus accrued and unpaid interest, if
any, to the date such Offer to Purchase is consummated (the "Offer
Price"), in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate Offer Price of the Notes tendered
pursuant to an Offer to Purchase is less than the Offer Amount relating
thereto or the aggregate amount of the Pari Passu Debt that is
purchased or repaid pursuant to the Pari Passu Offer is less than the
Pari Passu Debt Amount (such shortfall constituting a "Net Proceeds
Deficiency"), the Company may use such Net Proceeds Deficiency, or any
portion thereof, for general corporate purposes, subject to the
"Limitation on Restricted Payments" covenant.
(3) If the aggregate Offer Price of Notes validly tendered and
not withdrawn by Holders thereof exceeds the Offer Amount, Notes to be
purchased will be selected on a pro rata basis. Upon completion of an
Offer to Purchase and a Pari Passu Offer, the amount of Excess Proceeds
shall be reset to zero.
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The Company, to the extent applicable and if required by law, will
comply with Section 14 of the Exchange Act and the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act and any other federal
and state securities laws, rules and regulations which may then be applicable to
any offer by the Company to purchase the Notes at the option of the holders
pursuant to an Offer to Purchase.
It is expected that agreements with respect to Senior Debt the Company
may enter into would prohibit, and the TARC Intercompany Loan currently
prohibits, the repurchase of Debt subordinated to such Senior Debt, which would
include the Notes. Failure of the Company to repurchase the Notes validly
tendered to the Company pursuant to an Offer to Purchase would create an Event
of Default with respect to the Notes. In addition, the subordination provisions
of the Indenture prohibit, subject to certain conditions, the repurchase or
repayment of the Notes if there is a default under Senior Debt. As a result, the
Company may be prohibited from making payment pursuant to an Offer to Purchase
in connection with an Asset Sale.
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 Notes 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, not withstanding any provision to the
contrary in this Indenture or in any of the documents securing the payment of
the Notes 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
Notes 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 para graph 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 Notes.
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Section 4.16 Guarantee by Subsidiaries. All future Material
Subsidiaries and Subsidiaries that guarantee any pari passu Debt or Subordinated
Debt of the Company or of any other Subsidiary of the Company shall jointly and
severally guarantee irrevocably and unconditionally all principal, premium, if
any, and interest on the Notes on a senior subordinated unsecured basis. The
Company covenants to cause each of such Subsidiaries promptly to execute and
deliver to the Trustee a Guarantee pursuant to which such Subsidiary will
guarantee payment of the Notes and the performance of the Company's other
obligations under this Indenture to the extent set forth in this Section 4.16.
The liability of each Guarantor under its Guarantee will be limited to
the amount of its Adjusted Net Assets.
Section 4.17 Intentionally Omitted.
Section 4.18 Limitations on Line of Business. The Company shall not
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 or incidental 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
funds of the Company, its Subsidiaries' and 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 separate records and
books of account and such records and books of account shall be separate from
those of TransAmerican in each case 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 mislead any
other Person as to the identity or authority of the Company and its
Subsidiaries; and
(f) the Company and its Subsidiaries will provide for all of their
operating expenses and liabilities from their own separate funds, other than
pursuant to the Services Agreement.
Section 4.20 Accounts Receivable Subsidiary.
(a) Notwithstanding the provisions of Section 4.3, the Company may, and
may permit any of its Subsidiaries to, make Investments in an Accounts
Receivable Subsidiary (i) the proceeds of which are applied within five Business
Days of the making thereof solely to finance the purchase of accounts receivable
of the Company and its Subsidiaries and (ii) in the form of Accounts Receivable
Subsidiary Notes to the extent permitted by clause (b) below; provided that the
aggregate amount of such Investments shall not exceed the greater of $20 million
or 20% of the TARC Borrowing Base at any time;
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(b) The Company may not, nor may it permit any of its Subsidiaries to,
sell accounts receivable to an Accounts Receivable Subsidiary except for
consideration in an amount not less than that which would be obtained in an
arm's length transaction and solely in the form of cash or Cash Equivalents;
provided that an Accounts Receivable Subsidiary may pay the purchase price for
any such accounts receivable in the form of Accounts Receivable Subsidiary Notes
so long as, after giving effect to the issuance of any such Accounts Receivable
Subsidiary Notes, the aggregate principal amount of all Accounts Receivable
Subsidiary Notes outstanding shall not exceed the greater of $20 million or 20%
of the aggregate purchase price paid for all outstanding accounts receivable
purchased by an Accounts Receivable Subsidiary since the date of this Indenture
(and not written off or required to be written off in accordance with the normal
business practice of an Accounts Receivable Subsidiary);
(c) The Company may not, nor may it permit any of its Subsidiaries to,
enter into any guarantee, subject any of their respective properties or assets
(other than the accounts receivable sold by them to an Accounts Receivable
Subsidiary) to the satisfaction of any liability or obligation or otherwise
incur any liability or obligation (contingent or otherwise), in each case, on
behalf of an Accounts Receivable Subsidiary or in connection with any sale of
accounts receivable or participation interests therein by or to an Accounts
Receivable Subsidiary, other than obligations relating to breaches of
representations, warranties, covenants, and other agreements of the Company or
any of its Subsidiaries with respect to the accounts receivable sold by the
Company or any of its Subsidiaries to an Accounts Receivable Subsidiary or with
respect to the servicing thereof; provided that neither the Company nor any of
its Subsidiaries shall at any time guarantee or be otherwise liable for the
collectibility of accounts receivable sold by them; and
(d) The Company may not, nor may it permit any of its Subsidiaries to,
sell accounts receivable to, or enter into any such transaction with or for the
benefit of, an Accounts Receivable Subsidiary (i) if such Accounts Receivable
Subsidiary pursuant to or within the meaning of any Bankruptcy Law (A) commences
a voluntary case, (B) consents to the entry of an order for relief against it in
an involuntary case, (C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, (D) makes general assignment for the
benefit of its creditors, or (E) generally is not paying its debts as they
become due; or (ii) if a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (A) is for relief against such Accounts
Receivable Subsidiary in an involuntary case, (B) appoints a Custodian of such
Accounts Receivable Subsidiary or for all or substantially all of the property
of such Accounts Receivable Subsidiary, or (C) orders the liquidation of such
Accounts Receivable Subsidiary, and, with respect to clause (ii) hereof, the
order or decree remains unstayed and in effect for 60 consecutive days.
Section 4.21 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. The Guarantors will not, directly or indirectly, issue,
assume, guarantee, incur or otherwise become liable for any Debt which is both
subordinate or junior in right of payment to any Guarantor Senior Debt and
senior or superior in right of payment to the Guarantees.
Section 4.22 Maintenance of Interest Reserve Account.
(a) The Company shall establish and maintain with and at the Trustee a
custodial account in the name of the Trustee (or any agent thereof) (the
"Interest Reserve Account"), under the sole dominion and control of the Trustee.
Funds shall be released from the Interest Reserve Account only in accordance
with this Section 4.22.
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(b) The Company shall, out of the proceeds received by it from the
issuance of the Notes, make an initial deposit into the Interest Reserve Account
in the amount of $42,000,000 (the "Interest Reserve Amount"), such deposit being
of sufficient amount to pay for the first three (3) semi-annual interest
payments on the Notes issued on the date hereof that will become due and payable
on June 30, 1998, December 30, 1998 and June 30, 1999 (the "Subject Interest
Payment Dates"). If, after the date hereof and prior to June 30, 1999, the
Company issues additional Notes (the "Additional Notes") pursuant to the
Indenture (other than Notes issued upon transfer of or to replace Notes issued
on the date hereof) the Company shall, out of the proceeds received by it from
the issuance of the Additional Notes, deposit into the Interest Reserve Account
an amount sufficient to pay the interest that will become due and payable on
such Additional Notes on the Subject Interest Payment Dates.
(c) The Interest Reserve Account will be held in trust by the Trustee
for the equal and ratable benefit of the Holders and not commingled with any
ordinary deposit or commercial bank account, will be maintained with the
corporate trust department of the Trustee for the equal and ratable benefit of
the Holders and, to the extent expressly provided herein, for the Company, and
will be subject to the provisions of this Agreement. In accordance with written
instructions received from the Company, the Trustee shall, subject to the
Trustee's rights under this Section 4.22, (i) invest amounts on deposit in the
Interest Reserve Account in Cash Equivalents in the name of the Trustee as the
Company may select, (ii) invest interest paid on the Cash Equivalents referred
to in clause (i) above, and reinvest other proceeds of any such Cash Equivalents
that may mature or be sold, in Cash Equivalents in the name of the Trustee as
the Company may select (the Cash Equivalents referred to in clauses (i) and (ii)
above being, collectively, "Reserve Account Investments") and (iii) deposit and
hold in the Interest Reserve Account all interest and proceeds that are not
invested or reinvested in Reserve Account Investments. All disbursements made to
the Holders pursuant to this Agreement shall be made by the Trustee irrespective
of, and without deduction for, any counterclaim, defense, recoupment or setoff
and shall be final, and the Trustee will not seek to recover from any Holder for
any reason any such payment once made. All service charges and fees with respect
to the Interest Reserve Account shall be paid by the Company.
(d) The Company has no right to direct the Trustee to disburse the
funds in the Interest Reserve Account, other than the rights, exercisable upon
the giving by the Company of not less than one Business Day prior written notice
to the Trustee, (i) from time to time during the term of this Agreement, to
direct the Trustee to disburse to or for the account of the Company all or any
portion of the interest and other earnings on the funds on deposit in the
Interest Reserve Account and on Reserve Account Investments and (ii) if the
Company optionally redeems the Notes, from time to time during the term of this
Agreement, to direct the Trustee to disburse to or for the account of the
Company all or any portion of the funds on deposit in the Interest Reserve
Account in an aggregate amount that bears the same proportion to the aggregate
amount of funds in the Interest Reserve Account immediately prior to the release
of such proceeds as the aggregate principal amount of the Notes so redeemed by
the Company bears to the aggregate principal amount of Notes outstanding
immediately prior to such redemption; provided, however, that the Trustee shall
not be required to disburse any funds pursuant to this paragraph (d) after the
occurrence and during the continuance of an Event of Default. The amount of
funds that may be released by the Trustee to the Company in connection with any
such optional redemption shall be net of any costs, fees and expenses (such as
breakage costs) incurred to permit such release.
(e) The Trustee shall liquidate part or all of the Reserve Account
Investments, as necessary, to provide the availability of such funds in the
Investment Reserve Account as may be necessary to pay (and shall to the extent
funds are in the Interest Reserve Account pay therefrom) each of the first three
(3) semi-annual interest payments on the Notes, when and as they come due, and
to make such disbursements as may from time to time be requested by the Company
as permitted hereby. The Trustee shall disburse funds from the Interest Reserve
Account solely for the purposes of making the payments and distributions
described hereunder.
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(f) Promptly after the payment in full of the interest accrued through
and including the installment of interest payable on the June 30, 1999 interest
payment, the Trustee shall liquidate all Reserve Account Investments remaining
and shall disburse the full amount of the funds then on deposit in the Interest
Reserve Account to or for the account of the Company, whereupon the Interest
Reserve Account shall be closed; provided, however, that the Trustee shall not
disburse any funds pursuant to this paragraph (f) after the occurrence and
during the continuance of an Event of Default. If any such Event of Default is
continuing at the Interest Payment Date following the Subject Interest Payment
Dates, the funds in the Interest Reserve Account shall be applied to (and the
Trustee shall, to the extend of such funds, pay therefrom) the interest payment
due on such Interest Payment Date.
Section 4.23 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).
Section 4.24 [Intentionally Omitted].
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1 When the Company May Merge, Etc.
(a) The Company shall not, and shall not permit any Guarantor to,
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 or the Guarantor, as the case may be, shall
be the continuing Person, or (b) the Person (if other than the Company) formed
by such consolidation or into which the Company or the Guarantor, as the case
may be, is merged or to which all or substantially all of the properties and
assets of the Company, or the Guarantor, as the case may be, are transferred as
an entirety or substantially as an entirety (the Company or the Guarantor, as
the case may be, 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 or the Guarantor, as the case may be, under the Notes and this
Indenture;
(2) No Default or Event of Default shall exist or shall occur
immediately after giving effect to such transaction;
(3) 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 such
predecessor or transferring entity immediately prior to such transaction and (y)
except for a merger of the Company into a wholly owned Subsidiary of TEC or its
wholly owned Subsidiary incorporated in the State of Delaware solely for the
purpose of facilitating a
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reincorporation in Delaware or a repurchase of the Old TARC Warrants into a
right to receive cash, which conversion or reincorporation would not require
cash payments by the Company in excess of $250,000 in the aggregate, the
Surviving Person could incur $1.00 of additional Senior Debt pursuant to the
third paragraph of Section 4.11, as applicable (in all cases for this purpose
only, as if the Phase I Completion Date has occurred);
(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) except for a merger of the Company into a wholly owned Subsidiary
of TEC or its wholly owned Subsidiary incorporated in the State of Delaware
solely for the purpose of facilitating a reincorporation in Delaware or a
repurchase of the Old TARC Warrants into a right to receive cash, which
conversion or reincorporation would not require cash payments by the Company in
excess of $250,000 in the aggregate, at the time of or within 45 days after the
occurrence of the event specified above, the Notes, if then rated, have not been
or are not downgraded by Standard & Poor's Corporation, Inc., Moody's Investors
Service, Inc. or any successor rating agencies to either entity to a rating
below that which existed immediately prior to the time the event specified above
is first publicly announced.
For purposes of this Section 5.1, the Consolidated Fixed Charge
Coverage Ratio shall be determined on a pro forma consolidated basis (giving
effect to such transaction) for the four fiscal quarters immediately preceding
such transaction.
(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.
(c) Notwithstanding anything contained in the foregoing to the
contrary, any Subsidiary of the Company with a Net Worth greater than zero, may
merge into the Company (or a wholly owned Subsidiary of the Company) at any
time, provided, that 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. Notwithstanding anything contained in the foregoing, an Accounts
Receivable Subsidiary may merge into the Company, provided, that such merger
does not result in a Default or Event of Default hereunder.
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, or a
Guarantor, as the case may be, 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, or such Guarantor, as the case may be, under this Indenture with
the same effect as if such Surviving Person had been named as the Company, or
such Guarantor, as the case may be, herein. When a Surviving Person duly assumes
all of the obligations of the Company pursuant hereto and pursuant to the Notes,
the predecessor shall be released from such obligations.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be caused voluntarily or involuntarily or
effected, without limitation, by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest upon any Note 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 Notes when and as the same becomes due and
payable at maturity, redemption, by acceleration, or otherwise, including
default in the payment of the Offer Price in accordance with Section 4.14 or the
Change of Control Purchase Price in accordance with Article XI;
(c) default in the observance or performance of, or breach of, any
covenant, agreement or warranty of the Company or any of its Subsidiaries
contained in the Notes or this Indenture, and continuance of such default or
breach for the period and after the notice, if any, specified below;
(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under any mortgage,
indenture or instrument under which there is outstanding any Debt of the Company
or any of its Subsidiaries with an aggregate principal amount in excess of
$20,000,000, or 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 such default continues beyond any
applicable cure, forebearance 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 or
acceleration continues for a period of 10 days; provided, that a rescission or
annulment of such default or acceleration (prior to any action taken by the
Trustee with respect to the acceleration of the Obligations under the Notes)
pursuant to the agreement governing such Debt shall constitute a waiver
hereunder for the same period;
(e) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudging the Company or any of its Subsidiaries as
bankrupt or insolvent, or ordering relief against the Company or any of its
Subsidiaries in response to the commencement of an involuntary bankruptcy case,
or approving as properly filed a petition seeking reorganization or liquidation
of the Company or any of its Subsidiaries under any bankrupt cy or similar law,
and such decree or order shall have continued undischarged and unstayed for a
period of 60 days; or a decree or order of a court of competent jurisdiction
over the appointment of a receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of the Company, any of its Subsidiaries, or of the
property of any such Person, or for the winding up or liquidation of the affairs
of any such Person, shall have been entered, and such decree, judgment, or order
shall have remained in force undischarged and unstayed for a period of 60 days;
(f) the Company or any of its Subsidiaries shall institute voluntary
bankruptcy proceedings, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking
reorganization or liquidation under any bankruptcy or similar law or similar
statute, or shall consent to the filing of any such petition, or shall consent
to the appointment of a Custodian, receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of it or any of its assets or property, or shall make a
general assignment for the benefit
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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); or
(h) a Guarantee shall cease to be in full force and effect (other than
a release of a Guarantee by designation of a Guarantor as an Unrestricted
Subsidiary or otherwise in accordance with this Indenture) or any Guarantor
shall deny or disaffirm its obligations with respect thereto.
If a default occurs and is continuing and if it is known to the
Trustee, the 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 the Change of
Control Purchase Price as required by this 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 Holders.
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 Notes 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 Notes
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 Notes 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 Notes pursuant to Paragraph 5 of the Notes, 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 Notes 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 Notes to the contrary notwithstanding.
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment. If
an Event of Default (other than an Event of Default specified in Section 6.1(e)
or (f) relating to the Company or its Subsidiaries) occurs and is continuing,
then, and in every such case, unless the principal of all of the Notes shall
have already become due and payable, either the Trustee or the Holders of not
less than 25% in aggregate Value of then outstanding Notes, 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 Notes (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
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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 Notes shall be immediately due
and payable on all outstanding Notes 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 Value of then outstanding Notes, 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 accrued but unpaid interest on all Notes,
(2) the principal of (and premium, if any, applicable to) any Notes
which would become due otherwise than by such declaration of acceleration, and
accrued but unpaid interest thereon at the rate borne by the Notes,
(3) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Notes,
(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 Notes 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 (x) 662/3%
in aggregate Value of the Notes or (y) the affected Holder of each of the
outstanding Notes, unless (x) 662/3% in aggregate Value of the Notes or (y) all
such affected Holders, respectively, 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 Notes, the whole amount then due and
payable on such Notes 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 Notes, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including
compensation to, and expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Company fails to pay such amounts within 10 days of such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be
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payable in the manner provided by law out of the property of the Company or any
other obligor upon the Notes, 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
Notes.
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 Notes or the property of the Company
or of such other obligor or their creditors, the Trustee (irrespective of
whether the principal of the Notes 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 Notes 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 or other similar official in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Notes 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 Notes. All
rights of action and claims under this Indenture or the Notes may be prosecuted
and enforced by the Trustee without the possession of any of the Notes or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust in favor of the Holders, and any recovery of judgment shall, after
provision for the payment of compensation to, and expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Notes in respect of which such judgment has been recovered.
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Section 6.6 Priorities. 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 Notes 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 Notes 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 Notes 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 Note 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 Notes 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 Notes;
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 Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any) and interest on, such
Note on the Maturity Dates of such payments as expressed in such Note 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 Notes 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
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other right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.10 Delay or Omission Not Waiver. No delay or omission by the
Trustee or by any Holder of any Note 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 Value of then outstanding Notes shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred upon the Trustee,
provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee shall not determine that the action so directed would
be unjustly prejudicial to the Holders not taking part in such direction or that
such action may involve the Trustee in personal liability, and
(c) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 6.12 Waiver of Past Default. Subject to Section 6.8, the Holder
or Holders of not less than a majority in aggregate Value of the outstanding
Notes may, on behalf of all Holders, prior to the declaration of the maturity of
the Notes, 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 Note 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 Note affected or 662/3% in aggregate Value of the Notes at the time
outstanding, as the case may be; provided that such a default may be waived by
the consent of Holders of each outstanding Note affected or 662/3% in aggregate
value of the Notes outstanding, as the case may be.
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 Note 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 Notes, or to any suit instituted by any Holder for enforcement
of the payment of principal of, or premium (if any) or interest on, any
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Note on or after the respective Maturity Date expressed in such Note (including,
in the case of redemption, on or after the Redemption Date).
Section 6.14 Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every case, subject to any determination in such proceeding, the Company, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.1 Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(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 whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.1.
(2) 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
negligent in ascertaining the pertinent facts.
(3) 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
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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.
(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.
(g) The Trustee shall execute and deliver the Intercreditor Agreements
and any Subordination Agreements as provided in Section 12.2.
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 13.4 and 13.5. 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 Notes and may otherwise
deal with the Company, its Subsidiaries, or their respective
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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 Notes and it shall not
be accountable for the Company's use of the proceeds from the Notes, and it
shall not be responsible for (i) the use or application of any funds received by
a Paying Agent other than the Trustee, (ii) any statement in the Notes, other
than the Trustee's certificate of authentication or (iii) the sufficiency of the
collateral for the Notes.
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 Company 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 Noteholder notice of the uncured Default
or Event of Default within 90 days after such Default or Event of Default
occurs. Except in the case of a Default or an Event of Default in payment of
principal (or premium, if any,) of, or interest on, any Note (including all
payments due on any Maturity Date), the Trustee may withhold the notice if and
so long as the board of directors, the executive committee or a trust committee
of directors and/or responsible officers of the Trustee in good faith determines
that 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 Noteholder a brief report dated as of
such May 15 that complies with TIA ss. 313(a). The Trustee also shall comply
with TIA ss.ss. 313(b) and 313(c).
A copy of each report at the time of its mailing to Noteholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes 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
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reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its 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 Notes 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 Notes.
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 Notes may remove the Trustee by so notifying
the Company and the Trustee in writing and may appoint a successor trustee with
the Company's consent.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver, Custodian, or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in principal amount of the Notes 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 Notes
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 Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
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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 ss. 310(a)(1), (a)(2) and (a)(5). The
Trustee shall comply with TIA ss. 310(b).
Section 7.11 Preferential Collection of Claims against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 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 Notes or any
other action within the purview of this Indenture, any showings, certificates,
opinions, or other information, or corporate action or evidence thereof in
addition to that by the terms hereof required, as a condition of such action by
the Trustee if reasonably deemed desirable by the Trustee for the purpose of
establishing the right to the authentication of any Notes 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 Notes. The Company shall be deemed to have paid and discharged the entire
Debt on the Notes 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 Notes with the Trust ee, pursuant to an irrevocable trust
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 Notes, 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 Notes then outstanding, on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
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(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 relating to clauses (e) or (f) of
Section 6.1 shall have occurred or be continuing on the date of such deposit or
shall occur on or before the 91st day (or one day after such greater period of
time in which any such deposit of trust funds may remain subject to set aside or
avoidance under bankruptcy or insolvency laws) after the date of such deposit,
and such deposit will not result in a Default or Event of Default under this
Indenture or a breach or violation of, or constitute a default under, any other
instrument to which the Company or any Subsidiary of the Company is a party or
by which it or its property is bound;
(d) The deposit, defeasance and discharge will not be deemed, or result
in, a Federal income taxable event to the Holders of the Notes 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 set aside or avoidance under Bankruptcy Laws affecting creditors'
rights generally; and
(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.
In the event all or any portion of the Notes 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 Notes 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 Notes 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 Notes.
In addition to the Company's rights under Section 8.1, the Company may terminate
all of its respective obligations under this Indenture (subject to Sections 8.3
and 8.7) when:
(a) all Notes theretofore authenticated and delivered (other than Notes
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
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(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 Notes 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
Notes 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 the Company'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 Notes.
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 Notes 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 Company's obligations under this
Indenture, the Security Documents and the Notes 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 Notes because of the reinstatement of its obligations, the Company shall be
surrogated to the
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rights of the Holders of such Notes 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 and the Guarantors, if any, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto in form
satisfactory to the Trustee, for any of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency, or to make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this Indenture,
provided such action pursuant to this clause (a) shall not adversely affect the
interests of any Holder in any respect;
(b) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company or
to make any other change that does not adversely affect the rights of any
Holder, provided that the Company has delivered to the Trustee an Opinion of
Counsel stating that such change does not adversely affect the rights of any
Holder;
(c) to 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 Notes in accordance with Article V; or
(d) to comply with the TIA.
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 Value of then outstanding Notes, by
written act of said Holders (including an electronic mechanism utilized by the
Depository Trust Company as a means of receiving consents or tenders of
securities) delivered to the Company and the Trustee, the Company, when
authorized by Board Resolutions, and the Trustee may amend or supplement this
Indenture, the Notes 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 Notes or of modifying
in any manner the rights of the Holders under this Indenture or the Notes;
provided, that no such modification may, without the consent of the Holders of
not less than 662/3 in aggregate Value of the Notes at the time outstanding, (i)
prior to a Change of Control, reduce the Change of Control Purchase Price or
alter the provisions of Article XI or (ii) prior to the date upon which an Offer
to Purchase is required to be made, reduce the Offer Price or alter the
provisions of Section 4.14 in a manner adverse to the Holders. Subject to
Section 6.8, the Holder or Holders of not less than a majority, in aggregate
Value of then outstanding Notes may waive compliance by the Company with any
provision of this Indenture or the Notes; provided, that no such waiver may,
without the consent of the Holders of not less than 662/3 in aggregate Value of
the Notes at the time outstanding, have the effect of (i) prior to a Change of
Control, reducing the Change of Control Purchase Price or altering the
provisions of Article XI or (ii) prior to the date upon which an Offer to
Purchase is required to be made, reduce the Offer Price or alter the provisions
of Section 4.14 in a manner adverse to the Holders. Notwithstanding any of the
above, however, no
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such amendment, supplemental indenture or waiver shall, without the consent of
the Holder of each outstanding Note affected thereby:
(a) reduce the percentage of Value of Notes whose Holders must consent
to an amendment, supplement or waiver of any provision of this Indenture or the
Notes;
(b) reduce the rate or extend the time for payment of interest on any
Note;
(c) (i) reduce the principal amount of any Note or (ii) after the date
upon which a Change of Control Offer is required to be made, reduce the Change
of Control Purchase Price or (iii) after the date upon which an Offer to
Purchase is required to be made, reduce the to Purchase Offer Price or (iv)
reduce the Redemption Price;
(d) change the Stated Maturity or the payment date of any installment
of principal of, or the payment date of any installment of interest on, any
Note;
(e) (i) alter the redemption provisions of Article III or of paragraph
5 of the Notes or (ii) after the date upon which a Change of Control Offer is
required to be made, alter the terms or provisions of Article XI;
(f) make any changes in the provisions concerning waivers of Defaults
or Events of Default by Holders of the Notes (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 Note affected
thereby) or the rights of Holders to recover the principal or premium of,
interest on, or redemption payment with respect to, any Note;
(g) make any changes in Section 6.4, 6.7 or this third sentence of this
Section 9.2; or
(h) make the principal of, or the interest on, any Note 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 Note or any premium or the interest thereon is payable) and the Notes
as in effect on the date hereof.
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 Notes shall comply with the TIA as then in effect.
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Section 9.4 Revocation and Effect of Consents. Until an amendment,
waiver or supplement becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder's Note,
even if notation of the consent is not made on any Note. However, any such
Holder or subsequent Holder may revoke the consent as to his Note or portion of
his Note 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 Notes 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 Noteholder; 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 Note, on or after the respective dates set for such amounts to
become due and payable expressed in such Note, 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 Notes. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder of the Note to deliver it to the Trustee or require the Holder to put an
appropriate notation on the Note. The Trustee may place an appropriate notation
on the Note 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
Note shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms. Any failure to make the appropriate notation or to issue a new
Note shall not affect the validity of such amendment, supplement or waiver.
Section 9.6 Trustee to Sign Amendments, Etc. The Trustee shall execute
any amendment, supplement or waiver authorized pursuant to this Article IX,
provided that the Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture. The Trustee at the expense of the Company
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article IX is authorized or permitted by this
Indenture.
ARTICLE X
MEETINGS OF NOTEHOLDERS
Section 10.1 Purposes for Which Meetings May Be Called. A meeting of
Noteholders 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 Noteholders pursuant to any of the provisions
of Article VI;
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(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
Notes 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 Noteholders 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
Noteholders, 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 Noteholders shall be valid without notice if the Holders
of all Notes then outstanding are present in Person or by proxy, or if notice is
waived before or after the meeting by the Holders of all Notes 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 Notes then outstanding, shall have
requested the Trustee to call a meeting of Noteholders 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 Notes in the amount above specified may
determine the time and place in the City of New York, New York or elsewhere for
such meeting and may call such meeting for the purpose of taking such action, by
mailing or causing to be mailed notice thereof as provided in Section 10.2, or
by causing notice thereof to be published at least once in each of two
successive calendar weeks (on any Business Day during such week) in a newspaper
or newspapers printed in the English language, customarily published at least
five days a week of a general circulation in the City of New York, State of New
York, the first such publication to be not less than 10 nor more than 60 days
prior to the date fixed for the meeting.
Section 10.4 Who May Attend and Vote at Meetings. To be entitled to
vote at any meeting of Noteholders, a Person shall (a) be a registered Holder of
one or more Notes, or (b) be a Person appointed by an instrument in writing as
proxy for the registered Holder or Holders of Notes. The only Persons who shall
be entitled to be present or to speak at any meeting of Noteholders 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.
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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 Noteholders, in regard to proof of
the holding of Notes 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 Notes entitled to vote at such meeting, in which case those and only
those Persons who are Holders of Notes 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 Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders 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 Notes represented at the meeting and entitled to vote.
At any meeting each Noteholder or proxy shall be entitled to one vote
for each $1,000 Value of Notes held or represented by him; provided, however
that no vote shall be cast or counted at any meeting in respect of any Notes
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 Notes held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Noteholders. Any meeting
of Noteholders 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 Value of the Notes 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 Noteholders shall be by written
ballots on which shall be subscribed the signatures of the Holders of Notes or
of their representatives by proxy and the principal amount of the Notes 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 Noteholders shall be prepared
by the secretary of the meeting and there shall be attached to such record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more Persons having knowledge of the facts, setting
forth a copy of the notice of the meeting and showing that such notice was
mailed as provided in Section 10.2 or published as provided in Section 10.3. The
record shall be signed and verified by the affidavits of the permanent chairman
and the secretary of the meeting and one of the duplicates shall be delivered to
the Company and the other to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 Exercise of Rights of Trustee or Noteholders 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 Noteholders 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 Noteholders under any of the
provisions of this Indenture or of the Notes.
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ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
Section 11.1 Repurchase of Notes at Option of the Holder Upon Change of
Control.
(a) In the event that a Change of Control occurs, each Holder of Notes
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 (provided that the principal amount of such Notes at maturity
must be $1,000 or an integral multiple thereof) 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, on 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 Notes 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 Notes 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 accor dance 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 Purchase" 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
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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 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 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 Notes 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 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 shall 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 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 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
Section 12.1 Notes Subordinated to Senior Indebtedness.
The Company and each Holder, by its acceptance of Notes, agree that (a)
the payment of the principal of and interest on the Notes and (b) any other
payment in respect of the Notes, including on account of the acquisition or
redemption of the Notes by the Company (including, without limitation, pursuant
to Article XI) is subordinated, to the extent and in the manner provided in
this Article XII, to the prior payment in full of all Senior Debt of the
Company, whether outstanding at the date of this Indenture or thereafter
created, incurred, assumed or guaranteed, and that these subordination
provisions are for the benefit of the holders of Senior Debt.
This Article XII shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Debt, and such provisions are made for the benefit of the holders of
Senior Debt, and such holders are made obligees hereunder and any one or more of
them may enforce such provisions.
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Section 12.2 No Payment on Securities in Certain Circumstances.
(a) No payment may be made by the Company 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 (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.
(b) Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Senior Debt to declare such Senior Debt to
be due and payable (or, in the case of letters of credit, require cash
collateralization thereof) and (ii) written notice of such event of default
given to the Company and the Trustee by the lenders' agent under the Company's
working capital facility, if any, secured by Receivables and Inventory (provided
that such working facility constitutes Senior Debt) or holders of an aggregate
of at least $30 million principal amount outstanding of any Senior Debt or their
representative (a "Payment Notice"), then, unless and until such event of
default has been cured or waived or otherwise has ceased to exist, no payment
(by set-off or otherwise) may be made by or on behalf of the Company or any
Guarantor which is an obligor under such Senior Debt on account of any
Obligation in respect of the Notes, including the principal of, premium, if any,
or interest on the Notes, or to repurchase any of the Notes, or on account of
the redemption provisions of the Notes (or liquidated damages pursuant to the
registration rights agreement relating to the Notes), in any such case, other
than payments made with Junior Securities. Notwithstanding the foregoing, unless
the Senior Debt in respect of which such event of default exists has been
declared due and payable in its entirety within 179 days after the Payment
Notice is delivered as set forth above (the "Payment Blockage Period") (and such
declaration has not been rescinded or waived), at the end of the Payment
Blockage Period, the Company and the Guarantors shall be required to pay all
sums not paid to the Holders of the Notes during the Payment Blockage Period due
to the foregoing prohibitions and to resume all other payments as and when due
on the Notes. Any number of Payment Notices may be given; provided, however,
that (i) not more than one Payment Notice shall be given within a period of any
360 consecutive days, and (ii) no default that existed upon the date of such
Payment Notice or the commencement of such Payment Blockage Period (whether or
not such event of default is on the same issue of Senior Debt) shall be made the
basis for the commencement of any other Payment Blockage Period unless such
other Payment Blockage Period is commenced by a Payment Notice from the
Representative and such event of default shall have been cured or waived for a
period of at least 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or any Guarantor (other than Junior
Securities) shall be received by the Trustee or the Holders at a time when such
payment or distribution is prohibited by the foregoing provisions, such payment
or distribution shall be held in trust for the benefit of the holders of such
Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as
the case may be, to the holders of such Senior Debt remaining unpaid or
unprovided for or to their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing any
of such Senior Debt may have issued, ratably according to the aggregate
principal amounts remaining unpaid on account of such Senior Debt held or
represented by each, for application to the payment of all such Senior Debt
remaining unpaid, to the extent necessary to pay or to provide for the payment
of all such Senior Debt in full in cash or Cash Equivalents or otherwise to the
extent holders accept satisfaction of amounts due by settlement in other than
cash or Cash Equivalents after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
Section 12.3 Notes Subordinated to Prior Payment of All Senior Debt on
Dissolution, Liquidation or Reorganization.
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Upon any distribution of assets of the Company or any Guarantor upon
any dissolution, winding up, total or partial liquidation or reorganization of
the Company or a Guarantor, whether voluntary or involuntary, in bankruptcy,
insolvency, receivership or a similar proceeding or upon assignment for the
benefit of creditors or any marshalling of assets or liabilities, (i) the
holders of all Senior Debt of the Company or such Guarantor, as applicable, will
first be entitled to receive payment in full in cash or Cash Equivalents or
otherwise to the extent holders accept satisfaction of amounts due by settlement
in other than cash or Cash Equivalents (or have such payment duly provided for)
before the Holders are entitled to receive any payment on account of any
Obligation in respect of the Notes, including the principal of, premium, if any,
and interest on the Notes (or liquidated damages pursuant to the registration
rights agreement relating to the Notes) (other than Junior Securities) and (ii)
any payment or distribution of assets of the Company or such Guarantor of any
kind or character from any source, whether in cash, property or securities
(other than Junior Securities) to which the Holders or the Trustee on behalf of
the Holders would be entitled (by set-off or otherwise) but for the
subordination provisions contained in the Indenture, will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of such Senior Debt or their representative
to the extent necessary to make payment in full in Cash or Cash Equivalents (or
have such payment duly provided for) on all such Senior Debt remaining unpaid,
after giving effect to any concurrent payment or distribution to the holders of
such Senior Debt.
Section 12.4 Securityholders to Be Subrogated to Rights of Holders of
Senior Debt.
Subject to the payment in full of all Senior Debt of the
Company as provided herein, the Holders of Notes shall be subrogated to the
rights of the holders of such Senior Debt to receive payments or distributions
of assets of the Company applicable to the Senior Debt until all amounts owing
on the Notes shall be paid in full, and for the purpose of such subrogation no
such payments or distributions to the holders of such Senior Debt by the
Company, or by or on behalf of the Holders by virtue of this Article XII, which
otherwise would have been made to the Holders shall, as between the Company and
the Holders, be deemed to be payment by the Company or on account of such Senior
Debt, it being understood that the provisions of this Article XII are and are
intended solely for the purpose of defining the relative rights of the Holders,
on the one hand, and the holders of such Senior Debt, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article XII shall
have been applied, pursuant to the provisions of this Article XII, to the
payment of amounts payable under Senior Debt of the Company, then the Holders
shall be entitled to receive from the holders of such Senior Debt any payments
or distributions received by such holders of Senior Debt in excess of the amount
sufficient to pay all amounts payable under or in respect of such Senior Debt in
full.
Section 12.5 Obligations of the Company Unconditional.
Nothing contained in this Article XII or elsewhere in this
Indenture or in the Notes is intended to or shall impair as between the Company
and the Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, interest
on, and Liquidated Damages with respect to, the notes as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article XII, of the holders of Senior Debt in respect
of cash, property or securities of the Company received upon the exercise of any
such remedy. Notwithstanding anything to the contrary in this Article XII or
elsewhere in this Indenture or in the Notes, upon any distribution of assets of
the Company referred to in this Article XII, the Trustee, subject to the
provisions of Sections 7.1 and 7.2, and the Holders shall be entitled to rely
upon any order
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or decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other Person making any
distribution to the Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior 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 XII so long as such court has been apprised
of the provisions of, or the order, decree or certificate makes reference to,
the provisions of this Article XII. Nothing in this Section 12.5 shall apply to
the claims of, or payments to, the Trustee under or pursuant to Section 7.7.
Section 12.6 Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee unless and until a Trust Officer of the Trustee or any Paying
Agent shall have received, no later than one Business Day prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Indebtedness or from any representative therefor and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections 7.1
and 7.2, shall be entitled in all respects conclusively to assume that no such
fact exists.
Section 12.7 Application by Trustee of Assets Deposited with It.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of the Holders of the
Notes and, to the extent allocated for the payment of Notes, shall not be
subject to the subordination provisions of this Article XII. Otherwise, any
deposit of assets with the Trustee or the Agent (whether or not in trust) for
the payment of principal of or interest on any Notes shall be subject to the
provisions of Sections 12.1, 12.2, 12.3 and 12.4; provided that, if prior to one
Business Day preceding the date on which by the terms of this Indenture any such
assets may become distributable for any purpose (including, without limitation,
the payment of either principal of or interest on any Note) the Trustee or such
Paying Agent shall not have received with respect to such assets the written
notice provided for in Section 12.6, then the Trustee or such Paying Agent shall
have full power and authority to receive such assets and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date.
Section 12.8 Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination provisions contained in this Article XII 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 of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Debt may extend, renew, modify or
amend the terms of the Senior Debt or any security therefor and release, sell or
exchange such security and otherwise deal freely with the Company, all without
affecting the liabilities and obligations of the parties to this Indenture or
the Holders.
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Section 12.9 Holders of Notes Authorize Trustee to Effectuate
Subordination of Securities.
Each Holder of the Notes by his acceptance thereof authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained
in this Article XII and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors of the Company),
the immediate filing of a claim for the unpaid balance of his Notes in the form
required in said proceedings and cause said claim to be approved. If the Trustee
does not file a proper claim or proof of debt in the form required in such
proceeding prior to 30 days before the expiration of the time to file such claim
or claims, then the holders of the Senior Debt or their representative are or is
hereby authorized to have the right to file and are or is hereby authorized to
file an appropriate claim for and on behalf of the Holders of said Notes.
Nothing herein contained shall be deemed to authorize the Trustee or the holders
of Senior Debt or their representative to authorize or consent to or accept or
adopt on behalf of any Holder of Notes any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Debt or their
representative to vote in respect of the claim of any Holder of Note in any such
proceeding.
Section 12.10 Right of Trustee to Hold Senior Debt.
The Trustee shall be entitled to all of the rights set forth
in this Article XII in respect of any Senior Debt at any time held by it to the
same extent as any other holder of Senior Debt, and nothing in this Indenture
shall be construed to deprive the Trustee of any of its rights as such holder.
Section 12.11 Article XII Not to Prevent Events of Default.
The failure to make a payment on account of principal of,
premium, if any, interest on, or Liquidated Damages with respect to, the Notes
by reason of any provision of this Article XII shall not be construed as
preventing the occurrence of a Default or an Event of Default under Section 6.1
or in any way prevent the Holders from exercising any right hereunder other than
the right to receive payment on the Notes.
Section 12.12 No Fiduciary Duty of Trustee to 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 (other
than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Securities or the Company or
any other Person, cash, property or securities to which any holders of Senior
Debt shall be entitled by virtue of this Article XII or otherwise. Noth ing in
this Section 12.12 shall affect the obligation of any other such Person to hold
such payment for the benefit of, and to pay such payment over to, the holders of
Senior Debt or their representative.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 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.
73
<PAGE> 80
Section 13.2 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:
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East, Suite 320
Houston, Texas 77032
Attention: Edwin B. Donahue
if to the Trustee:
First Union National Bank
Corporate Trust Department
10 State House Square CT 5845
Hartford, CT 06103-3698
Attention: W. Jeffry Kramer
The Company or the Trustee by notice to each other party may designate
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to the Company or the Trustee shall be deemed
to have been given or made as of the date so delivered, if personally delivered;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
five Business Days after mailing if sent by registered or certified mail,
postage prepaid (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee).
Any notice or communication mailed to a Noteholder 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 Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, regardless of whether the addressee receives it.
Section 13.3 Communications by Holders with Other Holders. Noteholders
may communicate pursuant to TIA ss. 312(b) with other Noteholders with respect
to their rights under this Indenture or the Notes. The Company, the Trustee, the
Registrar and any other Person shall have the protection of TIA ss. 312(c).
Section 13.4 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.
74
<PAGE> 81
Section 13.5 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 13.6 Rules by Trustee, Paying Agent, Registrar. The Trustee may
make reasonable rules for action by or at a meeting of Noteholders. The Paying
Agent or Registrar may make reasonable rules for its functions.
Section 13.7 Legal Holidays. A "Legal Holiday" used with respect to a
particular place of payment is a Saturday, a Sunday or a day on which banking
institutions at such place are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
Section 13.8 Governing Law. THIS INDENTURE AND THE NOTES 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 NOTES 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 NOTEHOLDER 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 13.9 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.
75
<PAGE> 82
Section 13.10 No Recourse against Others. A director, officer,
employee, stockholder or incorporator, as such, of the Company or any of its
Subsidiaries shall not have any liability for any obligations of the Company or
such Subsidiary under the Notes or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creations. Each Noteholder
by accepting a Note waives and releases all such liability. Such waiver and
release are part of the consideration for the issuance of the Notes.
Section 13.11 Successors. All agreements of the Company in this
Indenture and the Notes shall bind its successor. All agreements of the Trustee
in this Indenture shall bind its successor.
Section 13.12 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 13.13 Severability. In case any one or more of the provisions
in this Indenture or in the Notes 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 13.14 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.
76
<PAGE> 83
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
TRANSAMERICAN REFINING CORPORATION
By:
-----------------------------------
Name:
Title:
[Seal]
Attest:
-----------------------------------
FIRST UNION NATIONAL BANK
as Trustee
By:
-----------------------------------
Name:
Title:
<PAGE> 84
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Unit
Exhibit C - Certificate of Transferor
<PAGE> 85
EXHIBIT A
(FACE OF NOTE)
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DEPOSITORY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.]1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) AS PERMITTING
RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY
PREDECESSOR OF SUCH NOTE) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A,
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS PURCHASING THE NOTE FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
- --------
1 This paragraph should be included only if the Note is issued in global form.
A-1
<PAGE> 86
[FORM OF NOTE]
TRANSAMERICAN REFINING CORPORATION
16% SENIOR SUBORDINATED NOTE DUE 2003
No.
$
[THIS NOTE WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") WITHIN THE
MEANING OF SECTION 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE
ISSUE DATE OF THIS NOTE IS DECEMBER 30, 1997. THE ISSUE PRICE PER $1000.00 OF
STATED PRINCIPAL AMOUNT OF THIS NOTE WILL BE $953.2951. THE ISSUE PRICE OF
THIS NOTE REPRESENTS A YIELD TO MATURITY OF 17.35% PER ANNUM COMPUTED ON A
SEMI-ANNUAL BOND EQUIVALENT BASIS AND CALCULATED FROM DECEMBER 30, 1997. THE
AMOUNT OF OID PER $1000.00 OF STATED PRINCIPAL AMOUNT OF ON THIS NOTE
WILL BE $46.7049.
CUSIP [ ]
TransAmerican Refining Corporation, a Texas 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 June 30, 2003.
Interest Payment Dates: June 30 and December 30, commencing
June 30, 1998
Record Dates: June 15 and December 15
Reference is made to the further provisions of this Note on
the reverse side, which will, for all purposes, have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated:
TRANSAMERICAN REFINING CORPORATION
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
A-2
<PAGE> 87
Trustee's Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
First Union National Bank
By:
-----------------------------------
Authorized Signature
A-3
<PAGE> 88
(BACK OF NOTE)
TRANSAMERICAN REFINING CORPORATION
16% SENIOR SUBORDINATED NOTE DUE 2003
1. Interest.
TransAmerican Refining Corporation, a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at a
rate of 16% 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 18% per annum compounded semi-annually.
The Company will pay interest semi-annually on June 30 and December 30
of each year (each, an "Inter est Payment Date"), commencing June 30, 1998.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance of the
Notes. Interest on the Notes 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 Notes (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 Notes 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, First Union National Bank (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 it
may, subject to certain exceptions, act as Paying Agent, Registrar or
co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of December
30, 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 Notes 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 Notes are subject to all such terms,
and Holders of Notes are referred to the Indenture and said Act for a statement
of them. The Notes are senior subordinated obligations of the Company limited in
aggregate principal amount to an amount that yields proceeds to the Company of
$200,000,000.
A-4
<PAGE> 89
5. Optional Redemption.
The Notes may be redeemed in whole or from time to time in part at any
time 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 to
the Redemption Date.
<TABLE>
<CAPTION>
If redeemed during
the period
indicated below Redemption Price
--------------- ----------------
<S> <C>
December 30, 1997 - June 29, 2000.................. 116.00%
June 30, 2000 - June 29, 2001...................... 110.67%
June 30, 2001 - June 29, 2002...................... 105.33%
June 30, 2002 - and thereafter..................... 100.00%
</TABLE>
Any such redemption 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
Notes to be redeemed at his registered address. Notes in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent on such Redemption Date the Notes called
for redemption will cease to bear interest and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price and any accrued
and unpaid interest to the Redemption Date.
7. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder may register the transfer of,
or exchange Notes 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 Notes
selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Note 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.
A-5
<PAGE> 90
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 Notes 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 Notes (including the
financial covenants, but excluding its obligation to pay the principal of and
interest on the Notes).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the writ ten consent of the Holders of at least a
majority in aggregate Value of the Notes 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 Value of the Notes then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Notes 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 Note).
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
Notes 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 (in integral multiples of $1,000) of such Holder's
Notes at a Change of Control Purchase Price equal to 101% of the principal
amount thereof, together with accrued and unpaid interest, if any, on and
including the Change of Control Payment Date.
14. Successors.
When a successor assumes all the obligations of its predecessor under
the Notes 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 combined Value of the Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority in
aggregate Value of the Notes then
A-6
<PAGE> 91
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Notes 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 of its Subsidiaries or any
successor corporation shall have any liability for any obligation of the Company
or such Subsidiary under the Notes 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 Note by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Note
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 Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Note, by his acceptance thereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, dated as of
December 30, 1997, among the Company and the Jefferies & Company, Inc. (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Company and the Purchasers (as defined therein) to the extent provided therein.
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to: TransAmerican Refining Corporation, 1300 North Sam
Houston Parkway East, Suite 320, Houston, Texas 77032.
21. Ranking.
Payment of principal, premium, if any, interest on and Liquidated
Damages with respect to the Notes is subordinated, to the extent set forth in
the Indenture, to the prior payment of all Senior Debt.
A-7
<PAGE> 92
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note 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 Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Signature
------------------------- ----------------------------------
(Sign exactly as your name
appears on the face of this
Note)
Signature Guarantee*
- ----------------------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
A-8
<PAGE> 93
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.14 or Article XI of the Indenture, check the
appropriate box below:
[ ] Section 4.14 [ ] Article XI
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.14 or Article XI of the Indenture, as the
case may be, state the principal amount (in integral multiples of $1,000) you
want to be purchased: $_____________
Date: Signature
--------------------- -----------------------------------
(Sign exactly as your name appears on
the face of this Note)
Your Social Security or Tax Identification Number:
-------------------------
Signature Guarantee:*
- -------------------------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agent Medallian Program (STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
A-9
<PAGE> 94
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES2
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal Amount Signature of
in Principal Amount in Principal Amount of this Global Note authorized signatory
Date of Exchange of this Global Note of this Global Note decrease (or increase) of Trustee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------------------
2 This should be included only if the Note is issued in global form.
A-10
<PAGE> 95
EXHIBIT B
[Form of Unit]
TRANSAMERICA REFINING CORPORATION
UNITS
CONSISTING OF 16% SENIOR SUBORDINATED NOTES DUE 2003
AND COMMON STOCK PURCHASE WARRANTS
No. Units
CUSIP [ ]
Each Unit consists of $1,000 principal amount
of 16% Senior Subordinated Notes due 2003 of TransAmerica Refining Corporation,
a Texas corporation (hereinafter called the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to) and one
Warrant to purchase 13.344257 shares of Common Stock, par value $0.01 per share,
of the Company for $0.01 per share (subject to adjustment) at any time before
5:00 p.m., New York City time, on June 30, 2003 (the "Expiration Date"). The
Notes and the Warrants are not separately transferable until the earlier of (i)
one year after the issuance of the Units, (ii) commencement of the Exchange
Offer (as defined in the Indenture) and (iii) such other date as determined by
Jefferies & Company, Inc. The terms of the Warrants are governed by a Warrant
Agreement dated as of December 30, 1997 (the "Warrant Agreement") between the
Company and First Union National Bank, as Warrant Agent (the "Warrant Agent"),
and are subject to the terms and provisions contained therein, to all of which
terms and provisions the holder of this Unit consents by acceptance hereof.
Copies of the Warrant Agreement are on file at the office of the Warrant Agent
at First Union National Bank, 10 State House Square CT 5845, Hartford CT
06103-3698, Attention: Corporate Trust Department, and are available to any
Warrant holder on written request and without cost. The Warrant shall be void
unless exercised before 5:00 p.m. New York City time on the Expiration Date.
The Company, for value received, hereby
promises to pay to ____________, or registered assigns, the principal sum of
____________ Dollars, on June 30, 2003.
Interest Payment Dates: June 30 and December
30, commencing June 30, 1998
Record Dates: June 15 and December 15
Reference is made to the further provisions of
the Note evidenced by this Unit on the reverse side, which will, for all
purposes, have the same effect as if set forth at this place.
B-1
<PAGE> 96
IN WITNESS WHEREOF, the Company has caused this Unit to be
signed manually or by facsimile by its duly authorized officers..
Dated:
TRANSAMERICAN REFINING CORPORATION
By:
------------------------------------
Attest:
- ------------------------------------
Secretary
[Seal]
B-2
<PAGE> 97
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Unit evidences one of those Notes described in the
within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
as Trustee
By:
------------------------------------
Authorized Signatory
Dated:
B-3
<PAGE> 98
TRANSAMERICAN REFINING CORPORATION
UNITS
CONSISTING OF 16% SENIOR SUBORDINATED NOTES DUE 2003
AND COMMON STOCK PURCHASE WARRANTS
1. Interest.
TransAmerican Refining Corporation, a Texas corporation (the
"Company"), promises to pay interest on the principal amount of the Notes at a
rate of 16% per annum (subject to adjustment). 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 18% per annum (subject to adjustment) compounded
semi-annually.
The Company will pay interest semi-annually on June 30 and
December 30 of every year (each, an "Interest Payment Date"), commencing June
30, 1998. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance of the Notes. Interest 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 Notes (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 Notes 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
may deliver any such interest payment to the Paying Agent or the Company may
mail any such interest payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, First Union National Bank (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or so-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act as Paying Agent,
Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of
December 30, 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 Notes include those stated in the Indenture and
those made part of the Indenture by reference to the TIA, as in effect on the
date of the Indenture. The Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and said Act for a statement of them. The
Notes are senior subordinated obligations of the Company limited in aggregate
principal amount to an amount that yields proceeds to the Company of
$200,000,000.
B-4
<PAGE> 99
5. Optional Redemption.
The Notes may be redeemed in whole or from time to time in
part at any time at the option of the Company, at the Redemption Price
(expressed as a percentage of the principal amount thereof) set forth below with
respect to the indicated Redemption Date, in each case, together with any
accrued but unpaid interest to the Redemption Date.
<TABLE>
<CAPTION>
If redeemed during the
period indicated below Redemption Price
- ---------------------- ----------------
<S> <C>
December 30, 1997 - June 29, 2000.................. 116.00%
June 30, 2000 - June 29, 2001...................... 110.67%
June 30, 2001 - June 29, 2002...................... 105.33%
June 30, 2002 and thereafter....................... 100.00%
</TABLE>
Any such redemption 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 Notes to be redeemed at his registered address. Notes in denominations
larger than $ 1 ,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Notes called for redemption
shall have been deposited with the Paying Agent on such Redemption Date the
Notes called for redemption will cease to bear interest and the only right of
the Holders of such Notes will be to receive payment of the Redemption Price and
any accrued and unpaid interest to the Redemption Date.
7. Denominations; Transfer: Exchange.
The Notes are in registered form, without coupons, in
denominations of $l,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Notes 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 Notes selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Note 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. After that, all liability of the
Trustee and such Paying Agent(s) with respect to such money shall cease.
B-5
<PAGE> 100
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 Government Securities sufficient to pay
the principal of and interest on the Notes 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
Notes (including the financial covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate value of the Notes 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 value of the Notes 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 Note).
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 Notes 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 (in integral multiples of $1,000) of such Holder's
Notes 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 Notes 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 value of the Notes then outstanding
may declare all the Notes to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of a majority in aggregate value
of the Notes then outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of Notes 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.
B-6
<PAGE> 101
16. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator,
as such, past, present or future, of the Company or any of its Subsidiaries or
any successor corporation shall have any liability for any obligation of the
Company or such Subsidiary under the Notes 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 Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
17. Authentication.
The Note evidenced by this Unit shall not be valid until the
Trustee or authenticating agent signs the certificate of authentication on the
other side of this Unit.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Note 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).
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 Notes and the Units as a convenience to the holders of the
Notes and holders of the Units. No representation is made as to the accuracy of
such numbers as printed on the Notes or the Units and reliance may be placed
only on the other identification numbers printed thereon and hereon.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Note evidenced by this Unit, by his
acceptance thereof, acknowledges and agrees to the provisions of the
Registration Rights Agreement, dated as of December 30, 1997, between the
Company and Jefferies & Company, Inc. (the "Registration Rights Agreement"),
including but not limited to the obligations of the Holders with respect to a
registration and the indemnification of the Company and the Purchasers (as
defined therein) to the extent provided therein.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to: TransAmerican Refining Corporation, 1300
North Sam Houston Parkway East, Suite 320, Houston, Texas 77032.
21. Ranking.
Payments of principal, premium, if any, interest on and
Liquidated Damages with respect to, the Notes is subordinated, to the extent set
forth in the Indenture, to the prior payment of all Senior Debt.
B-7
<PAGE> 102
TRANSAMERICAN REFININGCORPORATION
DEPOSIT OF WARRANTS TO PURCHASE COMMON STOCK OF TRANSAMERICAN REFINING
CORPORATION
Under the terms of the Warrant Agreement, and until such time as the
Holder of this Unit shall have surrendered this Unit to the Warrant Agent for
the exchange of this Unit, in whole or in part, for one or more Warrant
Certificates (as defined in the Warrant Agreement) and one or more Notes of a
like aggregate principal amount and of authorized denominations, the Holder of
this Unit is for each Unit evidenced by this certificate, the beneficial owner
of 13.344257 Warrants expiring June 30, 2003, entitling the holder thereof
initially to purchase 13.344257 shares of Common Stock, par value $0.01 per
share (the "Common Stock"), of the Company (subject to adjustment as provided in
the Warrant Agreement).
The Company has deposited with the Warrant Agent, as custodian for
Holders of Units, certificates for such Warrants. Prior to the exchange of this
Unit for one or more Warrant Certificates and one or more Notes, beneficial
ownership of such Warrants is transferable only by the transfer of this Unit
pursuant to the Indenture. After such exchange, ownership of a Warrant is
transferable only by the transfer of the certificate representing such Warrant
in accordance with the provisions of the Warrant Agreement.
By accepting a Unit, each Holder of this Unit shall be bound by all of
the terms and provisions of the Warrant Agreement (a copy of which is available
on request to the Company or the Warrant Agent) as fully and effectively as if
such Holder had signed the same.
B-8
<PAGE> 103
ELECTION TO EXERCISE WARRANTS
The undersigned registered Holder of this Unit hereby irrevocably
elects to exercise Warrants (evidenced by Warrant Certificates deposited with
the Warrant Agent the beneficial ownership of which is evidenced by this Unit)
representing the right to receive ___ shares of Common Stock, and in payment of
the Warrant Price (as defined in the Warrant Agreement) the undersigned herewith
tenders payment in money of the United States of America or by certified or
official bank check in lawful money of the United States of America to the order
of TransAmerican Refining Corporation in the amount of $__________. The
undersigned requests that a certificate representing the Common Stock issuable
upon exercise of such Warrants be registered in the name of
__________________________ whose address is ___________________________ and that
such certificate be delivered to ________________ whose address is
_________________________. All payments to be made in lieu of issuing a
fractional share should be made by check payable to
__________________________________ whose address is __________________________.
The undersigned hereby irrevocably instructs the Warrant Agent (A) to
deliver this Note to the Trustee pursuant to the provisions of the Indenture
with instructions to issue in the name of the registered Holder a Note in
principal amount equal to the principal amount of the Note evidenced by this
Unit; (B) to issue in the name of the undersigned registered Holder a Warrant
Certificate representing the number of Warrants equal to the difference between
(x) the number of Warrants represented by this Unit and (y) the Warrants
exercised hereby on behalf of the undersigned registered Holder; and (C) as
custodian of the Warrants on behalf of such registered Holder, to cause such
Warrants to be exercised on behalf of the undersigned Holder as provided in the
Warrant Agreement.
Dated:
Name of Holder of this Note:
------------------------------------
Address:
----------------------------
Signature:
--------------------------
[Note: the above signature must correspond with the name as written upon the
face of this Unit in every particular, without alteration or enlargement
whatever.]
B-9
<PAGE> 104
ASSIGNMENT
I or we assign this Unit to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of
assignee:
-----------------------------------
and irrevocably appoint agent
---------------------
to transfer this Unit on the books of the
Company. The agent may substitute another to act
for him.
Dated:
--------------------
Signature:
--------------------------------------------
(Sign exactly as name appears on the other side of this Unit)
B-10
<PAGE> 105
EXCHANGE
I or we assign the Note evidenced by this Unit to:
TransAmerican Energy Corporation
1300 North Sam Houston Parkway East
Suite 320
Houston, Texas 77032
I.R.S. Employer Identification No.: 76-0229632
and irrevocably appoint ______________________ agent to transfer the Note
evidenced by this Unit on the books of the Company. The agent may substitute
another to act for him.
Dated:
-----------------------
Signature:
-----------------------------------------------------
(Sign exactly as name appears on the other side of this Unit)
B-11
<PAGE> 106
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have the Note evidenced by this Unit
purchased by the Company pursuant to Section 4.14 or Article XI of the
Indenture, check the appropriate box below:
[ ] Section 4.14 [ ] Article XI
If you want to elect to have only part of the Note evidenced
by this Unit purchased by the Company pursuant to Section 4.14 or Article XI of
the Indenture, as the case may be, state the amount you want to be purchased:
$
------------
Dated:
--------------------
Signature:
------------------------------------
(Sign exactly as your name appears
on the other side of this Unit)
Your Social Security or Tax Identification Number:
------------------
Signature Guarantee***:
---------------------------------------------
- -----------------
***NOTICE: The signature must be guaranteed by an institution which is a member
of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agent Medallion Program (STAMP)
(2) The New York Stock Exchange Medallion Program (MSP)
(3) The Stock Exchange Medallion Program (SEMP)
B-12
<PAGE> 107
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF NOTES
Re: [Series A] [Series B] 16% Senior Subordinated Notes due 2003 (the
"Notes") of TransAmerican Refining Corporation
This Certificate relates to $ principal amount of
Notes held in [ ] book-entry or [ ] definitive form by
------------------------
(the "Transferor").
The Transferor, by written order, has requested the Trustee:
[ ] to deliver in exchange for its beneficial interest in the Global
Note held by the depository, a Note or Notes in definitive,
registered form of authorized denominations and an aggregate
principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above); or
[ ] to exchange or register the transfer of a Note or Notes. In
connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above captioned Notes and, the transfer
of this Note does not require registration under the Securities Act
of 1933, as amended (the "Securities Act") because such Note:
[ ] is being acquired for the Transferor's own account, without
transfer;
[ ] is being transferred pursuant to an effective registration
statement;
[ ] is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act), in reliance on such
Rule 144A;
[ ] is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;**
[ ] is being transferred pursuant to Rule 144 under the Securities
Act;** or
[ ] is being transferred pursuant to another exemption from the
registration requirements of the Securities Act (explain:
_______________________________ ). "
---------------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------
Date:
---------------------
- ------------------------------------
* Check applicable box.
** If the box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
C-1
<PAGE> 1
EXHIBIT 4.22
WARRANT AGREEMENT
Dated as of
December 30, 1997
Between
TRANSAMERICAN REFINING CORPORATION
and
FIRST UNION NATIONAL BANK
as the Warrant Agent
----------------------------------------------------------------
Warrants for
Common Stock of
TransAmerican Refining Corporation
----------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.1 Form of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.2 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.3 Execution and Delivery of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.4 Loss or Mutilation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.5 Transfer of Notes and Warrants Prior to Separation; Separation . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
Exercise Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.1 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.2 Exercise Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.3 Expiration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.4 Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.5 Issuance of Warrant Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.6 Fractional Warrant Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.7 Reservation of Warrant Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.8 Cancellation of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.9 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
Antidilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.1 Adjustment of Exercise Price and Warrant Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.2 Adjustment for Change in Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.3 Adjustment for Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.4 Adjustment for Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.5 Adjustment for Common Stock Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.6 Adjustment for Convertible Securities Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.7 [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.8 Consideration Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.9 When De Minimis Adjustment May Be Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.10 Adjustment to Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.11 When No Adjustment Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.12 Notice of Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.13 Voluntary Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.14 Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.15 Form of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.16 Other Dilutive Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.17 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.18 Non-applicability of Article IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V
Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.1 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.2 Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.3 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.4 Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.5 Surrender of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI
Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.1 Appointment of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.2 Rights and Duties of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.3 Individual Rights of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.4 Warrant Agent's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.5 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.6 Successor Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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ARTICLE VII
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.1 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.2 SEC Reports and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.3 Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.4 Persons Benefitting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.5 Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.6 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 7.9 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 7.10 Multiple Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 7.11 Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 7.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
iii
<PAGE> 5
THIS WARRANT AGREEMENT (this "Agreement"), dated as of December 30,
1997, is between TRANSAMERICAN REFINING CORPORATION, a Texas corporation
(together with its permitted successors and assigns, the "Company"), and FIRST
UNION NATIONAL BANK, as warrant agent (together with its permitted successors
and assigns, the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement, dated
December 22, 1997 (the "Purchase Agreement"), with Jefferies & Company, Inc.
(the "Purchaser"), pursuant to which the Company has agreed to issue and sell to
the Purchaser 175,000 Units (as defined below), consisting of (i) $175,000,000
aggregate principal amount of 16% Senior Subordinated Notes due 2003, Series A
(the "Notes") and (ii) 175,000 warrants (together with the warrants (the
"Purchaser Warrants") to purchase shares of the Company's Common Stock (as
defined below) issued to the Purchaser pursuant to the Solicitation Agent
Agreement, dated December 22, 1997, among the Company, TransAmerican Energy
Corporation, a Delaware corporation, and the Purchaser, the "Warrants") to
purchase initially 2,335,245 shares (together with the shares of the Company's
Common Stock underlying the Purchaser Warrants, the "Warrant Shares") of the
Company's common stock, $0.01 par value per share (the "Common Stock"), at an
exercise price of $0.01 per share;
WHEREAS, the Notes will be issued pursuant to an indenture (the
"Indenture") to be dated as of December 30, 1997 between the Company and First
Union National Bank, as trustee (the "Trustee");
WHEREAS, the Warrants are to be issued pursuant to this Agreement;
WHEREAS, the Notes and the Warrants (other than the Purchaser Warrants)
(the "Unit Warrants") will be sold in Units, each Unit consisting of (i) one
Note in the principal amount of $1,000 and (ii) one Warrant to purchase
initially 13.344257 Warrant Shares at an exercise price of $0.01 per share (the
"Units");
WHEREAS, prior to Separation (as defined below), record ownership of
the Notes and beneficial ownership of the Unit Warrants will be evidenced by
record ownership of the Units;
WHEREAS, definitive certificates (the "Custodian Warrants") evidencing
the Unit Warrants will be held by the Warrant Agent as custodian for the
registered holders of the Units;
WHEREAS, the Company further desires the Warrant Agent to act on behalf
of the Company in connection with the issuances, division, transfer, exchange,
substitution and exercise of the Warrants, and the Warrant Agent is willing to
so act; and
<PAGE> 6
NOW, THEREFORE, each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the holders of Warrants (or
until Separation (as defined below), the registered holders of Units) (each a
"Holder"):
ARTICLE I
Definitions
SECTION 1.1 Definitions. Capitalized terms used but not defined
herein shall have the respective meanings given to such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" of any specified Person means (i) any other Person
which, directly or indirectly, is controlling or controlled by or under direct
or indirect common control with such specified Person, or (ii) any other Person
who is a director or executive officer (A) of such Person, (B) of any subsidiary
of such specified Person, or (C) of any Person described in clause (i) above.
For purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Affiliate shall also
mean any beneficial owner of shares representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or warrants
to purchase such Voting Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Agent Member" has the meaning given to such term in Section 5.3.
"Board" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means any day other than (i) Saturday or Sunday,
(ii) or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to be closed.
"Common Stock" has the meaning given to such term in the recitals
to this Agreement.
"Company" has the meaning given to such term in the preamble to
this Agreement.
"Current Market Value" per share of Common Stock or any other
security at any date means, on any date of determination (a) the average of the
daily closing
2
<PAGE> 7
sale prices for each of 15 trading days immediately preceding such date (or
such shorter number of days during which such security has been listed or
traded), if the security has been listed on the New York Stock Exchange, the
American Stock Exchange or other national securities exchange or the NASDAQ
National Market for at least 10 trading days prior to such date, (b) if such
security is not so listed or traded, the average of the daily closing bid
prices for each of the 15 trading days immediately preceding such date (or such
shorter number of days during which such security had been quoted), if the
security has been quoted on a national over-the-counter market for at least 10
trading days, and (c) otherwise, the value of the security most recently
determined as of a date within the six months preceding such day by the Board.
"Definitive Warrants" has the meaning given to such term in
Section 2.1.
"DTC" means The Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC pursuant thereto.
"Exercise Date" has the meaning given to such term in Section 3.2.
"Exercise Price" has the meaning given to such term in Section
3.1.
"Expiration Date" has the meaning given to such term in Section
3.2.
"Global Warrant" has the meaning given to such term in Section
2.1.
"Global Warrants" has the meaning given to such term in Section
2.1.
"Holders" has the meaning given to such term in the recitals to
this Agreement.
"Indenture" has the meaning given to such term in the recitals to
this Agreement.
"Institutional Accredited Investor" has the meaning given to such
term in Section 2.3.
"Issue Date" means the date on which Warrants are initially
issued, which is December 30, 1997.
"Notes" has the meaning given to such term in the recitals to this
Agreement.
3
<PAGE> 8
"Offering Circular" means the final Offering Circular of the
Company dated December 23, 1997 relating to the issuance and sale of the Units.
"Officer" means the Chief Executive Officer, the President, the
Chief Financial Officer, any Vice President or the Treasurer of the Company.
"Old Warrants" means the common stock purchase warrants of the
Company issued pursuant to the warrant agreement, dated as of February 23, 1995,
between the Company and First Union National Bank, or successor warrant agent,
as amended.
"Person" means any individual, corporation, company (including any
limited liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Redeemable Stock" means, with respect to any Person, any capital
stock that by its terms (or by the terms of any security into which it is
convertible or exchangeable) or otherwise (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is or may
become redeemable or repurchasable at the option of the holder thereof, in whole
or in part, or (iii) is convertible or exchangeable for indebtedness.
"Restricted Definitive Warrant" has the meaning given to such term
in Section 2.3.
"Restricted Warrant" means a Global Warrant or a Restricted
Definitive Warrant.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Transfer Agent" has the meaning given to such term in
Section 3.5.
"Voting Stock" means all classes of capital stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Warrant Agent" has the meaning given to such term in the
Recitals.
4
<PAGE> 9
"Warrant Certificates" has the meaning given to such term in
Section 2.1.
"Warrant Number" has the meaning given to such term in Article IV.
"Warrant Shares" means the Common Stock (and other securities)
issuable upon the exercise of the Warrants.
"Warrants" has the meaning given to such term in the Recitals.
SECTION 1.2 Rules of Construction. Unless the text otherwise
requires: (i) a term has the meaning assigned to it; (ii) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles as in effect from time to time; (iii) "or" is not
exclusive; (iv) "including" means including, without limitation; (v) references
to "Section" and "Article" refer to Sections and Articles of this Agreement,
unless the context clearly requires otherwise; and (vi) words in the singular
include the plural and words in the plural include the singular.
ARTICLE II
Warrant Certificates
SECTION 2.1 Form of Warrant Certificates. Prior to Separation,
beneficial ownership of the Unit Warrants will be evidenced by record ownership
of the Units. From and after Separation, the Unit Warrants will be issued (a) in
global form (the "Global Warrant"), substantially in the form of Exhibit A
attached hereto (including the text accompanying the footnotes thereto), and (b)
in definitive form (the "Definitive Warrants"), substantially in the form of
Exhibit A (excluding the text accompanying the footnotes thereto). The Purchaser
Warrants will be issued as a Definitive Warrant or Warrants. The Global Warrant
shall represent the aggregate amount of outstanding Warrants from time to time
endorsed thereon; provided that the aggregate amount of outstanding Warrants
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the Global
Warrant to reflect the amount of any increase or decrease in the amount of
outstanding Warrants represented thereby shall be made by the Warrant Agent in
accordance with instructions given by the holder thereof.
The Depository with respect to the Global Warrant (the
"Depository") shall be The Depository Trust Company until a successor shall be
appointed by the Company and become such Depository. The Global Warrant shall be
registered in the name of the Depository, or the nominee of such Depository. So
long as the Depository or its nominee is the registered owner of such Global
Warrant it will be deemed the sole owner and holder of such Global Warrant for
all purposes hereunder and under such Global Warrant. The
5
<PAGE> 10
certificates (the "Warrant Certificates") evidencing the Global Warrant and the
Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto. Neither the
Company nor the Warrant Agent will have any responsibility or liability for any
aspects of the records relating to beneficial ownership interest of the Global
Warrant in the name of the Depository or its nominee or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
SECTION 2.2 Legends. Unless and until a Warrant or Warrant Share
is sold under an effective registration statement, each Warrant Certificate
evidencing the Global Warrants and the Definitive Warrants (and all Warrant
Certificates issued in exchange therefor or substitution thereof) and each
certificate representing the Warrant Shares shall bear a legend in substantially
the following form (with any appropriate modification for the Warrant Shares):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO YEARS
(OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) UNDER
THE SECURITIES ACT AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH TRANSAMERICAN REFINING CORPORATION ("THE
COMPANY") OR ANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS PURCHASING THE
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<PAGE> 11
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN
EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT
AGENT.
SECTION 2.3 Execution and Delivery of Warrant Certificates.
Warrant Certificates evidencing Warrants to purchase initially an aggregate of
up to 3,364,636 Warrant Shares may be executed, on or after the Issue Date, by
the Company and delivered to the Warrant Agent for countersignature, and the
Warrant Agent shall thereupon countersign and deliver such Warrant Certificates
upon the order and at the direction of the Company to the purchasers thereof on
the date of issuance. The Warrant Agent is hereby authorized to countersign and
deliver Warrant Certificates as required by this Agreement.
The Warrant Certificates shall be executed on behalf of the
Company by an Officer of the Company either manually or by facsimile signature
printed thereon. The Warrant Certificates shall be countersigned manually by the
Warrant Agent and shall not be valid for any purpose unless so countersigned. In
case any Officer of the Company whose signature shall have been placed upon any
of the Warrant Certificates shall cease to be such Officer of the Company before
countersignature by the Warrant Agent and issuance and delivery thereof, such
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such Officer of the Company.
Subject to Section 2.5, Warrants offered and sold in their initial
distribution to a limited number of institutions that are accredited investors
(which are not QIBs) within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act (and institutions in which all the equity owners are such
accredited investors) (together referred to as "Institutional Accredited
Investors") in transactions exempt from registration under the Securities Act
will be delivered, after separation, in certificated fully registered form (a
"Restricted Definitive Warrant") substantially in the form set forth in Exhibit
A. Such Warrants shall be delivered to such Institutional Accredited Investors
only upon the execution and delivery to the Company and the Initial Purchaser of
an institutional accredited investor transferee compliance letter (an "Investor
Letter") substantially in the form of Annex A to the Offering Circular.
Restricted Definitive Warrants may not be transferred or exchanged for
7
<PAGE> 12
interests in the Global Warrant or another Restricted Definitive Warrant,
except as provided herein.
SECTION 2.4 Loss or Mutilation. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership and the
loss, theft, destruction or mutilation of any Warrant Certificate and of
indemnity satisfactory to them and (in the case of mutilation) upon surrender
and cancellation thereof, then, in the absence of notice to the Company or the
Warrant Agent that the Warrants represented thereby have been acquired by a bona
fide purchaser, the Company shall execute and the Warrant Agent shall
countersign and deliver to the registered Holder of the lost, stolen, destroyed
or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new
Warrant Certificate of the same tenor and for a like aggregate number of
Warrants. Upon the issuance of any new Warrant Certificate under this Section
2.4, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and other
expenses (including the reasonable fees and expenses of the Warrant Agent and of
counsel to the Company) in connection therewith. Every new Warrant Certificate
executed and delivered pursuant to this Section 2.4 in lieu of any lost, stolen
or destroyed Warrant Certificate shall constitute a contractual obligation of
the Company, whether or not the allegedly lost, stolen or destroyed Warrant
Certificates shall be at any time enforceable under applicable law, and shall be
entitled to the benefits of this Agreement equally and proportionately with any
and all other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Section 2.4 are exclusive and shall preclude (to the extent
lawful) all other rights or remedies, notwithstanding any law or statute
existing or hereafter enacted to the contrary, with respect to the replacement
of mutilated, lost, stolen or destroyed Warrant Certificates.
Section 2.5. Transfers of Notes and Warrants Prior to Separation;
Separation.
The Custodian Warrants will be held by the Warrant Agent, as custodian
for the holders of the Units, until such time as the registered holder of a Unit
shall have surrendered such Unit to the Warrant Agent for the exchange of such
Unit, in whole or in part, for a Definitive Warrant or Warrants and for a Note
or Notes of a like aggregate principal amount of authorized denominations (such
surrender and exchange, together with the exchange for the Global Warrant
referred to below, are herein referred to as a "Separation" and the related
Warrants are referred to as being "Separated"); provided, that Separation may
not occur until the earlier of (i) one year from the date hereof, (ii)
commencement of the Exchange Offer (as defined in the Registration Rights
Agreement, dated the date hereof, between the Company and the Purchaser) and
(iii) such other date as may be determined by the Purchaser. Each Unit presented
for Separation shall be duly endorsed by the registered holder thereof or by the
duly appointed legal representative thereof or by a duly authorized
attorney-in-fact. The Warrant Agent shall deliver such Unit to the Trustee
pursuant to the provisions of the Indenture, with instructions to issue Notes in
authorized denominations for an aggregate principal amount equal to the
aggregate principal amount of the Notes surrendered in the name
8
<PAGE> 13
of each registered holder or holders. The Warrant Agent, as custodian, shall
deliver (or cause to be delivered) the Notes so received from the Trustee and a
Warrant Certificate or Certificates executed by the Company and countersigned
by the Warrant Agent in the name of such registered holder or holders for such
aggregate number of Warrants as shall equal Warrants so exchanged for
Separation, in each case, bearing numbers or other distinguishing symbols not
contemporaneously outstanding to the holder or holders entitled thereto.
ARTICLE III
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall initially entitle
the Holder thereof, subject to adjustment pursuant to the terms of this
Agreement, to purchase 13.344257 shares of Common Stock for an exercise price of
$0.01 per share of Common Stock (the "Exercise Price"). The Warrant Number and
Exercise Price are both subject to adjustment as set forth in Article IV.
SECTION 3.2 Exercise Period. (a) Subject to the terms and
conditions set forth herein, the Warrants shall only be exercisable at any time
or from time to time on any Business Day on or after the first anniversary of
the Issue Date (the "Exercise Date").
(b) No Warrant shall be exercisable after June 30, 2003 (the
"Expiration Date").
SECTION 3.3 Expiration. A Warrant shall terminate and become void
as of the earlier of (i) the close of business on the Expiration Date or (ii)
the date such Warrant is exercised. The Company shall give notice not less than
90, and not more than 120, days prior to the Expiration Date to the Holders of
all then outstanding Warrants to the effect that the Warrants will terminate and
become void as of the close of business on the Expiration Date; provided,
however, that notwithstanding that the Company may fail to give notice as
provided in this Section 3.3, the Warrants will terminate and become void on the
Expiration Date.
SECTION 3.4 Manner of Exercise. Warrants may be exercised at any
time on or after the Exercise Date by surrendering to the Warrant Agent the
Warrant Certificates at any office or agency maintained for that purpose,
together with the form of election to purchase Common Stock on the reverse
thereof duly completed and signed by the Holder thereof and paying in full the
Exercise Price for each Warrant exercised and any other amounts required to be
paid pursuant to Section 5.2 hereof. Payment of the Exercise Price (and any
other required amounts) shall be made in the form of cash or a certified or
official bank check payable to the order of the Company. Subject to Section 3.2,
the rights represented by the Warrants shall be exercisable at the election of
the Holders thereof either in
9
<PAGE> 14
full at any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise in respect of less than all the Warrant
Shares purchasable on such exercise at any time prior to the expiration of the
Exercise Period a new Warrant Certificate exercisable for the remaining Warrant
Shares will be issued. The Warrant Agent shall countersign and deliver the
required new Warrant Certificates, and the Company, at the Warrant Agent's
request, shall supply the Warrant Agent with Warrant Certificates duly signed
on behalf of the Company for such purpose.
SECTION 3.5 Issuance of Warrant Shares. Upon the surrender of
Warrant Certificates, as set forth in Section 3.4, the Company shall issue and
cause the Warrant Agent or, if appointed, a transfer agent for the Common Stock
("Stock Transfer Agent") to countersign and deliver to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrants or other securities or property to which it
is entitled, registered or otherwise, to the Person or Persons entitled to
receive the same, together with cash as provided in Section 3.6 in respect of
any fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price, as aforesaid.
SECTION 3.6 Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.6, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in cash
equal to the same fraction of the Current Market Value for one share of Common
Stock less the portion of the Exercise Price attributable thereto, rounded to
the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. The Company shall at
all times keep reserved out of its authorized shares of Common Stock, a number
of shares of Common Stock sufficient to provide for the exercise of all
outstanding Warrants. The registrar for the Common Stock (the "Registrar") shall
at all times until the expiration of the Exercise Period reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with the Stock Transfer Agent. The Company will
supply such Stock Transfer Agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be payable as provided in Section 3.6. The Company will furnish to such Stock
Transfer Agent a copy of all notices of adjustments and certificates related
thereto transmitted to each Holder.
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<PAGE> 15
The Company covenants that all shares of Common Stock that may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights, free from all taxes and free from all liens, charges
and security interests, created by or through the Company, with respect to the
issue thereof.
SECTION 3.8 Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates properly surrendered for exchange, substitution,
transfer or exercise. The Warrant Agent shall destroy canceled Warrant
Certificates held by it and deliver a certificate of destruction to the Company.
The Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of Warrant Shares through the exercise of such Warrants.
SECTION 3.9 Compliance with Law. (a) Notwithstanding anything in
this Agreement to the contrary, in no event shall a Holder be entitled to
exercise a Warrant, unless (i) a registration statement filed under the
Securities Act in respect of the issuance of the Warrant Shares is then
effective or (ii) in the opinion of counsel addressed to the Warrant Agent an
exemption from the registration requirements is available under the Securities
Act for the issuance of the Warrant Shares (and the delivery of any other
securities for which the Warrants may at the time be exercisable) at the time of
such exercise.
(b) If any shares of Common Stock required to be reserved for
purposes of exercise of Warrants require, under any other Federal or state law
or applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing on any
such national securities exchange before such shares may be issued upon
exercise, the Company will in good faith and as expeditiously as possible
endeavor also to cause such shares to be duly registered or approved by such
governmental authority or listed on the relevant national securities exchange,
as the case may be.
11
<PAGE> 16
ARTICLE IV
Antidilution Provisions
SECTION 4.1 Adjustment of Exercise Price and Warrant Number. The
number of shares of Common Stock issuable upon the exercise of each Warrant (the
"Warrant Number") is initially 13.344257. The Warrant Number is subject to
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Article IV .
SECTION 4.2 Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(2) subdivides or reclassifies its outstanding shares
of Common Stock into a greater number of shares;
(3) combines or reclassifies its outstanding shares of
Common Stock into a smaller number of shares;
(4) makes a distribution on Common Stock in shares of
its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any
shares of its capital stock (other than reclassifications arising solely as
a result of a change in the par value or no par value of the Common Stock);
then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which it would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
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<PAGE> 17
Such adjustment shall be made successively whenever any event listed
above shall occur. If the occurrence of any event listed above results in an
adjustment under Section 4.3 or 4.4 below, no further adjustment shall be made
under this Section 4.2.
The Company shall not issue shares of Common Stock as a dividend or
distribution on any class of capital stock other than Common Stock unless (i)
such dividend or distribution is not prohibited by the Indenture and (ii) the
Warrant Holders also receive such dividend or distribution on a ratable basis or
the appropriate adjustment to the Warrant Number is made under this Article IV.
SECTION 4.3 Adjustment for Rights Issue.
If the Company distributes (and receives no consideration therefor) any
rights, options or warrants (whether or not immediately exercisable) to holders
of any class of its Common Stock entitling them to purchase shares of Common
Stock at a price per share less than the Current Market Value per share on the
record date relating to such distribution, the Warrant Number shall be adjusted
in accordance with the formula:
W' = W x O + N
---------
O + N x P
-----
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date for any
such distribution.
O = the number of shares of Common Stock outstanding on the record
date for any such distribu- tion.
N = the number of additional shares of Common Stock issuable upon
exercise of such rights, options or warrants.
P = the exercise price per share of such rights, options or
warrants.
M = the Current Market Value per share of Common Stock on the record
date for any such distribution.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of
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<PAGE> 18
the period during which such rights, options or warrants are exercisable, not
all rights, options or warrants shall have been exercised, the adjusted Warrant
Number shall be immediately readjusted to what it would have been if "N" in the
above formula had been the number of shares actually issued.
SECTION 4.4 Adjustment for Other Distributions.
If the Company distributes to holders of any class of its Common Stock
(as such) (i) any evidences of indebtedness of the Company or any of its
subsidiaries, (ii) any assets of the Company or any of its subsidiaries, or
(iii) any rights, options or warrants to acquire any of the foregoing or to
acquire any other securities of the Company, the Warrant Number shall be
adjusted in accordance with the formula:
W' = W x M
-----
M - F
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date
mentioned below.
M = the Current Market Value per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date mentioned below of the
shares, indebtedness, as- sets, rights, options or warrants
distributable to the holder of one share of Common Stock.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If an adjustment is made pursuant to this subsection (c) as a result of the
issuance of rights, options or warrants and at the end of the period during
which any such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the adjusted Warrant Number shall
be immediately readjusted as if "F" in the above formula was the fair market
value on the record date of the indebtedness or assets actually distributed upon
exercise of such rights, options or warrants divided by the number of shares of
Common Stock outstanding on the record date.
In the event that "F" in the above formula is greater than or equal to
"M" in the above formula, then each Holder of the Warrants, notwithstanding that
such Holder's Warrants
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<PAGE> 19
have not been exercised, shall receive the distribution referred to in this
Section 4.4 on the basis of number of Warrant Shares underlying the Warrants
held by each such Holder.
This subsection does not apply to rights, options or warrants referred
to in Section 4.3.
SECTION 4.5 Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a consideration per
share less than the Current Market Value per share on the date the Company fixes
the offering price of such additional shares, the Warrant Number shall be
adjusted in accordance with the formula:
W' = W x A
------
O + P
--
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common Stock.
P = the aggregate consideration received for the issuance of such
additional shares of Common Stock.
M = the Current Market Value per share of Common Stock on the date
of issuance of such addi- tional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares of Common Stock.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
This Section 4.5 does not apply to any of the transactions described in
Section 4.2 or to the issuance of Common Stock upon exercise of the Old
Warrants.
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<PAGE> 20
SECTION 4.6 Adjustment for Convertible Securities Issue.
If the Company issues any options, warrants or other securities
convertible into or exchangeable or exercisable for Common Stock (other than
securities issued in transactions described in Sections 4.3 or 4.4) for a
consideration per share of Common Stock initially deliverable upon conversion,
exchange or exercise of such securities less than the Current Market Value per
share on the date of issuance of such securities, the Warrant Number shall be
adjusted in accordance with this formula:
W' = W x O + D
-----
O + P
-
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the sum of the aggregate consideration received for the issuance
of such securities and the aggregate minimum consideration
receivable by the Company for issuance of Common Stock upon
conversion or in exchange for, or upon exercise of, such
securities.
M = the Current Market Value per share of Common Stock on the date
of issuance of such securities.
D = the maximum number of shares of Common Stock deliverable upon
conversion or in exchange for or upon exercise of such securities
at the initial conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion, exchange or
exercise of such securities has not been issued when the conversion, exchange or
exercise rights of such securities have expired or been terminated, then the
adjusted Warrant Number shall promptly be readjusted to the adjusted Warrant
Number which would then be in effect had the adjustment upon the issuance of
such securities been made on the basis of the actual number of shares of Common
Stock issued upon conversion, exchange or exercise of such securities. If the
aggregate minimum
16
<PAGE> 21
consideration receivable by the Company for issuance of Common Stock upon
conversion or in exchange for, or upon exercise of, such securities shall be
increased by virtue of provisions therein contained or upon the arrival of a
specified date or the happening of a specified event, then the Warrant Number
shall promptly be readjusted to the Warrant Number which would then be in
effect had the adjustment upon the issuance of such securities been made on the
basis of such increased minimum consideration.
This Section 4.6 does not apply to the issuance of the Warrants or to
any of the transactions described in Section 4.3.
SECTION 4.7 [INTENTIONALLY OMITTED.]
SECTION 4.8 Consideration Received.
For purposes of any computation respecting consideration received
pursuant to Sections 4.4, 4.5 and 4.6, the following shall apply:
(1) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash (without
any deduction being made for any commissions, discounts or other expenses
incurred by the Company for any underwriting of the issue or otherwise in
connection therewith);
(2) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof (irrespective of the accounting treatment thereof) as determined
in good faith by the Board; and
(3) in the case of the issuance of options, warrants
or other securities convertible into or exchangeable or exercisable for
shares of Common Stock, the aggregate consideration received therefor shall
be deemed to be the consideration received by the Company for the issuance
of such securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion, exchange or exercise thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
SECTION 4.9 When De Minimis Adjustment May Be Deferred.
No adjustment in the Warrant Number need be made unless the adjustment
would require an increase or decrease of at least 0.5% in the Warrant Number.
Any adjustment that is
17
<PAGE> 22
not made shall be carried forward and taken into account in any subsequent
adjustment, provided that no such adjustment shall be deferred beyond the date
on which a Warrant is exercised.
All calculations under this Article IV shall be made to the nearest
1/100th of a share.
SECTION 4.10 Adjustment to Exercise Price.
Upon each adjustment to the Warrant Number pursuant to this Article IV,
the Exercise Price shall be adjusted so that it is equal to the Exercise Price
in effect immediately prior to such adjustment multiplied by a quotient, the
numerator of which is the Warrant Number in effect immediately prior to such
adjustment, and the denominator of which is the Warrant Number in effect
immediately after such adjustment; provided, that the Exercise Price shall not
be adjusted below the lesser of $0.01 per share of Common Stock and the then par
value per share of Common Stock.
SECTION 4.11 When No Adjustment Required.
If an adjustment is made upon the establishment of a record date for a
distribution subject to Sections 4.2, 4.3 or 4.4 hereof and such distribution is
subsequently cancelled, the Warrant Number and Exercise Price then in effect
shall be readjusted, effective as of the date when the Board determines to
cancel such distribution, to that which would have been in effect if such record
date had not been fixed.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the amount of cash into which such Warrants are
exercisable. Interest will not accrue on the cash.
SECTION 4.12 Notice of Adjustment.
Whenever the Warrant Number or Exercise Price is adjusted, The Company
shall provide the notices required by Section 7.7 hereof.
SECTION 4.13 Voluntary Reduction.
The Company from time to time may reduce the Exercise Price by any
amount for any period of time (including, without limitation, permanently) if
the period is at least 20 days and if the reduction is irrevocable during the
period.
Whenever the Exercise Price is reduced, the Company shall mail to the
Holders a notice of the reduction. The Company shall mail the notice at least 15
days before the date the reduced Exercise Price takes effect. The notice shall
state the reduced Exercise Price and the period it will be in effect.
18
<PAGE> 23
A reduction of the Exercise Price under this Section 4.13 (other than a
permanent reduction) does not change or adjust the Exercise Price otherwise in
effect for purposes of Sections 4.2, 4.3, 4.4, 4.5 or 4.6.
SECTION 4.14 Reorganizations.
In case of any capital reorganization, other than in the cases referred
to in Sections 4.2, 4.3, 4.4, 4.5 or 4.6 hereof, or the consolidation or merger
of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock
into shares of other stock or other securities or property), or the sale of the
property of the Company as an entirety or substantially as an entirety
(collectively, such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Common Stock theretofore deliverable) the amount of
cash, the number of shares of stock or other securities or property to which a
holder of the number of shares of Common Stock that would otherwise have been
deliverable upon the exercise of such Warrant would have been entitled upon such
Reorganization if such Warrant had been exercised in full immediately prior to
such Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of the Company, whose determination shall
be described in a duly adopted resolution certified by The Company's Secretary
or Assistant Secretary, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Holders so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to or
simultaneously with the consummation thereof the successor corporation (if other
than the Company) resulting from such Reorganization or the corporation
purchasing or leasing such assets or other appropriate corporation or entity
shall expressly assume, by a supplemental Warrant Agreement or other
acknowledgment executed and delivered to the Holder(s), the obligation to
deliver to each such Holder such cash, such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to purchase, and all other obligations and liabilities under this
Agreement.
SECTION 4.15 Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
19
<PAGE> 24
SECTION 4.16 Other Dilutive Events.
In case any event shall occur as to which the provisions of this
Article IV are not strictly applicable but the failure to make any adjustment
would not fairly protect the purchase rights represented by the Warrants in
accordance with the essential intent and principles of such sections, then, in
each such case, the Company shall make a good faith adjustment to the Exercise
Price and Warrant Number into which each Warrant is exercisable in accordance
with the intent of this Article IV and, upon the written request of the holders
of a majority of the Warrants, shall appoint a firm of independent certified
public accountants of recognized national standing (which may be the regular
auditors of the Company), which shall give their opinion upon the adjustment, if
any, on a basis consistent with the essential intent and principles established
in this Article IV, necessary to preserve, without dilution, the purchase rights
represented by these Warrants. Upon receipt of such opinion, the Company shall
promptly mail a copy thereof to the Holder of each Warrant and shall make the
adjustments described therein.
SECTION 4.17 Miscellaneous.
For purpose of this Article IV the term "shares of Common Stock" shall
mean (i) shares of any class of stock designated as Common Stock of the Company
as of the date of this Agreement, (ii) shares of any other class of stock
resulting from successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value and (iii) shares of Common Stock of the Company issuable
upon exercise of options, warrants or rights to purchase Common Stock of the
Company or upon conversion or exchange of securities convertible into or
exchangeable for shares of Common Stock of the Company outstanding at the date
of determination. In the event that at any time, as a result of an adjustment
made pursuant to this Article IV, the holders of Warrants shall become entitled
to purchase any securities of The Company other than, or in addition to, shares
of Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in Sections 4.2 through
4.16 of this Article IV, inclusive, and the provisions of this Agreement with
respect to the Warrant Shares or the Common Stock shall apply on like terms to
any such other securities.
SECTION 4.18 Non-applicability of Article IV.
The provisions of this Article IV do not apply to (i) a change solely
in the par value or no par value of the Common Stock, provided that the Company
shall not increase the par value to exceed the Exercise Price, (ii) the
conversion or exchange (other than pursuant to a reclassification), in any case
on a share-for-share basis, of Common Stock for non-voting common stock that has
rights (other than voting rights) identical to the Common Stock, or of such
non-voting stock for Common Stock, (iii) the issuance to employees of
Transamerican Energy
20
<PAGE> 25
Corporation or any of its subsidiaries of stock or stock options in an amount
which, upon purchase or exercise, as the case may be, would represent in the
aggregate, less than 10% of the Company's Common Stock on a fully-diluted
basis, (iv) any distribution by the Company of Capital Stock of TransTexas Gas
Corporation to a holder or holders of Common Stock, or (v) any exercise of
Warrants.
ARTICLE V
Transferability
SECTION 5.1 Transfer and Exchange. The Company shall cause to be
kept at the office of the Warrant Agent a register in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Warrant Certificates and transfers or exchanges of Warrant
Certificates as herein provided. All Warrant Certificates issued upon any
registration of transfer or exchange of Warrant Certificates shall be the valid
obligations of the Company, evidencing the same obligations, and entitled to the
same benefit under this Agreement, as the Warrant Certificates surrendered for
such registration of transfer or exchange.
A Holder may transfer its Warrants only by complying with the
terms of this Agreement. No such transfer shall be effected until, and such
transferee shall succeed to the rights of a Holder only upon, final acceptance
and registration of the transfer by the Warrant Agent in the register. Prior to
the registration of any transfer of Warrants by a Holder as provided herein, the
Company, the Warrant Agent, any agent of the Company or the Warrant Agent may
treat the Person in whose name the Warrants are registered as the owner thereof
for all purposes and as the Person entitled to exercise the rights represented
thereby, any notice to the contrary notwithstanding. Furthermore, any Holder of
a Global Warrant shall, by acceptance of such Global Warrant, agree that
transfers of beneficial interests in such Global Warrant may be effected only
through a book-entry system maintained by the Holder of such Global Warrant (or
its agent), and that ownership of a beneficial interest in the Warrants
represented thereby shall be required to be reflected in a book entry. When
Warrant Certificates are presented to the Warrant Agent with a request to
register the transfer or to exchange them for an equal amount of Warrants of
other authorized denominations, the Warrant Agent shall register the transfer or
make the exchange in accordance with the provisions hereof.
To permit registrations of transfer and exchanges, the Company
shall make available to the Warrant Agent a sufficient number of executed
Warrant Certificates to effect such registrations of transfers and exchanges. No
service charge shall be made to the Holder for any registration of transfer or
exchange of Warrants, but the Company may require from the transferring or
exchanging Holder payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable upon exchanges pursuant to Section 2.4 and
exchanges in respect of portions of Warrants not exercised and the Company may
deduct such taxes from any payment of money to be made and such transfer or
exchange shall not be consummated (if such taxes are not deducted in full)
unless or until the Holder shall have paid to the Company the amount of such tax
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<PAGE> 26
or shall have established to the satisfaction of the Company and the Warrant
Agent that such tax has been paid.
SECTION 5.2 Registration, Registration of Transfer and Exchange.
(a) Transfer and Exchange of Definitive Warrants. When Definitive Warrants
are presented to the Warrant Agent with a request (i) to register the transfer
of the Definitive Warrant or (ii) to exchange such Definitive Warrants for an
equal number of Definitive Warrants of other authorized denominations, the
Warrant Agent shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Warrants so presented have been duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Warrant Agent, duly
executed by the holder thereof or by his attorney, duly authorized in writing;
(b) Transfer of a Definitive Warrant for a Beneficial Interest in Global
Warrant. A Definitive Warrant may be exchanged for a beneficial interest in the
Global Warrant only upon receipt by the Warrant Agent of a Definitive Warrant,
duly endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Warrant Agent, together with written instructions directing
the Warrant Agent to make an endorsement on the Global Warrant to reflect an
increase in the number of Warrants and Warrant Shares represented by the Global
Warrant, and then the Warrant Agent shall cancel such Definitive Warrant and
cause the number of Warrants and Warrant Shares represented by the Global
Warrant to be increased accordingly. If no Global Warrant is then outstanding,
the Company shall issue and the Warrant Agent shall countersign a new Global
Warrant representing the appropriate number of Warrants and Warrant Shares.
(c) Transfer and Exchange of Global Warrant. The transfer and exchange of
the Global Warrant or beneficial interests therein shall be effected through the
Depository, in accordance with this Warrant Agreement and the procedures of the
Depository therefor. Notwithstanding any other provisions of this Warrant
Agreement, the Global Warrant may not be transferred as a whole except by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository: provided, that if:
(i) the Depository notifies the Company that the Depository is
unwilling or unable to continue as Depository for the Global Warrant and a
successor Depository for the Global Warrant is not appointed by the Company
within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants under
this Warrant Agreement.
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<PAGE> 27
then the Company shall execute and the Warrant Agent shall countersign and
deliver, Definitive Warrants in an aggregate number equal to the number of
Warrants evidenced by the Global Warrant, in exchange for such Global
Warrant.
(d) Transfer of a Beneficial Interest in Global Warrant for a
Definitive Warrant. Upon receipt by the Warrant Agent of written transfer
instructions (or such other form of instructions as is customary for the
Depository) from the Depository (or its nominee) on behalf of any person having
a beneficial interest in the Global Warrant, the Warrant Agent shall cause, in
accordance with the standing instructions and procedures existing between the
Depository and the Warrant Agent (the "Standing Instructions"), the number of
Warrants and Warrant Shares represented by the Global Warrant to be reduced and,
following such reduction, the Company shall execute and the Warrant Agent shall
countersign and deliver to the transferee, as the case may be, a Definitive
Warrant. Definitive Warrants issued in exchange for a beneficial interest in the
Global Warrant shall be registered in such names and in such authorized
denominations as the Depository shall instruct the Warrant Agent.
(e) Cancellation and/or Adjustment of Global Warrant. At such time as
all beneficial interests in the Global Warrant have either been exchanged for
Definitive Warrants, exercised or cancelled, the Global Warrant shall be
returned to or retained and cancelled by the Warrant Agent. At any time prior to
such cancellation, if any beneficial interest in the Global Warrant is exchanged
for Definitive Warrants, exercised or cancelled, the number of Warrants and
Warrant Shares represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant by the Warrant Agent to reflect
such reduction.
SECTION 5.3 [INTENTIONALLY OMITTED].
SECTION 5.4 Special Transfer Provisions. The following provisions
shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors.
Subject to Section 2.5, the following provisions shall apply with respect to the
registration of any proposed transfer of Warrants to any Institutional
Accredited Investor that is not a QIB (excluding Non-U.S. Persons):
(i) The Warrant Agent shall register the transfer of any Warrant
Certificate, if (x)(A) the requested transfer is at least two years after
the Issue Date or (B) the proposed transferee has delivered to the Warrant
Agent certificates substantially in the forms of Exhibit B hereto and (y)
if requested by the Warrant Agent or the Company, the proposed transferee
has delivered to the Warrant Agent or the Company, an opinion of counsel
acceptable to the Warrant Agent or the Company that such transfer is in
compliance with the Securities Act.
23
<PAGE> 28
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Global Warrant, upon receipt by the Warrant
Agent of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with DTC's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and records the
date and a decrease in the number of Warrants represented by the Global
Warrant in an amount equal to the number of Warrants represented by the
Global Warrant to be transferred, and the Company shall execute, and the
Warrant Agent shall countersign and deliver, one or more Restricted
Definitive Warrants of like tenor and amount.
(b) Transfers to QIBs. Subject to Section 2.5, the following
provisions shall apply with respect to the registration of any proposed transfer
of Warrants to a QIB:
(i) If the Warrants to be transferred are represented by (x)
Restricted Definitive Warrants, the Warrant Agent shall register the
transfer if it has received from such transferor a certificate
substantially in the form of Exhibit B hereto that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Warrant Certificate
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that it is purchasing the Warrants for its own account or an
account with respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of Rule 144A, and
is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A or (y) an interest in the Global
Warrant, the transfer of such interest may be effected only through the
book-entry system maintained by DTC.
(ii) If the proposed transferee is an Agent Member, and the
Warrants to be transferred are represented by Restricted Definitive
Warrants, upon receipt by the Warrant Agent of the documents referred to in
clause (i) above and instructions given in accordance with DTC's and the
Warrant Agent's procedures, the Warrant Agent shall reflect on its books
and records the date and an increase in the number of Warrants represented
by the Global Warrant in an amount equal to the number of Warrants
represented by the Restricted Definitive Warrants, and the Warrant Agent
shall cancel the Restricted Definitive Warrant.
(c) General. By its acceptance of any Warrants represented by a
Warrant Certificate bearing the legend in Section 2.2, each Holder of such
Warrants acknowledges the restrictions on transfer of such Warrants set forth in
this Agreement and in the legend and agrees that it will transfer such Warrants
only as provided in this Agreement. The Warrant Agent shall not register a
transfer of any Warrants unless such transfer complies with the requirements of
this Section 5.4. In connection with any transfer of Warrants, each Holder
agrees by its acceptance of Warrants to furnish the Warrant Agent or the Company
such certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being
24
<PAGE> 29
made pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided, however, that the
Warrant Agent shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information. The Warrant Agent's only
obligation to enforce the transfer restrictions of this Agreement shall be to
require the certifications and opinions specifically required by this Section
5.4 as a condition to a transfer.
(d) Records. The Warrant Agent shall retain copies of all letters,
notices and other written communications received pursuant to Section 5.3 hereof
or this Section 5.4. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Warrant Agent.
SECTION 5.5 Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange, exercise or
repurchase of the Warrants represented thereby shall, if surrendered to the
Company, be delivered to the Warrant Agent, and all Warrant Certificates
surrendered or so delivered to the Warrant Agent shall be promptly canceled by
the Warrant Agent and shall not be reissued by the Company and, except as
provided in this Article V in case of an exchange or in Article III hereof in
case of the exercise or repurchase of less than all the Warrants represented
thereby or in case of a mutilated Warrant Certificate, no Warrant Certificate
shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to
the Company from time to time or otherwise dispose of such canceled Warrant
Certificates as the Company may direct in writing.
ARTICLE VI
Warrant Agent
SECTION 6.1 Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
provisions of this Agreement and the Warrant Agent hereby accepts such
appointment.
SECTION 6.2 Rights and Duties of Warrant Agent.
(a) Agent for the Company. In acting under this Warrant Agreement
and in connection with the Warrant Certificates, the Warrant Agent is acting
solely as agent of the Company and does not assume any obligation or
relationship or agency or trust for or with any of the holders of Warrant
Certificates or beneficial owners of Warrants.
(b) Counsel. The Warrant Agent may consult with counsel
satisfactory to it, and the advice of such counsel shall be full and complete
authorization and protection in respect
25
<PAGE> 30
of any action taken, suffered or omitted by it hereunder in good faith and in
accordance with the advice of such counsel.
(c) Documents. The Warrant Agent shall be protected and shall
incur no liability for or in respect of any action taken or thing suffered by it
in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, statement or other paper or document reasonably believed
by it to be genuine and to have been presented or signed by the proper parties.
(d) No Implied Obligations. The Warrant Agent shall be obligated
to perform only such duties as are herein and in the Warrant Certificates
specifically set forth and no implied duties or obligations shall be read into
this Agreement or the Warrant Certificates against the Warrant Agent. The
Warrant Agent shall not be under any obligation to take any action hereunder
which may tend to involve it in any expense or liability for which it does not
receive indemnity if such indemnity is reasonably requested. The Warrant Agent
shall not be accountable or under any duty or responsibility for the use by the
Company of any of the Warrant Certificates countersigned by the Warrant Agent
and delivered by it to the Holders or on behalf of the Holders pursuant to this
Agreement or for the application by the Company of the proceeds of the Warrants.
The Warrant Agent shall have no duty or responsibility in case of any default by
the Company in the performance of its covenants or agreements contained herein
or in the Warrant Certificates or in the case of the receipt of any written
demand from a Holder with respect to such default, including any duty or
responsibility to initiate or attempt to initiate any proceedings at law or
otherwise.
(e) Not Responsible for Adjustments or Validity of Stock. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the Warrant Number or the Exercise Price, or with respect to the nature or
extent of any adjustment when made, or with respect to the method employed, or
herein or in any supplemental agreement provided to be employed, in making the
same. The Warrant Agent shall not be accountable with respect to the validity or
value of any shares of Common Stock or of any securities or property which may
at any time be issued or delivered upon the exercise of any Warrant or upon any
adjustment pursuant to Article IV, and it makes no representation with respect
thereto. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares of
Common Stock or stock certificates upon the surrender of any Warrant Certificate
for the purpose of exercise or upon any adjustment pursuant to Article IV, or to
comply with any of the covenants of the Company contained in Article IV.
SECTION 6.3 Individual Rights of Warrant Agent. The Warrant Agent
and any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company or its
affiliates or become pecuniarily interested in transactions in which the Company
or its affiliates may be interested, or contract with or lend money to the
Company or its affiliates or otherwise act as fully and freely as though it were
not
26
<PAGE> 31
the Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
SECTION 6.4 Warrant Agent's Disclaimer. The Warrant Agent shall
not be responsible for and makes no representation as to the validity or
adequacy of this Agreement or the Warrant Certificates and it shall not be
responsible for any statement in this Agreement or the Warrant Certificates
other than its countersignature thereon.
SECTION 6.5 Compensation and Indemnity. The Company agrees to pay
the Warrant Agent from time to time reasonable compensation for its services and
to reimburse the Warrant Agent upon request for all reasonable out-of-pocket
expenses incurred by it, including the reasonable compensation and expenses of
the Warrant Agent's agents and counsel, in connection with the services rendered
hereunder. The Company shall indemnify the Warrant Agent against any loss,
liability or expense (including reasonable agents' and attorneys' fees and
expenses) incurred by it without negligence or bad faith on its part arising out
of or in connection with the acceptance or performance of its duties under this
Agreement. The Warrant Agent shall notify the Company promptly of any claim for
which it may seek indemnity. The Company need not reimburse any expense or
indemnify against any loss or liability incurred by the Warrant Agent through
willful misconduct, negligence or bad faith. The Company's payment obligations
pursuant to this Section 6.5 shall survive the termination of this Agreement.
To secure the Company's payment obligations under this Agreement,
the Warrant Agent shall have a lien prior to the Warrant Holders on all money or
property held or collected by the Warrant Agent.
SECTION 6.6 Successor Warrant Agent.
(a) The Company To Provide Warrant Agent. The Company agrees for
the benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(b) Resignation and Removal. The Warrant Agent may at any time
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 60 days after the date
on which such notice is given unless the Company otherwise agrees. The Warrant
Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed by or on behalf of the Company and specifying such
removal and the date when it shall become effective, which date shall not be
less than 60 days after such notice is given unless the Warrant Agent otherwise
agrees. Any removal under this Section 6.6 shall take effect upon the
appointment by the Company as hereinafter provided of a successor Warrant Agent
(which shall be a bank or trust company authorized under the laws of the
jurisdiction of its organization to exercise corporate trust powers) and the
acceptance of such appointment by such successor Warrant Agent.
27
<PAGE> 32
(c) The Company To Appoint Successor. In case at any time the
Warrant Agent shall resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or shall commence a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable Federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Warrant Agent or its property or affairs, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action, or a decree or order for
relief by a court having jurisdiction in the premises shall have been entered in
respect of the Warrant Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or similar law; or a decree order by a court having
jurisdiction in the premises shall have been entered for the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar
official) of the Warrant Agent or of its property or affairs, or any public
officer shall take charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation, winding up of or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
appointed by the Company by an instrument in writing, filed with the successor
Warrant Agent (or, in the absence of such appointment within 60 days after the
notice of resignation or removal, either party hereto may petition the
appointment of a successor by a court of competent jurisdiction.) Upon the
appointment as aforesaid of a successor Warrant Agent and acceptance by the
successor Warrant Agent of such appointment, the Warrant Agent shall cease to be
Warrant Agent hereunder; provided, however, that in the event of the resignation
of the Warrant Agent under this subsection (c), such resignation shall be
effective on the earlier of (i) the date specified in the Warrant Agent's notice
of resignation and (ii) the appointment and acceptance of a successor Warrant
Agent hereunder. As soon as practicable after appointment of the successor
Warrant Agent, the Company shall cause written notice of the change in the
Warrant Agent to be given to each of the registered holders of the Warrants in
the manner provided for in Section 7.7 hereof. However, failure to give any
notice provided for in this clause (c) or any defect therein, shall not affect
the legality or validity of the resignation or removal of the Warrant Agent or
the appointment of the successor Warrant Agent, as the case may be.
(d) Successor Expressly To Assume Duties. Any successor Warrant
Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder, and thereupon such successor Warrant Agent, without any further act,
deed or conveyance, shall become vested with all the rights and obligations of
such predecessor with like effect as if originally named as Warrant Agent
hereunder, and such predecessor, upon payment of its charges and disbursements
then unpaid, shall thereupon become obligated to transfer, deliver and pay over,
and such successor Warrant Agent shall be entitled to receive, all monies,
securities and other property on deposit with or held by such predecessor, as
Warrant Agent hereunder.
(e) Successor by Merger. Any corporation into which the Warrant
Agent hereunder may be merged or consolidated, or any corporation resulting from
any merger or
28
<PAGE> 33
consolidation to which the Warrant Agent shall be a party, or any corporation
to which the Warrant Agent shall sell or otherwise transfer all or
substantially all of its corporate trust business; provided that it shall be
qualified as aforesaid, shall be the successor Warrant Agent under this
Agreement without the execution or filing of any paper or any further act on
the part of any of the parties hereto.
ARTICLE VII
Miscellaneous
SECTION 7.1 [INTENTIONALLY OMITTED.]
SECTION 7.2 SEC Reports and Other Information. Notwithstanding
that the Company may not be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, the Company shall, for all periods ending after
the date of this Warrant Agreement, file with the SEC and thereupon provide the
Warrant Agent and Holders with such annual reports and such information,
documents and other reports are as specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed at the times specified
for the filing of such information, documents and reports under such Sections,
and within 5 Business Days thereafter such information, documents and other
reports shall be provided to the Warrant Agent and the Holders.
SECTION 7.3 Rule 144A. The Company hereby agrees with each Holder,
for so long as any Warrants or Warrant Shares remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to any Holder or
beneficial owner of Warrants or Warrant Shares in connection with any sale
thereof and any prospective purchaser of such Warrants or Warrant Shares from
such Holder or beneficial owner, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Warrants or Warrant
Shares pursuant to Rule 144A.
SECTION 7.4 Persons Benefitting. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than the Company,
the Warrant Agent and the Holders any right, remedy or claim under or by reason
of this agreement or any part hereof.
SECTION 7.5 Rights of Holders. Except as expressly contemplated
herein, holders of unexercised Warrants are not entitled (i) to receive
dividends or other distributions, (ii) to receive notice of or vote at any
meeting of the stockholders, (iii) to consent to any action of the stockholders,
(iv) to exercise any preemptive right or to receive notice of any other
proceedings of the Company or (v) to exercise any other rights whatsoever as
stockholders of the Company.
29
<PAGE> 34
SECTION 7.6 Amendment. This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided however, that the Company determines, and
the Warrant Agent may rely on such determination, that such action shall not
affect adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has a material adverse effect on the interests of the Holders
shall require the written consent of the Holders of a majority of the then
outstanding Warrants. The consent of each Holder affected shall be required for
any amendment pursuant to which the Exercise Price would be increased or the
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided in Article IV as of the
Issue Date of the Warrants). In determining whether the Holders of the required
number of Warrants have concurred in any direction, waiver or consent, Warrants
owned by the Company or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company shall
be disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Warrant Agent shall be protected in relying on any such
direction, waiver or consent, only Warrants which the Warrant Agent knows are so
owned shall be so disregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
SECTION 7.7 Notices. Any notice or communication shall be in
writing and delivered in Person or mailed by first-class mail addressed as
follows:
if to the Company:
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East
Suite 200
Houston, Texas 77032-2949
Attention: Ed Donahue
Vice President
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
Dallas, Texas 75201
Attention: C. Robert Butterfield
30
<PAGE> 35
if to the Warrant Agent:
First Union National Bank
10 State House Square CT 5845
Hartford, CT 06103-3698
Attention: Corporate Trust Administration
The Company or the Warrant Agent by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to
the Holder at the Holder's address as it appears on the register in which the
Company shall provide for the registration of Warrants and Warrant Shares and of
transfers and exchanges of Warrants and Warrant Shares and shall be sufficiently
given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY, ON BEHALF OF
ITSELF, HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS
CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY,
ON BEHALF OF ITSELF, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF 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.
SECTION 7.9 Successors. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors. All agreements
of the Warrant Agent in this Agreement shall bind its successors.
SECTION 7.10 Multiple Originals. The parties may sign any number
of copies of this Agreement. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Agreement.
31
<PAGE> 36
SECTION 7.11 Table of Contents. The table of contents and headings
of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 7.12 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
SECTION 7.13 Further Assurances. From time to time on and after
the date hereof, the Company shall deliver or cause to be delivered to the
Warrant Agent such further documents and instruments and shall do and cause to
be done such further acts as the Warrant Agent shall reasonably request (it
being understood that the Warrant Agent shall have no obligation to make such
request) to carry out more effectively the provisions and purposes of this
Agreement, to evidence compliance herewith or to assure itself that it is
protected hereunder.
32
<PAGE> 37
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
TRANSAMERICAN REFINING CORPORATION
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
FIRST UNION NATIONAL BANK, as
Warrant Agent,
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
33
<PAGE> 38
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO YEARS
(OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) UNDER
THE SECURITIES ACT AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH TRANSAMERICAN REFINING CORPORATION ("THE
COMPANY") ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D),(E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO
A-1
<PAGE> 39
EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE WARRANT AGENT.
[Unless and until it is exchanged in whole or in part for Warrants
in definitive form, this Warrant may not be transferred except as a whole by the
depository to a nominee of the depository or by a nominee of the depository to
the depository or another nominee of the depository or by the depository or any
such nominee to a successor depository or a nominee of such successor
depository. The Depository Trust Company ("DTC") (55 Water Street, New York, New
York) shall act as the depository until a successor shall be appointed by the
Company and the Warrant Agent. Unless this certificate is presented by an
authorized representative of DTC to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]*
No. [ ] Certificate for Warrants
--------
- -----------------------
* To be included only if the Warrant is in global form.
A-2
<PAGE> 40
WARRANTS TO PURCHASE COMMON STOCK OF
TRANSAMERICAN REFINING CORPORATION
THIS CERTIFIES THAT, [ ], or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
Each Warrant entitles the holder thereof (the "Holder"), at its option and
subject to the provisions contained herein and in the Warrant Agreement referred
to below, to purchase from TransAmerican Refining Corporation, a Texas
corporation ("the Company"), initially 13.344257 shares of Common Stock, $0.01
par value, of the Company (the "Common Stock") at the per share exercise price
of $0.01 (the "Exercise Price"). This Warrant Certificate shall terminate and
become void as of the close of business on June 30, 2003 (the "Expiration Date")
or upon the exercise hereof as to all the shares of Common Stock subject hereto.
The number of shares purchasable upon exercise of the Warrants and the Exercise
Price per share shall be subject to adjustment from time to time as set forth in
the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of December 30, 1997 (the "Warrant Agreement"),
between the Company and First Union National Bank (the "Warrant Agent," which
term includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of the Company, the Warrant Agent and the Holders of the
Warrants. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Warrant Agreement. A copy of the Warrant Agreement may
be obtained for inspection by the Holder hereof upon written request to the
Warrant Agent at First Union National Bank, 10 State House Square CT 5845,
Hartford, CT 06103-3698, attention of Corporate Trust Administration.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part by presentation of this Warrant Certificate.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time or
from time to time on any Business Day only on or after December 30, 1998;
provided, however, that no Warrant shall be exercisable after June 30, 2003.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 5.2 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
A-3
<PAGE> 41
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares of Common Stock as to which the Warrants shall not have
been exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. No fractional Warrant Shares will be
issued upon the exercise of the Warrants, but the Company shall pay an amount in
cash equal to the Market Price for one Warrant Share on the trading day immedi-
ately preceding the date the Warrant is exercised, multiplied by the fraction of
a Warrant Share that would be issuable on the exercise of any Warrant.
All shares of Common Stock issuable by the Company upon the
exercise of the Warrants shall, upon such issue, be duly and validly issued and
fully paid and nonassessable.
The Holder in whose name the Warrant Certificate is registered may
be deemed and treated by the Company and the Warrant Agent as the absolute owner
of the Warrant Certificate for all purposes whatsoever and neither the Company
nor the Warrant Agent shall be affected by notice to the contrary.
The Warrants do not entitle any holder hereof to any of the rights
of a stockholder of the Company.
A-4
<PAGE> 42
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
TRANSAMERICAN REFINING CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Attest:
- ---------------------------
Secretary
DATED:
Countersigned:
FIRST UNION NATIONAL BANK,
as Warrant Agent,
By:
------------------------
Authorized Signatory
A-5
<PAGE> 43
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS*
The following exchanges of a part of this Global Warrant for definitive
Warrants have been made:
<TABLE>
<CAPTION>
Number of
Warrants in
Amount of this Global
increase/ Warrant Signature of
decrease in Number following authorized
Date of of Warrants in such increase/ officer of
Exchange this Global Warrant decrease Warrant Agent
<S> <C> <C> <C>
</TABLE>
- --------
* To be included only if the Warrant is in global form.
A-6
<PAGE> 44
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of
TransAmerican Refining Corporation (the "Company")
This Certificate relates to Warrants held in definitive form
by _______________ (the "Transferor").
The Transferor has requested the Warrant Agent by
written order to exchange or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant, the
Transferor does hereby certify that the Transferor is familiar with the Warrant
Agreement relating to the above captioned Warrants and that the transfer of
this Warrant does not require registration under the Securities Act of 1933
(the "Securities Act") because *:
[_] Such Warrant is being acquired for the Transferor's
own account without transfer.
[_] Such Warrant is being transferred to the Company.
[_] Such Warrant is being transferred pursuant to an
effective registration statement pursuant to the Securities Act.
[_] Such Warrant is being transferred in a transaction
meeting the requirements of Rule 144 under the Securities Act.
- --------
* Please check applicable box.
B-1
<PAGE> 45
The Warrant Agent and the Company are entitled to rely upon
this Certificate and are irrevocably authorized to produce this Certificate or
a copy hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby.
-------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
----------------------------------
Date:
--------------------------------
B-2
<PAGE> 1
EXHIBIT 4.23
TRANSAMERICAN REFINING CORPORATION
$175,000,000 16% Senior Subordinated Notes due 2003
REGISTRATION RIGHTS AGREEMENT
December 30, 1997
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
TransAmerican Refining Corporation, a Texas corporation (the
"Company"), is issuing and selling to Jefferies & Company, Inc. (the
"Purchaser"), upon the terms set forth in the Purchase Agreement (as defined
below), $175,000,000 aggregate principal amount of its 16% Senior Subordinated
Notes due 2003, Series A (the "Notes"). As an inducement to the Purchaser to
enter into the Purchase Agreement, the Company agrees with the Purchaser, for
the benefit of the holders of the Securities (as defined below) (including,
without limitation, the Purchaser), as follows:
1. Definitions. Capitalized terms used but not defined herein have the
respective meanings given to such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"Advice" has the meaning given to such term in Section 6.
"Agreement" means this Registration Rights Agreement.
"Applicable Period" has the meaning given to such term in Section 2(f).
"Business Day" means any day other than (i) Saturday or Sunday, or (ii)
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
"Closing Date" means December 30, 1997.
"Company" has the meaning given to such term in the introductory
paragraph hereof.
"Effectiveness Date" means the 210th day following the Closing Date.
"Effectiveness Period" has the meaning given to such term in Section
3(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
<PAGE> 2
"Exchange Offer" has the meaning given to such term in Section 2(a).
"Exchange Offer Registration Statement" has the meaning given to such
term in Section 2(a).
"Exchange Securities" means 16% Senior Subordinated Notes due 2003,
Series B, of the Company, identical in all respects to the Notes, except for
references to series and restrictive legends.
"Filing Date" means the 150th day following the Closing Date.
"Holder" means each holder of Registrable Securities.
"Indemnified Party" has the meaning given to such term in Section 8(c).
"Indemnifying Party" has the meaning given to such term in Section
8(c).
"Indenture" means the Indenture dated the date hereof between the
Company and First Union National Bank, 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" has the meaning given to such term in
Section 3(a).
"Losses" has the meaning given to such term in Section 8(a).
"NASD" means the National Association of Securities Dealers, Inc.
"Notes" has the meaning given to such term in the introductory
paragraph hereof.
"Participating Broker-Dealer" has the meaning given to such term in
Section 2(f).
"Person" means an individual, trustee, corporation, partnership, joint
stock company, joint venture, trust, unincorporated organization or government
or any agency or political subdivision thereof, union, business association,
firm or other entity.
"Private Exchange" has the meaning given to such term in Section 2(g).
"Private Exchange Securities" has the meaning given to such term in
Section 2(g).
"Prospectus" means 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 Securities covered by
such Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Purchaser" has the meaning given to such term in the introductory
paragraph hereof.
"Purchase Agreement" means the Purchase Agreement dated as of December
22, 1997 by and between the Company and the Purchaser.
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<PAGE> 3
"Registrable Securities" means (i) Notes, (ii) Private Exchange
Securities and (iii) Exchange Securities received in the Exchange Offer that may
not be sold without restriction under federal or state securities law.
"Registration Default Date" has the meaning given to such term in
Section 4(a).
"Registration Statement" means any registration statement of the
Company that covers any of the Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
"Rule 415" means Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes, the Private Exchange Securities and the
Exchange Securities, collectively.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shelf Notice" has the meaning given to such term in Section 2(i).
"Shelf Registration" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
"Special Counsel" means counsel chosen by the holders of a majority in
aggregate principal amount of Securities.
"Subsequent Shelf Registration" has the meaning given to such term in
Section 3(b).
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trustee" means the trustee under the Indenture and, if any, the
trustee under any indenture governing the Exchange Securities or the Private
Exchange Securities.
"Underwritten Registration" or "Underwritten Offering" means a
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
"Weekly Liquidated Damages Amount" has the meaning given to such term
in Section 4(a).
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<PAGE> 4
2. Exchange Offer.
(a) The Company shall (i) prepare and file with the SEC
promptly after the date hereof, but in no event later than the Filing
Date, a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with
respect to a proposed offer (the "Exchange Offer") to the Holders to
issue and deliver to such Holders, in exchange for the Notes, a like
aggregate principal amount of Exchange Securities, (ii) use its best
efforts to cause the Exchange Offer Registration Statement to become
effective as promptly as practicable after the filing thereof, but in
no event later than the Effectiveness Date, (iii) keep the Exchange
Offer Registration Statement effective until the consummation of the
Exchange Offer pursuant to its terms, and (iv) unless the Exchange
Offer would not be permitted by a policy of the SEC, commence the
Exchange Offer and use its best efforts to issue, on or prior to 30
Business Days after the date on which the Exchange Offer Registration
Statement is declared effective, Exchange Securities in exchange for
all Notes tendered prior thereto in the Exchange Offer. The Exchange
Offer shall not be subject to any conditions, other than (i) that the
Exchange Offer does not violate applicable law or any applicable
interpretation of the staff of the SEC and (ii) as otherwise expressed
herein.
(b) The Exchange Securities shall be issued under, and
entitled to the benefits of, the Indenture or a trust indenture that is
identical to the Indenture (other than such changes as are necessary to
comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA).
(c) In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal that is an
exhibit to the Exchange Offer Registration Statement and
related documents;
(ii) keep the Exchange Offer open for not less than
30 days after the date notice thereof is mailed to the Holders
(or longer if required by applicable law);
(iii) utilize the services of a depository for the
Exchange Offer with an address in the Borough of Manhattan,
The City of New York;
(iv) permit Holders to withdraw tendered Notes at any
time prior to the close of business, New York time, on the
last Business Day on which the Exchange Offer shall remain
open; and
(v) otherwise comply with all laws applicable to the
Exchange Offer.
(d) As soon as practicable after the close of the Exchange
Offer, the Company shall:
(i) accept for exchange all Notes validly tendered
and not validly withdrawn pursuant to the Exchange Offer;
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<PAGE> 5
(ii) deliver to the Trustee for cancellation all
Notes so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and
deliver to each Holder of Notes, Exchange Securities equal in
aggregate principal amount to the Notes of such Holder so
accepted for exchange.
(e) Interest on each Exchange Security and Private Exchange
Security will accrue (or principal will accrete, as applicable) from
the last interest payment date on which interest was paid on the Notes
surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the date of original issue of the Notes. Each Exchange
Security and Private Exchange Security shall bear interest at the rate
set forth thereon; provided, that interest with respect to the period
prior to the issuance thereof shall accrue at the rate or rates borne
by the Notes from time to time during such period.
(f) The Company shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution," containing a summary statement of the positions taken
or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribution" section
shall also allow the use of the Prospectus by all Persons subject to
the prospectus delivery requirements of the Securities Act, including
(without limitation) all Participating BrokersDealers, and include a
statement describing the means by which Participating Broker-Dealers
may resell the Exchange Securities. The Company shall use its best
efforts to keep the Exchange Offer Registration Statement effective and
to amend and supplement the Prospectus to be lawfully delivered by all
Persons subject to the prospectus delivery requirement of the
Securities Act for such period of time as such Persons must comply with
such requirements in order to resell the Exchange Securities; provided
that such period shall not exceed 180 days after consummation of the
Exchange Offer (as such period may be extended pursuant to the last
paragraph of Section 6 (the "Applicable Period").
(g) If, prior to consummation of the Exchange Offer, the
Purchaser holds any Securities acquired by it and having the status as
an unsold allotment in the initial distribution, the Company shall,
upon the request of the Purchaser, simultaneously with the delivery of
the Exchange Securities in the Exchange Offer, issue (pursuant to the
same indenture as the Exchange Securities) and deliver to the
Purchaser, in exchange for the Securities held by the Purchaser (the
"Private Exchange"), a like principal amount of debt securities of the
Company that are identical to the Exchange Securities (the "Private
Exchange Securities"). The Private Exchange Securities shall bear the
same CUSIP number as the Exchange Securities.
(h) The Company may require each Holder participating in the
Exchange Offer to represent to the Company that at the time of the
consummation of the Exchange Offer (i) any Exchange Securities received
by such Holder in the Exchange Offer will be acquired in the ordinary
course of its business, (ii) such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the
Exchange Securities within the meaning of the Securities Act or resale
of the Exchange Securities in violation of the Securities Act, (iii) if
such Holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in,
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<PAGE> 6
the distribution of the Exchange Securities, (iv) if such Holder is a
broker-dealer that will receive Exchange Securities for its own account
in exchange for Notes that were acquired as a result of market-making
or other trading activities, that it will deliver a prospectus, as
required by law, in connection with any resale of such Exchange
Securities and (v) if such Holder is an affiliate of the Company, that
it will comply with the registration and prospectus delivery
requirements of the Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer,
either the Company or the Holders of a majority in aggregate principal
amount of Registrable Securities determines in its or their reasonable
judgment that (A) the Exchange Securities would not, upon receipt, be
tradeable by the Holders thereof without restriction under the
Securities Act and the Exchange Act and without material restrictions
under applicable Blue Sky or state securities laws, or (B) the
interests of the Holders under this Agreement, taken as a whole, would
be materially adversely affected by the consummation of the Exchange
Offer, (ii) applicable interpretations of the staff of the SEC would
not permit the consummation of the Exchange Offer prior to 90 days
after the Effectiveness Date, (iii) subsequent to the consummation of
the Private Exchange but within one year of the Closing Date, the
Purchaser so requests, (iv) the Exchange Offer is not consummated
within 270 days of the Closing Date for any reason or (v) in the case
of any Holder not permitted to participate in the Exchange Offer or of
any Holder participating in the Exchange Offer that receives Exchange
Securities that may not be sold without material restriction under
state and federal securities laws (other than due solely to the status
of such Holder as an affiliate of the Company within the meaning of the
Securities Act) and, in either case contemplated by this clause (v),
such Holder notifies the Company within six months of consummation of
the Exchange Offer, then the Company shall promptly deliver to the
Holders (or in the case of any occurrence of the event described in
clause (v) of this Section 2(i), to any such Holder) and the Trustee
notice thereof (the "Shelf Notice") and shall as promptly as possible
thereafter file an Initial Shelf Registration pursuant to Section 3.
3. Shelf Registration. If a Shelf Notice is required to be delivered
pursuant to Section 2(a)(i), (ii), (iii) or (iv), then this Section 3 shall
apply to all Registrable Securities. Otherwise, upon consummation of the
Exchange Offer in accordance with Section 2, the provisions of this Section 3
shall apply solely with respect to (i) Notes held by any Holder thereof not
permitted to participate in the Exchange Offer and (ii) Exchange Securities that
are not freely tradeable as contemplated by Section 2(i)(v).
(a) Initial Shelf Registration. The Company shall use its best
efforts to prepare and file with the SEC a Registration Statement for
an offering to be made on a continuous basis pursuant to Rule 415
covering all of the Registrable Securities (the "Initial Shelf
Registration"). If the Company has not yet filed an Exchange Offer
Registration Statement, the Company shall use its best efforts to file
with the SEC the Initial Shelf Registration on or prior to the Filing
Date. Otherwise, the Company shall use its best efforts to file the
Initial Shelf Registration within 20 days of the delivery of the Shelf
Notice or as promptly as possible following the request of the
Purchaser. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable
Securities for resale by such holders in the manner or manners
designated by them (including, without limitation, one or more
underwritten offerings). The Company shall (i) not permit any
securities other than the Registrable Securities to be included in any
Shelf Registration, and (ii) use its best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act as
promptly as practicable after the filing thereof and to keep the
Initial Shelf Registration continuously
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<PAGE> 7
effective under the Securities Act until the date that is 24 months
from the Effectiveness Date (subject to extension pursuant to the last
paragraph of Section 6) (the "Effectiveness Period"), or such shorter
period ending when (i) all Registrable Securities covered by the
Initial Shelf Registration have been sold or (ii) a Subsequent Shelf
Registration covering all of the Registrable Securities has been
declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If any Shelf Registration
ceases to be effective for any reason at any time during the
Effectiveness Period (other than because of the sale of all of the
Registrable Securities registered thereunder), 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 30
days of such cessation of effectiveness amend the 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 the
Registrable Securities (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
Subsequent Shelf Registration continuously effective for a period equal
to the number of days in the Effectiveness Period less the aggregate
number of days during which the Initial Shelf Registration, and any
Subsequent Shelf Registration, was previously effective.
4. Liquidated Damages.
(a) The Company acknowledges and agrees that the holders
of Registrable Securities will suffer damages, and that it would not be
feasible to ascertain the extent of such damages with precision, if the
Company fails to fulfill its obligations hereunder. Accordingly, in the
event of such failure, the Company agrees to pay liquidated damages to
each Holder under the circumstances and to the extent set forth below:
(i) if neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration has been filed
with the SEC on or prior to the Filing Date; or
(ii) if neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration is declared
effective by the SEC on or prior to the Effectiveness Date; or
(iii) if the Company has not accepted for exchange
all Notes validly tendered in accordance with the terms of the
Exchange Offer within 30 Business Days after the date on which
an Exchange Offer Registration Statement is declared effective
by the SEC; or
(iv) if a Shelf Registration is filed and declared
effective by the SEC but thereafter ceases to be effective
without being succeeded within 30 days by a Subsequent Shelf
Registration filed and declared effective;
(each of the foregoing a "Registration Default," and the date on which
the Registration Default occurs being referred to herein as a
"Registration Default Date").
Upon the occurrence of any Registration Default, the
Company shall be obligated to pay, or cause to be paid, in addition to
amounts otherwise due under the Indenture
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<PAGE> 8
and the Registrable Securities, as liquidated damages, and not as a
penalty, to each holder of a Registrable Security, an additional amount
(the "Weekly Liquidated Damages Amount") equal to (A) for each weekly
period beginning on the Registration Default Date for the first 120-day
period immediately following such Registration Default Date, $0.05 per
week per $1,000 principal amount of Registrable Securities held by such
holder, and (B) for each weekly period beginning with the first full
week after the 120-day period set forth in the foregoing clause (A),
$0.15 per week per $1,000 principal amount of Registrable Securities
held by such holder; provided that such liquidated damages will, in
each case, cease to accrue (subject to the occurrence of another
Registration Default) on the date on which all Registration Defaults
have been cured. A Registration Default under clause (i) above shall be
cured on the date that either the Exchange Offer Registration Statement
or the Initial Shelf Registration is filed with the SEC; a Registration
Default under clause (ii) above shall be cured on the date that either
the Exchange Offer Registration Statement or the Initial Shelf
Registration is declared effective by the SEC; a Registration Default
under clause (iii) above shall be cured on the earlier of the date (A)
the Exchange Offer is consummated with respect to all Notes validly
tendered or (B) the Company delivers a Shelf Notice to the Holders; and
a Registration Default under clause (iv) above shall be cured on the
earlier of (A) the date on which the applicable Shelf Registration is
no longer subject to an order suspending the effectiveness thereof or
proceedings relating thereto or (B) a Subsequent Shelf Registration is
declared effective.
(b) The Company shall notify the Trustee within five Business
Days after each Registration Default Date. The Company shall pay the
liquidated damages due on the Registrable Securities by depositing with
the Trustee, in trust, for the benefit of the Holders thereof, by 12:00
noon, New York City time, on or before the semi-annual interest payment
date for any of the Registrable Securities, immediately available funds
in sums sufficient to pay the liquidated damages then due. The
liquidated damages amount due shall be payable on each interest payment
date to the Holder entitled to receive the interest payment to be made
on such date as set forth in the Indenture.
5. Hold-Back Agreements. The Company agrees (i) without the prior
written consent of the Holders of a majority of the aggregate principal amount
of the then outstanding Securities, not to effect any public or private sale or
distribution (including a sale pursuant to Regulation D under the Securities
Act) of any securities the same as or substantially similar to those covered by
a Registration Statement filed pursuant to Section 2 or 3, or any securities
convertible into or exchangeable or exercisable for such securities, during the
10 days prior to, and during the 90-day period beginning on, (A) the effective
date of any Registration Statement filed pursuant to Sections 2 and 3, unless
the Holders of a majority in aggregate principal amount of Registrable
Securities to be included in such Registration Statement consent or (B) the
commencement of an underwritten public distribution of Registrable Securities,
where the managing underwriter so requests; and (ii) to cause each holder of
such securities that are the same as or substantially similar to Registrable
Securities issued at any time after the date of this Agreement (other than
securities purchased in a registered public offering) to agree, unless prevented
by applicable statute or regulation, not to effect any public sale or
distribution of any such securities during such periods, including a sale
pursuant to Rule 144 or Rule 144A.
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<PAGE> 9
6. Registration Procedures. In connection with the registration of any
Securities pursuant to Sections 2 or 3, the Company shall effect such
registrations to permit the sale of such Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company shall:
(a) Prepare and file with the SEC, as soon as practicable
after the date hereof but in any event on or 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 as
provided herein; provided, that, if (i) such filing is pursuant to
Section 3 or (ii) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Securities during the Applicable Period,
before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall, if requested,
furnish to and afford the Holders of the Registrable Securities covered
by such Registration Statement, their Special Counsel, each
Participating Broker-Dealer, the managing underwriters, if any, and
their counsel, a reasonable opportunity to review and make available
for inspection by such Persons copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed, such financial and other
information and books and records of the Company, and cause the
officers, directors and employees of the Company, Company counsel and
independent certified public accountants of the Company, to respond to
such inquiries, as shall be necessary, in the opinion of respective
counsel to such holders, Participating Broker-Dealer and underwriters,
to conduct a reasonable investigation within the meaning of the
Securities Act. The Company may require each Holder to agree to keep
confidential any non-public information relating to the Company
received by such Holder and not disclose such information (other than
to an Affiliate or prospective purchaser who agrees to respect the
confidentiality provisions of this Section 6(a)) until such information
has been made generally available to the public unless the release of
such information is required by law or necessary to respond to
inquiries of regulatory authorities (including the National Association
of Insurance Commissioners, or similar organizations or their
successors). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which
the Holders must be afforded an opportunity to review prior to the
filing of such document, if the Holders of a majority in aggregate
principal amount of the Registrable Securities covered by such
Registration Statement, their Special Counsel, any Participating
Broker-Dealer or the managing underwriters, if any, or their counsel
shall reasonably object.
(b) Provide an indenture trustee for the Registrable
Securities or the Exchange Securities, as the case may be, and cause
the Indenture (or other indenture relating to the Registrable
Securities) to be qualified under the TIA not later than the effective
date of the first Registration Statement; and in connection therewith,
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 such 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.
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<PAGE> 10
(c) Prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the time periods required hereby; cause the related Prospectus to
be supplemented by any Prospectus supplement required by applicable
law, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) under the Securities Act; and comply
in all material respects with the provisions of the Securities Act and
the Exchange Act applicable thereto 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 distribution set forth in such Registration
Statement or Prospectus as so amended.
(d) Furnish to such selling Holders and Participating
Broker-Dealers who so request (i) upon the Company's receipt, a copy of
the order of the SEC declaring such Registration Statement and any
post-effective amendment thereto effective and (ii) such reasonable
number of copies of such Registration Statement and of each amendment
and supplement thereto (in each case including any documents
incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such
Registration Statement (including each preliminary Prospectus), and
such reasonable number of copies of the final Prospectus as filed by
the Company pursuant to Rule 424(b) under the Securities Act, in
conformity with the requirements of the Securities Act, and (iv) such
other documents (including any amendments required to be filed pursuant
to clause (c) of this Section), as any such Person may reasonably
request. The Company hereby consent to the use of the Prospectus by
each of the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters
or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Securities covered by, or the sale
by Participating Broker-Dealers of the Exchange Securities pursuant to,
such Prospectus and any amendment thereto.
(e) If (A) a Shelf Registration is filed pursuant to Section 3
or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, notify the selling
Holders of Registrable Securities, their Special Counsel, each
Participating Broker-Dealer and the managing underwriters, if any,
promptly (but in any event within two Business Days), and confirm such
notice in writing, (i) when a Prospectus has been filed, and, with
respect to a Registration Statement or any post-effective amendment,
when the same has become effective under the Securities Act, (ii) 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 Prospectus or the initiation of any proceedings for that
purpose, (iii) if, at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Securities, the representations and warranties of the
Company contained in any agreement (including any underwriting
agreement) contemplated by Section 6(n) below cease to be true and
correct in any material respect, (iv) 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 Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or
the contemplation, initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event that makes any statement
made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any
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<PAGE> 11
material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate.
(f) Use its reasonable efforts to register or qualify, and, if
applicable, to cooperate with the selling Holders of Registrable
Securities, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from
such registration or qualification) of, Securities to be included in a
Registration Statement for offer and sale under the securities or Blue
Sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer or the managing underwriters
reasonably request in writing; and, if Securities are offered other
than through an Underwritten Offering, the Company shall cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 6(f) at
the expense of the Company; 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 Securities covered by the
applicable Registration Statement, provided, however, that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) to take action
that would subject it to general service of process in any jurisdiction
where it is not so subject or (iii) subject it to taxation in excess of
a nominal dollar amount in any such jurisdiction where it is not then
subject.
(g) 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
Securities for sale in any jurisdiction, and, if any such order is
issued, to use its best efforts to obtain the withdrawal of any such
order at the earliest possible time.
(h) If (A) a Shelf Registration is filed pursuant to Section 3
or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, and if requested by
the managing underwriters, if any, or the Holders of a majority in
aggregate principal amount of the Registrable Securities, (i) promptly
incorporate in a Prospectus or post-effective amendment such
information as the managing underwriters, if any, or such Holders
reasonably request to be included therein required to comply with any
applicable law and (ii) make all required filings of such Prospectus or
such post-effective amendment as soon as practicable after the Company
has received notification of such matters required by Applicable Law to
be incorporated in such Prospectus or post-effective amendment.
(i) If (A) a Shelf Registration is filed pursuant to Section 3
or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, cooperate with the
selling Holders and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates
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representing Registrable Securities 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 ("DTC"); and enable such
Registrable Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or Holders may
reasonably request.
(j) If (i) a Shelf Registration is filed pursuant to Section 3
or (ii) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, upon the occurrence
of any event contemplated by paragraph 6(e)(v) or 6(e)(vi) above, as
promptly as practicable prepare a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder or to the purchasers of the Exchange Securities
to whom such Prospectus will be delivered by a Participating
Broker-Dealer, such Prospectus will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) In good faith endeavor to cause the Securities covered by
a Registration Statement to be rated with the appropriate rating
agencies, if appropriate, if so requested by the Holders of a majority
in aggregate principal amount of Securities covered by such
Registration Statement or the managing underwriters, if any.
(l) Prior to the effective date of the first Registration
Statement relating to the Securities, (i) provide the applicable
trustee with printed certificates for the Securities in a form eligible
for deposit with DTC and (ii) provide a CUSIP number for each of the
Securities.
(m) Use its best efforts to cause all Securities covered by
such Registration Statement to be listed on each securities exchange,
if any, on which similar debt securities issued by the Company are then
listed.
(n) If a Shelf Registration is filed pursuant to Section 3,
enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in Underwritten Offerings)
and take all such other actions in connection therewith (including
those reasonably requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Securities being sold) in order to expedite or facilitate the
registration or the disposition of such Registrable Securities, and in
such connection, regardless of whether an underwriting agreement is
entered into and regardless of whether the registration is an
Underwritten Registration, (i) make such representations and warranties
to the Holders and the underwriters, if any, with respect to the
business of the Company and its subsidiaries, and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in
Underwritten Offerings, and confirm the same if and when reasonably
requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and 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
Registrable Securities being sold), addressed to each selling Holder
and each of the underwriters, if any, covering the matters
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<PAGE> 13
customarily covered in opinions requested in Underwritten Offerings;
(iii) obtain "cold comfort" letters and updates thereof (which letters
and updates (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters) from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the
Company or of 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 of the underwriters and
each selling Holder, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with Underwritten Offerings and such other matters as
reasonably requested by underwriters; and (iv) deliver such documents
and certificates as may be reasonably requested by the Holders of a
majority in principal amount of the Registrable Securities being sold
and the managing underwriters, if any, to evidence the continued
validity of the representations and warranties of the Company and its
subsidiaries made pursuant to clause (i) above and to evidence
compliance with any conditions contained in the underwriting agreement
or other similar agreement entered into by the Company.
(o) 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 and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) 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 on the first day of the fiscal quarter
following each fiscal quarter in which Registrable Securities 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.
(p) Upon consummation of an Exchange Offer or Private
Exchange, obtain an opinion of counsel to the Company (in form, scope
and substance reasonably satisfactory to the Purchaser), addressed to
all Holders participating in the Exchange Offer or Private Exchange, as
the case may be, to the effect that (i) the Company has duly
authorized, executed and delivered the Exchange Securities or the
Private Exchange Securities, as the case may be, and the Indenture,
(ii) the Exchange Securities or the Private Exchange Securities, as the
case may be, and the Indenture constitute legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforcement may
be subject to (x) applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and (y) general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law), and
(iii) all obligations of the Company under the Exchange Securities or
the Private Exchange Securities, as the case may be, and the Indenture
are secured by Liens on the assets securing the obligations of the
Company under the Notes.
(q) If an Exchange Offer or Private Exchange is to be
consummated, upon delivery of the Registrable Securities by such
Holders to the Company (or to such other Person as directed by the
Company) in exchange for the Exchange Securities or the Private
Exchange Securities, as the case may be, the Company shall mark, or
caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in
no event shall such Registrable Securities be marked as paid or
otherwise satisfied.
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<PAGE> 14
(r) Cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be
made with the NASD.
(s) Use its best efforts to take all other steps reasonably
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Securities
or Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities as the Company may, from time to time, reasonably request in writing.
The Company may exclude from such registration the Registrable Securities of any
seller or Exchange Securities of any Participating Broker-Dealer who
unreasonably fails to furnish such information.
Each Holder and each Participating Broker-Dealer agrees by
acquisition of such Registrable Securities or Exchange Securities of any
Participating Broker-Dealer that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 6(e)(ii),
6(e)(iv), 6(e)(v) or 6(e)(vi), such Holder will forthwith discontinue
disposition (in the jurisdictions specified in a notice of a 6(e)(iv) event, and
elsewhere in a notice of a 6(e)(ii), 6(e)(v) or 6(e)(vi) event) of such
Securities 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(j), or until it is advised in writing (the "Advice")
by the Company that offers or sales in a particular jurisdiction may be resumed
or that the use of the applicable Prospectus may be resumed, as the case may be,
and has received copies of any amendments or supplements thereto. If the Company
shall give such notice, each of the Effectiveness Period and the Applicable
Period shall be extended by the number of days during such periods from and
including the date of the giving of such notice to and including the date when
each seller of such Securities covered by such Registration Statement shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 6(j) or (y) the Advice.
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, regardless of whether the 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 with respect to filings required
to be made with the NASD and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of
counsel in connection with Blue Sky qualifications of the
Registrable Securities or Exchange Securities and
determination of the eligibility of the Registrable Securities
or Exchange Securities for investment under the laws of such
jurisdictions (x) where the Holders are located, in the case
of the Exchange Securities, or (y) as provided in Section
6(f), in the case of Registrable Securities or Exchange
Securities to be sold by a Participating Broker-Dealer during
the Applicable Period);
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<PAGE> 15
(ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable
Securities or Exchange Securities in a form eligible for
deposit with DTC and of printing Prospectuses if the printing
of Prospectuses is requested by the managing underwriters, if
any, or, in respect of Registrable Securities or Exchange
Securities to be sold by a Participating Broker-Dealer during
the Applicable Period, by the Holders of a majority in
aggregate principal amount of the Registrable Securities
included in any Registration Statement or of such Exchange
Securities, as the case may be);
(iii) messenger, telephone, duplication, word
processing and delivery expenses incurred by the Company in
the performance of its obligations hereunder;
(iv) fees and disbursements of counsel for the
Company;
(v) fees and disbursements of all independent
certified public accountants referred to in Section 6(n)(iii)
(including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to
such performance);
(vi) fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in
an offering pursuant to Section 3 of Schedule E to the By-laws
of the NASD, but only where the need for such a "qualified
independent underwriter" arises due to a relationship with the
Company;
(vii) Securities Act liability insurance, if the
Company so desires such insurance;
(viii) fees and expenses of all other Persons
retained by the Company; internal expenses of the Company
(including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or
accounting duties); and the expense of any annual audit; and
(ix) rating agency fees and the fees and expenses
incurred in connection with the listing of the Securities to
be registered on any securities exchange.
(b) The Company shall reimburse the Holders for the reasonable
fees and disbursements of not more than one counsel (in addition to
appropriate local counsel) chosen by the Holders of a majority in
aggregate principal amount of the Registrable Securities to be
included in any Registration Statement and other reasonable and
necessary out-of-pocket expenses of the Holders incurred in connection
with the registration of the Registrable Securities.
8. Indemnification.
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless each Holder and each
Participating Broker-Dealer selling Exchange Securities during the
Applicable Period, each Person who controls each such Holder (within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act) and the officers, directors, partners, employees,
representatives and agents of each such Holder, Participating
Broker-Dealer and controlling person, to the fullest extent lawful,
from
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<PAGE> 16
and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of preparation and
reasonable attorneys' fees) and expenses (including, without
limitation, reasonable costs and expenses incurred in connection with
investigating, preparing, pursuing or defending against any of the
foregoing) (collectively, "Losses"), as incurred, directly or
indirectly caused by, related to, based upon, arising out of or in
connection with any untrue or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or form of
prospectus, or in any amendment or supplement thereto, or in any
preliminary prospectus, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, except insofar as such Losses are
based upon information relating to such Holder or Participating
Broker-Dealer and furnished in writing to the Company by such Holder or
Participating Broker-Dealer expressly for use therein; provided,
however, that the Company shall not be liable to any Indemnified Party
to the extent that any such losses arise solely out of an untrue
statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus if (i) such Indemnified Party or
related holder of a Registrable Security failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written
confirmation of the sale by such Indemnified Party or the related
holder of a Registrable Security to the person asserting the claim from
which such Losses arise, (ii) the Prospectus would have corrected such
untrue statement or alleged untrue statement or omission or alleged
omission, and (iii) the Company has complied with its obligations under
Section 6(e). The Company shall also, jointly and severally, indemnify
underwriters, 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 Persons (within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders or the Participating
Broker-Dealer.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement, Prospectus or form of
prospectus, any amendment or supplement thereto, or any preliminary
prospectus in which a Holder is participating, such Holder shall
furnish to the Company in writing such information as the Company
reasonably requests for use in connection with any Registration
Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without
limitation as to time, indemnify and hold harmless the Company, its
officers, directors, partners, employees, representatives and agents,
each Person, if any, who controls the Company (within the meaning of
Section 15 of the Securities Act and Section 20(a) of the Exchange
Act), and the officers, directors, partners, employees, representatives
and agents of such controlling persons, to the fullest extent lawful,
from and against all Losses arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading to the extent, but only to the extent, that such untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact is contained in any information so
furnished in writing by such holder to the Company expressly for use
therein. In no event shall the liability of any selling Holder be
greater in amount than the dollar amount of the proceeds (net of
payment of
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<PAGE> 17
all expenses) received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the party or parties from which such indemnity is
sought (the "Indemnifying Parties") in writing; provided, that the
failure to so notify the Indemnifying Parties shall not relieve the
Indemnifying Parties from any obligation or liability except to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal) that the
Indemnifying Parties have been prejudiced materially by such failure.
The Indemnifying Party shall have the right,
exercisable by giving written notice to an Indemnified Party, within 20
Business Days after receipt of written notice from such Indemnified
Party of such Proceeding, to assume, at its expense, the defense of any
such Proceeding, provided, that an Indemnified Party 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 has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding or shall have failed to employ
counsel reasonably satisfactory to such Indemnified Party; or (3) the
named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party or any
of its affiliates or controlling persons, and such Indemnified Party
shall have been advised by counsel that there may be one or more
defenses available to such Indemnified Party that are in addition to,
or in conflict with, those defenses available to the Indemnifying Party
or such affiliate or controlling person (in which case, if such
Indemnified Party notifies the Indemnifying Parties in writing that it
elects to employ separate counsel at the expense of the Indemnifying
Parties, the Indemnifying Parties shall not have the right to assume
the defense thereof and the reasonable fees and expenses of such
counsel shall be at the expense of the Indemnifying Party; it being
understood, however, that, the Indemnifying Party 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 expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for such Indemnified Parties).
No Indemnifying Party shall be liable for any
settlement of any such Proceeding effected without its written consent,
but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such Proceeding, each Indemnifying
Party jointly and severally agrees, subject to the exceptions and
limitations set forth above, to indemnify and hold harmless each
Indemnified Party from and against any and all Losses by reason of such
settlement or judgment. The Indemnifying Party shall not consent to the
entry of any judgment against an indemnified party or enter into any
settlement that imposes any obligation on any indemnified party that
does not include as a term thereof the giving by the claimant or
plaintiff to each Indemnified Party of a release, in form and substance
reasonably satisfactory to the Indemnified Party, from all liability in
respect of such Proceeding for which such Indemnified Party would be
entitled to indemnification hereunder (regardless of whether any
Indemnified Party is a party thereto).
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<PAGE> 18
(d) Contribution. If the indemnification provided for in this
Section 8 is unavailable to an Indemnified Party or is insufficient to
hold such Indemnified Party harmless for any Losses in respect of which
this Section 8 would otherwise apply by its terms (other than by reason
of exceptions provided in this Section 8), 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
the Indemnifying Party, on the one hand, and such Indemnified Party, on
the other hand, in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party, on the
one hand, and 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 relates to information supplied by such
Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent any such statement or omission. The amount paid or payable by
an Indemnified Party as a result of any Losses shall be deemed to
include any legal or other fees or expenses incurred by such party in
connection with any Proceeding, to the extent such party would have
been indemnified for such fees or expenses 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), an Indemnifying Party that is a selling Holder shall not
be required to contribute, in the aggregate, any amount in excess of
such Holder's Maximum Contribution Amount. A selling Holder's "Maximum
Contribution Amount" shall equal the excess of (i) the aggregate
proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that
such Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
9. Rule 144 and Rule 144A. The Company covenants that it shall (a) file
the reports required to be filed by it (if so required) under the Securities Act
and the Exchange Act in a timely manner and, if at any time any such Person is
not required to file such reports, it will, upon the request of any Holder, make
publicly available other information necessary to permit sales pursuant to Rule
144 and Rule 144A and (b) take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act
pursuant to the exemptions provided by Rule 144 and Rule 144A. Upon the request
of any Holder, the Company shall deliver to such Holder a written statement as
to whether they have complied with such information and requirements.
10. Underwritten Registrations. If any of the Registrable Securities
covered by any Shelf Registration are to be sold in an Underwritten Offering,
the investment banker or investment bankers
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<PAGE> 19
and manager or managers that will manage the offering will be selected by the
Holders of a majority in aggregate principal amount of such Registrable
Securities included in such offering. No Holder may participate in any
Underwritten Registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable 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, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
11. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of any
of its obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights provided herein, in the Indenture
or, in the case of the Purchaser, in the Purchase Agreement, or granted
by law, including recovery of damages, will 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 it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action
for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not entered
into, as of the date hereof, and shall not enter into, after the date
of this Agreement, any agreement with respect to any of its securities
that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified
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 Registrable Securities;
provided, that Sections 6(a) and 8 shall not be amended, modified or
supplemented, and waivers or consents to departures from this proviso
may not be given, unless the Company has obtained the written consent
of each Holder affected thereby. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to
a matter that relates exclusively to the rights of Holders whose
securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect the rights of other Holders may
be given by Holders of at least a majority in aggregate principal
amount of the Registrable Securities being sold by such Holders
pursuant to such Registration Statement, provided that the provisions
of this sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(d) 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 by
hand-delivery, certified first-class mail, return receipt requested,
next-day air courier or facsimile:
(i) if to a Holder, at the most current address given
by such Holder to the Company in accordance with the
provisions of this Section 11(d), which address initially is,
with respect to each Holder, the address of such holder
maintained by the
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Registrar under the Indenture, with a copy to Skadden, Arps,
Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los
Angeles, California 90071, telecopy number (213) 687-5600,
Attention: Rodrigo A. Guerra, Jr.; and
(ii) if to the Company, at 1300 North Sam Houston
Parkway East, Suite 310, Houston, Texas 77032-2949, telecopy
number (281) 986-8865, Attention: President, with a copy to
Gardere & Wynne, L.L.P., 3000 Thanksgiving Tower, Dallas,
Texas 75201, telecopy number (214) 999-4667, Attention: C.
Robert Butterfield;
and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 11(d).
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 to a next-day air
courier; and when receipt is acknowledged by the addressee, if
telecopied. Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the
Trustee under the Indenture at the address specified in such Indenture.
(e) 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, subsequent Holders.
(f) 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.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF 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 AGREEMENT, 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 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
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<PAGE> 21
FORUM. THE COMPANY IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY HOLDER 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.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(j) Entire Agreement. This Agreement 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 hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein, with
respect to the registration rights granted by the Company in respect of
securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
(k) Attorneys' Fees. In any Proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the
courts, shall be entitled to recover reasonable attorneys' fees in
addition to its costs and expenses and any other available remedy.
(l) Securities Held by the Company or its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities
held by the Company or its affiliates (as such term is defined in Rule
405 under the Securities Act) (other than Holders deemed to be such
affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the holders of such required percentage.
[Signature Page Follows]
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REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
TRANSAMERICAN REFINING CORPORATION
By:
-------------------------------
Name:
----------------------------
Title:
----------------------------
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By:
-------------------------
Name:
----------------------
Title:
----------------------
<PAGE> 1
EXHIBIT 4.24
TRANSAMERICAN REFINING CORPORATION
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
December 30, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
TransAmerican Refining Corporation (the "Company"), a Texas
corporation, proposes to issue and sell to Jefferies & Company, Inc. (the
"Purchaser"), upon the terms set forth in a purchase agreement, dated as of
December 22, 1997 (the "Purchase Agreement"), between the Purchaser and the
Company, 175,000 Units (as defined below), consisting of (i) $175,000,000
aggregate principal amount of 16% Senior Subordinated Notes due 2003, Series A
(the "Series A Notes") and (ii) 175,000 warrants (the "Warrants") to purchase
initially 2,335,245 number of shares (the "Warrant Shares") of the Issuer's
common stock, $0.01 par value per share (together with any securities issued in
exchange therefor or in substitution thereof, the "Common Stock"), at an
exercise price of $0.01 per share. The Series A Notes will be issued pursuant
to an indenture (the "Indenture"), to be dated as of December 30, 1997, between
the Issuer and First Union National Bank, as trustee (the "Trustee"). The
Warrants are to be issued pursuant to a warrant agreement (the "Warrant
Agreement"), to be dated as of December 30, 1997, between the Issuer and the
warrant agent named therein (the "Warrant Agent"). The Series A Notes and the
Warrants will be sold in Units, each Unit consisting of (i) one Series A Note
in the principal amount of $1000 and (ii) one Warrant to purchase initially
13.344257 Warrant Shares at an exercise price of $0.01 per share (the "Units").
Unless the context requires otherwise, references herein to "Securities" shall
be deemed to include the Units, the Series A Notes (as defined below),
Warrants, and Warrant Shares upon initial issuance to the Purchaser as well as
following separation.
As an inducement to the Purchaser to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the
Purchaser thereunder, the Company agrees with the Purchaser, (i) for the
benefit of the Purchaser and (ii) for the benefit of the holders from time to
time of the Warrants and the Warrant Shares, as follows:
<PAGE> 2
1. Definitions. Capitalized terms used but not defined herein shall
have the respective meaning given to such terms in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"Affiliate" of any specified person, means 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.
"Business Day" means any day other than (i) Saturday or Sunday or
(ii) a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to be closed.
"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 or limited partnership interest or other equity interest of such
Person, if such Person is a partnership.
"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 November 15, 2004.
"DTC" means The Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holders" means the Persons with a beneficial interest in the
Warrant Shares, the Old TARC Warrant Shares or other Registrable Securities.
"Initiating Holders" means one or more Holders of the Requisite
Securities.
"Officer's Certificate" means a certificate signed by any one of
the Chairman, any Vice Chairman, any Chief Executive Officer, any Senior Vice
President or the Chief Financial Officer.
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<PAGE> 3
"Old Warrants" means the common stock purchase warrants of the
Company issued pursuant to the warrant agreement, dated as of February 23,
1995, between the Company and First Union National Bank, as successor warrant
agent, as amended on the date hereof.
"Old Warrant Shares" means the shares of Common Stock of the
Company underlying the Old Warrants.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means 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 under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities.
"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 any Person pursuant to an effective
registration statement filed with the SEC pursuant to the Securities Act.
"Purchaser Warrant Shares" means the shares of Common Stock of
the Company underlying the common stock purchase warrants of the Company issued
to the Purchaser pursuant to the Solicitation Agent Agreement (as defined in
the Purchase Agreement).
"Registrable Securities" means any of (i) the Warrant Shares
(whether or not the related Warrants have been exercised) or Purchaser Warrant
Shares (whether or not the related warrants have been issued) and (ii) any other
securities issued or issuable with respect to any Warrant Shares or Purchaser
Warrant Shares by way of stock dividends or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the offering of such securities by the Holder thereof
shall have been declared effective under the Securities Act and such securities
shall have been disposed of by such Holder pursuant to such Registration
Statement, (ii) such securities are eligible for sale to the public pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A)
promulgated under the Securities Act, (iii) such securities shall have been
otherwise transferred by such Holder thereof and new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company or its transfer agent and subsequent disposition of
such securities shall not require
3
<PAGE> 4
registration or qualification under the Securities Act or any similar state law
then in force or (iv) such securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), preparing,
printing, filing, duplicating and distributing the Registration Statement and
the related prospectus, the cost of printing stock certificates, the cost and
charges of any transfer agent, rating agency fees, printing expenses,
messenger, telephone and delivery expenses, reasonable fees and disbursements
of counsel for the Company and all independent certified public accountants,
the fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (but not including any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of Registrable
Securities by Selling Holders), reasonable fees and expenses of one counsel for
the Holders and other reasonable out-of-pocket expenses of Holders.
"Registration Statement" shall mean any appropriate registration
statement of the Company filed with the SEC pursuant to the Securities Act
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement and all amendments and supplements to any such Registration
Statement, including post-effective amendments in each case including the
prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Requisite Securities" shall mean a number of Registrable
Securities equal to not less than 25% of the Registrable Securities held in the
aggregate by all Holders.
"Rule 144" means Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 144A" means Rule 144A promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement
thereto having substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 174" means Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
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<PAGE> 5
"Rule 415" means Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended form time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Selling Holder" shall mean a Holder who is selling Registrable
Securities in accordance with the provisions of this Agreement.
"Special Counsel" means any special counsel to the Holders, for
which Holders will be reimbursed pursuant to this Agreement.
2. Demand Registration.
(a) From time to time after 180 days following the completion by
the Company of a Public Equity Offering, one or more Initiating Holders may
request in writing that the Company effect the registration under the
Securities Act of all or part of such Initiating Holders' Registrable
Securities and shall specify the intended method of disposition thereof (the
"Demand Request"). The Company will give written notice of the Demand Request
to all registered holders of Registrable Securi- ties within fifteen (15) days
of receipt thereof. Within 120 days of receipt of the Demand Request the
Company will, subject to the terms of this Agreement, file a Registration
Statement and use its best efforts to effect the registration under the
Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such Initiating Holders for disposition
in accordance with the intended method of disposition stated in such
request;
(ii) all other Registrable Securities the holders of
which shall have made a written request to the Company for registration
thereof within 20 days after the giving of such written notice by the
Company (which request shall specify the intended method of disposition
of such Registrable Securities); and
(iii) all shares of securities which the Company may
elect to register in connection with the offering of Registrable
Securities pursuant to this Section 2,
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<PAGE> 6
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional securities so to be registered.
(b) Registrations under this Section (each, a "Demand
Registration") shall be on such appropriate registration form of the SEC (i) as
shall be selected by the Company and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods
of disposition specified in their request for such registration.
(c) The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2. The
Selling Holders shall pay the underwriting discounts, commissions, and transfer
taxes, if any, in connection with each Registration Statement requested under
this Section 2, which costs shall be allocated pro rata among all Selling
Holders on whose behalf Registrable Securities of the Company are included in
such registration, on the basis of the respective amounts of the Registrable
Securities then being registered on their behalf.
(d) The Holders shall be entitled to request two (2)
registrations pursuant to this Section 2. A Registration Statement requested
pursuant to this Section 2 shall not be deemed to have been effected (i) unless
a Registration Statement with respect thereto has been declared effective by
the SEC and (ii) the Company has complied in a timely manner and in all
material respects with all of its obligations under this Agreement; provided,
(i) if, after such Registration Statement has become effective, the offering of
Warrant Shares pursuant to such Registration Statement is or becomes subject to
any stop order, injunction or other order or requirement of the SEC or other
governmental or administrative agency or court that prevents, restrains or
otherwise limits the sale of Warrant Shares under such Registration Statement
for any reason, other than by reason of some act or omission by any Holder
participating in such registration, and does not become effective within a
reasonable period of time thereafter, such period not to exceed 60 days from
the date of such stop order, injunction, or other governmental order or
requirement, (ii) the Registration Statement does not remain effective under
the Securities Act until at least the earlier of (A) an aggregate of 90 days
after the effective date thereof or (B) the consummation of the distribution by
the Selling Holders of all of the Registrable Securities covered thereby or
(iii) if the Selling Holders are not able to sell at least 80% of the
Registrable Securities to be included therein, less any Registrable Securities
withdrawn or excluded from such Demand Registration in accordance with the
provisions hereof, then, in each case, such Registration Statement shall be
deemed not to have been effected. For purposes of calculating the 90-day
period referred to in the preceding sentence, any period of time during which
such Registration Statement was not in effect shall be excluded. The Holders
shall be permitted to withdraw all or any part of the Registrable Securities
from a Demand Registration at any time prior to the effective date of such
Demand Registration.
(e) If a requested registration pursuant to this Section 2
involves an underwritten offering, and the managing underwriter shall advise
the Company in writing (with a copy to each Holder requesting registration)
that, in its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not
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<PAGE> 7
Registrable Securities) is such as to adversely affect the success of such
offering, including the price at which such securities can be sold, then the
Company will include in such registration, to the extent of the number which
the Company is so advised can be sold in such offering, (i) first, Registrable
Securities requested to be included in such registration by the Holders, pro
rata among such holders requesting such registration on the basis of the number
of such securities requested to be included by such Holders and (ii) second,
securities held by other Persons, including the Company.
3. Piggy-Back Registration.
(a) If at any time after the Company has completed a Public
Equity Offering the Company proposes to file a Registration Statement under the
Securities Act with respect to an offering by the Company for its own account
or for the account of any of the holders of any class of its Common Stock in a
firmly underwritten Public Equity Offering (other than (i) a Registration
Statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
SEC) or (ii) a Registration Statement filed in connection with an exchange
offer or offering of securities solely to the Company's existing security
holders), then the Company shall give written notice of such proposed filing to
the Holders as soon as practicable (but in no event fewer than 20 days before
the anticipated filing date), and such notice shall offer such Holders the
opportunity to register such number of Warrant Shares as each such Holder may
request in writing within 30 days after receipt of such written notice from the
Company (which request shall specify the Warrant Shares intended to be disposed
of by such Selling Holder) (a "Piggy-Back Registration"). Upon the written
request of any such Holder made within 30 days after the receipt of any such
notice (which request shall specify the number of Registrable Securities
intended to be disposed of by such Holder and the intended method of
disposition thereof), the Company will, subject to the terms of this Agreement,
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the Holders thereof, to
the extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement that covers the securities which the Company proposes to register,
provided that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of
such securities, the Company may, at its election, give written notice of such
determination to each Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any holder or holders of Registrable
Securities entitled to do so to request that such registration be effected as a
registration under Section 2, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this Section 3 shall relieve the
Company of its obligation
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<PAGE> 8
to effect any registration upon request under Section 2, nor shall any such
registration hereunder be deemed to have been effected pursuant to Section 2.
(b) The Company shall use its best efforts to keep such Piggy-
Back Registration continuously effective under the Securities Act until the
earlier of (A) an aggregate of 90 days after the effective date thereof or (B)
the consummation of the distribution by the Holders of all of the Warrant
Shares covered thereby. The Company shall use its reasonable efforts to cause
the managing underwriter or underwriters of such proposed offering to permit
the Registrable Securities requested to be included in a Piggy-Back
Registration to be included in the same terms and conditions as any similar
securities of the Company or any other security holder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. Any Selling
Holder shall have the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement pursuant to these
provisions by giving written notice to the Company of its request to withdraw.
(c) The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 3 and the Selling Holders shall pay the underwriting discounts,
commissions, and transfer taxes, if any, relating to the sale of such Selling
Holders' Registrable Securities pursuant to this Section 3, such costs being
allocated pro rata among all Selling Holders on whose behalf Registrable
Securities of the Company are included in such registration, on the basis of
the respective amounts of Registrable Securities then being registered on their
behalf.
(d) Priority in Piggy-Back Registrations. If a registration
pursuant to this Section 3 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company,
the Company will, if requested by any Holder and subject to the provisions of
this Section 3, use its reasonable efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such Holder
among the securities to be distributed by such underwriters. Notwithstanding
anything to the contrary, if the managing underwriter of such underwritten
offering shall, in writing, inform the Holders requesting such registration and
the holders of any of the Company's other securities which shall have exercised
registration rights in respect of such underwritten offering of its belief that
the number of securities requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering, then, in
such event, (x) in cases initially involving the registration for sale of
securities for the Company's own account, securities shall be registered in
such offering in the following order of priority: (i) first, the securities
that the Company proposes to register, and (ii) second, the securities that
have been requested to be included in such registration by Holders (pro rata on
the amount of securities sought to be registered by such Holders), and (iii)
third, the securities that have been requested to be included in such
registration by Persons (other than Holders) entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company (pro
rata on the amount of securities sought to be registered by such Persons); and
(y) in cases not initially involving the registration for sale of
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<PAGE> 9
securities for the Company's own account, securities shall be registered in
such offering as follows: (i) first, the securities of any person whose
exercise of a "demand" registration right pursuant to a contractual commitment
of the Company is the basis for the registration (provided that if such person
is a Holder, there shall be no priority as among Holders and Warrant Shares
sought to be included by Holders shall be included pro rata based on the amount
of securities sought to be registered by such persons), (ii) second, the
securities that have been requested to be included in such registration by
Holders (pro rata on the amount of securities sought to be registered by such
Holders), (iii) third, securities of other persons entitled to exercise "piggy-
back" registration rights pursuant to contractual commitments (pro rata based
on the amount of securities sought to be registered by such persons) and (iv)
fourth, the securities which the Company proposes to register.
4. Registration Procedures. In connection with any Demand
Registration or Piggy-back Registration, the Company shall:
(a) No fewer than five Business Days prior to the initial
filing of a Registration Statement or Prospectus and no fewer than two Business
Days prior to the filing of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), if requested, furnish to the Holders, their Special Counsel and the
managing underwriters, if any, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, their
Special Counsel and such underwriters, if any, cause the officers and directors
of the Company, counsel to the Company and independent certified public
accountants to the Company to respond to such inquiries as shall be necessary,
in the opinion of respective counsel to such Holders and such underwriters, to
conduct a reasonable investigation within the meaning of the Securities Act,
and shall use reasonable efforts to reflect in each such document filed
pursuant to a Demand Registration, when so filed with the SEC, such reasonable
comments as the Holders, their Special Counsel and the managing underwriters,
if any, may propose in writing; provided, however, that the Company shall not
be deemed to have kept a Registration Statement effective during the applicable
period if it voluntarily takes or fails to take any action that results in
Selling Holders covered thereby not being able to sell such Registrable
Securities pursuant to Federal securities laws during that period; provided,
further, the Company shall not file any such Registration Statement or related
Prospectus or any amendments or supplements thereto in connection with a Demand
Registration to which the Holders of a majority of the Registrable Securities,
their Special Counsel, or the managing underwriters, if any, shall reasonably
object on a timely basis;
(b) Take such action as may be necessary so that (i) any
Registration Statement and any amendment thereto and any Prospectus forming
part thereof and any amendment or supplement thereto (and each report or other
document incorporated herein by reference in each case) complies in all
material respects with the Securities Act and the Exchange Act and the
respective rules and regulations thereunder, (ii) any Registration Statement
and any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material
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<PAGE> 10
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Registration Statement, and any amendment or
supplement to such Prospectus, does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they were made, not
misleading.
(c) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be necessary
to keep such Registration Statement continuously effective for the applicable
time period; 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; and comply
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(d) Notify the Selling Holders, their Special Counsel and the
managing underwriters, if any, promptly (and in the case of an event specified
by clause (i)(A) of this paragraph in no event fewer than two Business Days
prior to such filing), and (if requested by any such Person), confirm such
notice in writing, (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment is proposed to be filed, and, (B) with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of the
issuance by the SEC, any state securities commission, any other governmental
agency or any court of any stop order, order or injunction suspending or
enjoining the use or the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if at any time any of the
representations and warranties of either the Company contained in any agreement
(including any underwriting agreement) contemplated hereby cease to be true and
correct in all material respects, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (vi) of the happening of any event that makes any statement made in
such Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in such Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (vii) of the Company's reasonable determination that a post-
effective amendment to such Registration Statement would be appropriate;
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(e) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of any order enjoining or suspending the use or
effectiveness of a Registration Statement or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment;
(f) If requested by the managing underwriters, if any, or the
Holders of a majority in aggregate number of the Registrable Securities being
sold in connection with such offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the managing
underwriters, if any, and such Holders reasonably agree should be included
therein, (ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment and (iii) supplement or make amendments to such
Registration Statement; provided, however, that the Company shall not be
required to take any action pursuant to this Section 4(f) that would, in the
opinion of counsel for the Company, violate applicable law;
(g) Furnish to each Selling Holder, their Special Counsel and
each managing underwriter, if any, without charge, at least one conformed copy
of each Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
each Holder (including those previously furnished or incorporated by reference)
as soon as practicable after the filing of such documents with the SEC;
(h) Deliver to each Selling Holder, their Special Counsel, and
the underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons reasonably request; and the Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the Selling Holders and the underwriters, if any, in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto;
(i) Prior to any public offering of Registrable Securities,
use its reasonable efforts to register or qualify or cooperate with the Holders
of Registrable Securities to be sold or tendered for, the underwriters, if any,
and their respective counsel in connection with the registration or quali-
fication (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions within the United States as any Holder or underwriter
reasonably requests in writing, or, in the event of a non-underwritten
offering, as the Holders of a majority of such Registrable Securities being
sold may request; provided, however, that where Registrable Securities 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 4(i); 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
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<PAGE> 12
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by such Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where they are not then so
qualified or to take any action that would subject them to general service of
process in any such jurisdiction where they are not then so subject or subject
the Company to any tax in any such jurisdiction where it is not then so
subject;
(j) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being Registrable
Securities, cooperate with the Holders and the managing underwriters, if any,
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with the DTC
and to enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or Holders may
request at least two Business Days prior to any sale of Registrable Securities;
(k) Use its best efforts to cause the offering of the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities within the
United States, except as may be required as a consequence of the nature of such
Selling Holder's business, in which case the Company will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of such
Registrable Securities; provided, however, that the Company shall not be
required to register the Registrable Securities in any jurisdiction that would
subject them to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any tax in any such jurisdiction
where it is not then so subject or to require the Company to qualify to do
business in any jurisdiction where it is not then so qualified;
(l) Upon the occurrence of any event contemplated by Section
4(d)(vi) or 4(d)(vii), as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered, such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders of the occurrence of any
event contemplated by paragraph 4(d)(vi) or 4(d)(vii) above, the Holders shall
suspend the use of the Prospectus until the requisite changes to the Prospectus
have been made;
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Securities, as applicable, to (i) provide
the registrar for the Registrable Securities with certificates for such
securities in a form eligible for deposit with the DTC and (ii) provide a CUSIP
number for the Registrable Securities;
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<PAGE> 13
(n) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection therewith
(including those reasonably requested by the managing underwriters, if any, or
the Holders of a majority in aggregate number of the Registrable Securities
being sold) in order to expedite or facilitate the disposition of such
Registrable Securities, and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an
underwritten registration, (i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters, if any, with
respect to the business of the Company (including with respect to businesses or
assets acquired or to be acquired by it), and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if
any, and Special Counsel to the Holders of the Registrable Securities being
sold), addressed to each Selling Holder and each of the underwriters, if any,
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Special
Counsel and underwriters (iii) obtain customary "comfort" letters and updates
thereof (including, if such registration includes an underwritten public offer-
ing, a "bring down" comfort letter dated the date of the closing under the
underwriting agreement) from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any business which may hereafter be acquired by the Company for
which financial statements and financial data are required to be included in
the Registration Statement), addressed (where reasonably possible) to each
Selling Holder and each of the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in
"comfort" letters in connection with underwritten offerings and such other
matters as reasonably required by the managing underwriter or underwriters and
as permitted by the Statement of Auditing Standards No. 72; (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the Selling Holders and the
underwriters, if any, than those set forth in Section 8 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
number of Registrable Securities covered by such Registration Statement and the
managing underwriters); and (v) deliver such documents and certificates as may
be reasonably requested by the Holders of a majority in aggregate number of the
Registrable Securities being sold, their Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the representations
and warranties made pursuant to clause 4(n)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company;
(o) Make available for inspection by a representative of the
Selling Holders, any underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney, consultant or accountant
retained by such Selling Holders or underwriter, at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent
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<PAGE> 14
corporate documents and properties of the Company (including with respect to
business and assets acquired or to be acquired to the extent that such
information is available to the Company, and cause the officers, directors,
agents and employees of the Company (including with respect to business and
assets acquired or to be acquired to the extent that such information is avail-
able to the Company) to supply all information in each case reasonably
requested by any such representative, underwriter, attorney, consultant or
accountant in connection with such Registration, provided, however, the Company
may first require that such Persons agree to keep confidential any non-public
information relating to the Company received by such Person and not disclose
such information (other than to an Affiliate or prospective purchaser who
agrees to respect the confidentiality provisions of this Section 4(o)) until
such information has been made generally available to the public unless the
release of such information is required by law or necessary to respond to
inquiries of regulatory authorities (including the National Association of
Insurance Commissioners, or similar organizations or their successors);
(p) Use its best efforts to cause the Warrant Shares issuable
upon exercise of the Warrants to be quoted or listed on any exchange upon which
the Company's Common Stock is then quoted or listed;
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to their security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act), 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 end
of any fiscal quarter in which Registrable Securities are sold to underwriters
in a firm commitment or reasonable efforts underwritten offering and (ii) if
not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter after the effective date of a Registration Statement,
which statement shall cover said period, consistent with the requirements of
Rule 158; and
(r) Use its best efforts to take all other steps necessary to
effect the registration, offering and sale of the Registrable Securities
covered by the Registration Statement.
The Company may require each Selling Holder as to which any
registration is being effected to furnish to the Company such information
regarding the distribution of such Registrable Securities as is required by law
to be disclosed in the applicable Registration Statement and the Company may
exclude from such registration the Registrable Securities of any Selling Holder
who unreasonably fails to furnish such information within a reasonable time
after receiving such request.
If any such Registration Statement refers to any Holder by name
or otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i) the insertion therein of language, in form
and substance reasonably satisfactory to such Holder, to the effect that the
holding by such Holder of such securities is not to be construed as a
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<PAGE> 15
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (ii) in the event that such reference to such Holder by name or otherwise is
not required by the Securities Act or any similar Federal statute then in
force, the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 4(d)(ii), 4(d)(iii), 4(d)(v) or 4(d)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(l) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
90-day period referred to in Section 2(d) 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 Securities
covered by such Registration Statement shall have received (x) the copies of
the supplemented or amended Prospectus contemplated by Section 3(l) hereof or
(y) the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
5. Certain Limitations, Conditions and Qualifications to the
Company's Obligations Under Sections 2 and 3.
The obligations of the Company described in Sections 2 and 3 of
this Agreement are subject to each of the following limitations, conditions and
qualifications:
(a) Subject to the next sentence of this paragraph, the
Company shall be entitled to postpone, for a reasonable period of time, the
filing or effectiveness of, or suspend the rights of any Holder to make sales
pursuant to, any Registration Statement otherwise required to be prepared,
filed and made and kept effective by it under the registration covenants
described in Sections 2 hereof; provided, however, that the duration of such
postponement or suspension may not exceed the earlier to occur of (A) 30 days
after the cessation of the circumstances described in the next sentence of this
paragraph on which such postponement or suspension is based or (B) 120 days
after the date of the determination of the Board of Directors of the Company
referred to in the next sentence, and the duration of such postponement or
suspension shall be excluded from the calculation of the 90-day period
described in Section 2(d) hereof. Such postponement or suspension may only be
effected if the Board of Directors of the Company determines in good faith that
the filing or effectiveness of, or sales pursuant to, such registration
statement would materially impede, delay or interfere with any financing, offer
or sale of securities, acquisition, corporate reorganization
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<PAGE> 16
or other significant transaction involving the Company or any of its affiliates
(whether or not planned, proposed or authorized prior to the exercise of demand
registration rights hereunder or any other registration rights agreement) or
require disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential. If the Company shall so
postpone the filing or effectiveness of, or suspend the rights of any Holders
to make sales pursuant to, a Registration Statement it shall, as promptly as
possible, notify any Selling Holders of such determination, and the Selling
Holders shall (y) have the right, in the case of a postponement of the filing
or effectiveness of a Registration Statement, upon the affirmative vote of the
Selling Holders of not less than a majority of the Registrable Securities to be
included in such Registration Statement, to withdraw the request for
registration by giving written notice to the Company within 10 days after
receipt of such notice, or (z) in the case of a suspension of the right to make
sales, receive an extension of the registration period equal to the number of
days of the suspension. Any Demand Registration as to which the withdrawal
election referred to in the preceding sentence has been effected shall not be
counted for purposes of the two Demand Registrations referred to in Section
2(d) hereof.
(b) The Company shall not be required by this Agreement to
include securities in a Registration Statement relating to a Piggy-back
Registration above if (i) in the written opinion of counsel to the Company,
addressed to the Holders seeking registration and delivered to them, the
Holders of such securities seeking registration would be free to sell all such
securities within the current calendar quarter, without registration, under
Rule 144 under the Securities Act, which opinion may be based in part upon the
representation by the Holders of such securities seeking registration, which
registration shall not be unreasonably withheld, that each such Holder is not
an affiliate of the Company within the meaning of the Securities Act, and (ii)
all requirements under the Securities Act for effecting such sales are
satisfied at such time.
(c) The Company's obligations shall be subject to the
obligations of the Selling Holders to furnish all information and materials and
not to take any and all actions as may be required under Federal and state
securities laws and regulations to permit the Company to comply with all
applicable requirements of the SEC and to obtain any acceleration of the
effective date of such Registration Statement.
(d) The Company shall not be obligated to cause any special
audit to be undertaken in connection with any registration pursuant to this
Agreement unless such audit is requested by the underwriters with respect to
such registration.
6. Indemnification
(a) The Company agrees to indemnify and hold harmless each of
(i) the Purchaser, (ii) each Holder (iii) each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
any of the foregoing (any of the persons referred to in this clause (i) being
hereinafter referred to as a "controlling person"), and (iv) the respective
officers, directors, partners, employees, representatives and agents of the
Purchaser, each Holder,
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<PAGE> 17
each broker-dealer participating in an offering subject to this Agreement or
any controlling person (any person referred to in clause (i), (ii), (iii) or
(iv) may hereinafter be referred to as an "Indemnified Person"), to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including, without limitation,
and as incurred, reimbursement of all reasonable costs of investigating,
preparing, pursuing or defending any claim or action, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
including the reasonable fees and expenses of counsel to any Indemnified
Person) directly or indirectly caused by, related to, based upon, arising out
of or in connection with, any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or form of
Prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of Prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Indemnified Person
furnished in writing to the Company by or on behalf of such Indemnified Person
expressly for use therein; provided that the foregoing indemnity with respect
to any preliminary Prospectus shall not inure to the benefit of any Indemnified
Person from whom the person asserting such losses, claims, damages, liabilities
and judgments purchased securities if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary Prospectus is
eliminated or remedied in the Prospectus and a copy of the Prospectus shall not
have been furnished to such person in a timely manner due to the wrongful
action or wrongful inaction of such Indemnified Person.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any such
Prospectus or any amendment or supplement thereto and with respect to which
indemnity may be sought against the Company, such Indemnified Person shall
promptly notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Person and payment of all fees and expenses; provided, however,
that the failure to so notify the Company shall not relieve it of any
obligation or liability which it may have hereunder or otherwise (unless and
only to the extent that such failure directly results in the loss or compromise
of any material rights or defenses by the Company and the Company was not
otherwise aware of such action or claim). Any Indemnified Person shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any impleaded parties) include both
such Indemnified Person and the Company and such Indemnified Person shall have
been advised by counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Company
(in which case the Company shall not have the right to assume the defense of
such action on behalf of such Indemnified Person, it being understood, however,
that the Company shall not, in
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<PAGE> 18
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred). The Company shall not be liable for any settlement of any
such action effected without its written consent but if settled with the
written consent of the Company, the Company agrees to indemnify and hold
harmless any Indemnified Person from and against any loss or liability by
reason of such settlement. The Company shall not, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the subject
matter of such proceeding.
(c) In connection with any Registration Statement in which a
Holder is participating, such Holder agrees, severally and not jointly, to
indemnify and hold harmless each of the Company, its directors, its officers
and any person controlling the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to each Indemnified Person but only with reference
to information relating to such Indemnified Person furnished in writing by or
on behalf of such Indemnified Person expressly for use in such Registration
Statement or any Prospectus (or any amendment or supplement thereto) or any
preliminary Prospectus. In case any action shall be brought against the
Company, any of their directors, any such officer or any person controlling the
Company based on such Registration Statement and in respect of which indemnity
may be sought against any Indemnified Person, the Indemnified Person shall have
the rights and duties given to the Company (except that if the Company shall
have assumed the defense thereof, such Indemnified Person shall not be required
to do so, but may employ separate counsel therein and participate in defense
thereof but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person), and the Company, its directors, any such officers and
any person controlling the Company shall have the rights and duties given to
the Indemnified Person, by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an Indemnified Person in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then the Company, in lieu of
indemnifying such Indemnified Person, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and each
Indemnified Person on the other hand from the offering of the Warrant Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and each such Indemnified Person in connection with the
statements or omissions (or alleged statements or omissions) which resulted in
such losses, claims, damages, liabilities or judgments, as well as any
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<PAGE> 19
other relevant equitable considerations. The relative fault of the Company and
each such Indemnified Person shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or the alleged omission to state a material fact relates to
information supplied by the Company or such Indemnified Person and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Purchaser agree that
it would not be just and equitable if contribution pursuant to this Section
6(d) were determined by pro rata allocation (even if the Indemnified Person
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
the Company as a result of the losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6, no Indemnified Person shall be required to
contribute any amount in excess of the amount by which the total net profit
received by it in connection with the sale of the Warrant Shares pursuant to
this Agreement exceeds the amount of any damages which such Indemnified Person
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section 6 will be in addition to any liability which the Company may otherwise
have to the Indemnified Persons referred to above. The Indemnified Persons'
obligations to contribute pursuant to this Section 6(d) are several in
proportion to the respective amount of Warrant Shares included in any such
Registration Statement by each Indemnified Person and not joint.
7. Rules 144 and 144A
The Company shall use its best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time it is not required to file such reports but
in the past had been required to or did file such reports, it will, upon the
request of any Holder, make available other information as required by, and so
long as necessary to permit, sales of its Registrable Securities pursuant to
Rule 144A. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
8. Underwritten Registrations
If any of the Registrable Securities covered by any Registration
Statement pursuant to a Demand Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by
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<PAGE> 20
the Holders of a majority in aggregate number of such Registrable Securities
included in such offering, subject to the consent of the Company (which will
not be unreasonably withheld or delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Registrable
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
9. Miscellaneous
(a) Remedies. In the event of a breach by the Company, or by
a Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Without the written consent
of the Holders of a majority of the then outstanding Registrable Securities,
the Company shall not grant to any person the right to request it to register
any of its equity securities under the Securities Act unless the rights so
granted are subject in all respects to the prior rights of the Holders set
forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement.
(c) [intentionally omitted].
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the written consent of the Holders of a majority of
the then outstanding Registrable Securities is obtained; provided, however,
that, for the purposes of this Agreement, Registrable Securities that are
owned, directly or indirectly, by the Company or an Affiliate of the Company
are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
number of the Registrable Securities 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.
20
<PAGE> 21
(e) Notices. All notices and other communications provided
for herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, or facsimile:
(i) if to the Company:
TransAmerican Refining Corporation
1300 North Sam Houston
Parkway, Suite 320
Houston, Texas 77032-2949
Fax: (281) 986-8865
Attention: Ed Donahue
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
Dallas, Texas 75201
Fax: (214) 999-4667
Attention: C. Robert Butterfield
(ii) if to the Purchaser:
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Fax: (310) 575-5299
Attention: Jerry M. Gluck
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
34th Floor
Los Angeles, California 90071
Fax: (213) 687-5600
Attention: Rod A. Guerra
(iii) if to any other person who is then a registered
Holder, to the address of such Holder as it appears
in the share register of the Company.
21
<PAGE> 22
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by
hand, if personally delivered; one business day after being timely delivered to
a next-day air courier; five business days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Notwithstanding the foregoing, no transferee shall have any of
the rights granted under this Agreement until such transferee shall acknowledge
its rights and obligations hereunder by a signed written statement of such
transferee's acceptance of such rights and obligations.
(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) Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.
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. 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 AGREEMENT, AND IRREVOCABLY ACCEPT
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS.
(i) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts to find
and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
22
<PAGE> 23
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
(k) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof or
thereof is validly asserted as a defense, the prevailing party, as determined
by the court, shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement, the Warrant Agreement, and the 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 hereto in respect of the subject matter contained herein and therein.
This Agreement, the Purchase Agreement, the Warrant Agreement, and the
Indenture supersede all prior agreements and understandings between the parties
with respect to such subject matter.
23
<PAGE> 24
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
TRANSAMERICAN REFINING CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
The foregoing Securityholders' and Registration
Rights Agreement is hereby confirmed and accepted
as of the date first above written.
JEFFERIES & COMPANY, INC.
By:
-------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE> 1
EXHIBIT 4.25
-------------------------------------------------------------
TRANSAMERICAN REFINING CORPORATION
Issuer
and
TRANSAMERICAN ENERGY CORPORATION
Guarantor
and
FIRST UNION NATIONAL BANK, formerly known as
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
Trustee
-------------------------
THIRD SUPPLEMENTAL INDENTURE
effective as of January 16, 1998
-------------------------
$340,000,000 Guaranteed First Mortgage Discount Notes due 2002
and
$100,000,000 Guaranteed First Mortgage Notes due 2002
-------------------------------------------------------------
<PAGE> 2
THIS THIRD SUPPLEMENTAL INDENTURE, effective as of January 16, 1998
(this "Supplemental Indenture"), is made and entered into by and among
TRANSAMERICAN REFINING CORPORATION, a Texas corporation (the "Company"),
TRANSAMERICAN ENERGY CORPORATION, a Delaware corporation ("TEC), and FIRST UNION
NATIONAL BANK, formerly known as FIRST FIDELITY BANK, NATIONAL ASSOCIATION (the
"Trustee"), under an Indenture dated as of February 15, 1995, by and among the
Company, TEC and the Trustee, as amended and supplemented by a First
Supplemental Indenture dated as of February 24, 1997, among the Company, TEC and
the Trustee, and as further amended and supplemented by a Second Supplemental
Indenture, dated as of June 13, 1997, among the Company, TEC and the Trustee (as
so amended and supplemented, the "Current Indenture"). All capitalized terms
used in this Supplemental Indenture that are defined in the Current Indenture,
either directly or by reference therein, have the meanings assigned to them
therein, except to the extent such terms are defined in this Supplemental
Indenture or the context clearly requires otherwise.
WHEREAS, Section 9.1 of the Current Indenture provides, among other
things, that the Company, when authorized by Board Resolutions, and the Trustee,
at any time and from time to time, may, without the necessity for consent of any
Holder, enter into one or more indenture supplements, in form satisfactory to
the Trustee, to cure any ambiguity, defect or inconsistency, or to make any
other provisions with respect to matters or questions arising under the
provisions of the Indenture, which shall not be inconsistent with the provisions
of the Indenture, provided such action shall not adversely affect the interests
of any Holder in any respect; and
WHEREAS, the Board of Directors of the Company has adopted resolutions
authorizing and approving the amendment of certain provisions of the Indenture,
as more particularly described in this Supplemental Indenture, and the Company,
the Guarantor and the Trustee are executing and delivering this Supplemental
Indenture in order to provide for such amendments; and
WHEREAS, the Company and TEC have determined that the amendments
described below are necessary to permit the Company to comply with the
requirements of Section 8.1 of the Indenture in connection with its proposed
payment and discharge of the entire Debt on the Securities as permitted therein
and that such amendments do not adversely affect the interests of any Holder in
any respect;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Supplemental
Indenture hereby agree as follows:
ARTICLE I
AMENDMENTS TO CURRENT INDENTURE
Section 1.01. Section 8.1(c). Section 8.1(c) of the Current Indenture
is hereby amended to read in its entirety as follows:
"(c) No Default or Event of Default relating to clauses
(e) or (f) of Section 6.1 shall have occurred or be continuing on the date of
such deposit or shall occur on or before the 91st day (or one day after such
greater period of time in which any such deposit of trust funds may
2
<PAGE> 3
remain subject to set aside or avoidance under bankruptcy or insolvency laws)
after the date of such deposit, and such deposit will not result in a Default or
Event of Default under this Indenture or a breach or violation of, or constitute
a default under, any other instrument to which the Company or any Subsidiary of
the Company is a party or by which it or its property is bound;"
Section 1.02. Section 8.1(f). Section 8.1(f) of the Current Indenture
is hereby amended to read in its entirety as follows:
"(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 set aside or
avoidance under any Bankruptcy Laws affecting creditors' rights
generally;"
Section 1.03. Section 8.1(g). Section 8.1(g) of the Current Indenture
is hereby amended to read in its entirety as follows:
"(g) Holders of the Notes will have a valid,
perfected and unavoidable (under applicable bankruptcy or insolvency
laws), subject to the passage of time referred to in clause (f) above,
first-priority security interest in all of the Company's right, title
and interest in the trust funds; and"
ARTICLE II
GENERAL PROVISIONS
Section 2.01. Ratification of Indenture. The Current Indenture is in
all respects acknowledged, ratified and confirmed, and shall continue in full
force and effect in accordance with the terms thereof and as supplemented by
this Supplemental Indenture. The Current Indenture and this Supplemental
Indenture, shall be read, taken and construed as one and the same instrument.
Section 2.02. Certificate and Opinion as to Conditions Precedent.
Simultaneously with and as a condition to the execution of this Supplemental
Indenture, the Company is delivering to the Trustee
(a) an Officer's Certificate in the form attached hereto as Exhibit A;
and
(b) an Opinion of Counsel covering the matters described in Exhibit B
hereto.
Section 2.03. Effect of Headings. The Article and Section headings in
this Supplemental Indenture are for convenience only and shall not affect the
construction of this Supplemental Indenture.
Section 2.04. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
3
<PAGE> 4
Section 2.05. Counterparts. This Supplemental Indenture may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute the same
instrument.
IN WITNESS WHEREOF, the parties to this Supplemental Indenture have
caused this Supplemental Indenture to be duly executed, and their respective
corporate seals to be hereunto affixed and attested, effective on this ____ day
of ___________________, 1998.
TRANSAMERICAN REFINING CORPORATION
Attest: By:
------------------------- ----------------------------------
John R. Stanley, President and
Chief Executive Officer
TRANSAMERICAN ENERGY CORPORATION
Attest: By:
------------------------- ----------------------------------
John R. Stanley, President and
Chief Executive Officer
FIRST UNION NATIONAL BANK, formerly known
as FIRST FIDELITY BANK, NATIONAL
ASSOCIATION, Trustee
Attest: By:
------------------------- ----------------------------------
4
<PAGE> 1
EXHIBIT 4.26
================================================================================
IRREVOCABLE TRUST AND SECURITY AGREEMENT
AMONG
TRANSAMERICAN REFINING CORPORATION,
TRANSAMERICAN ENERGY CORPORATION
AND
FIRST UNION NATIONAL BANK, FORMERLY KNOWN AS
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
AS TRUSTEE
-------------------
DATED AS OF
JANUARY 16, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
INITIAL TRANSFER TO TRUST FUND
Section 2.01. Transfer to the Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02. Execution of Funding Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.03. Sufficiency of Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
CREATION AND OPERATION OF TRUST FUND
Section 3.01. Establishment of Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.02. Payment of Principal and Interest; Redemption of Notes . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.03. Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.04. Return of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
INVESTMENTS
Section 4.01. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.02. Security for Cash Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V
SECURITY INTEREST
Section 5.01. Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.02. Security for Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.03. Financing Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.04. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI
RECORDS AND REPORTS
Section 6.01. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.02. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.01. Notices to be Given . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.02. Moneys to be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.03. Concerning Compensation and Expenses of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.04. Responsibility of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.05. Reliance by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.06. Resolution of Disagreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.02. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.03. Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.04. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.05. Texas Law Governs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8.06. Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8.07. Performance on Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8.08. Inability of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
ii
<PAGE> 4
IRREVOCABLE TRUST AND SECURITY AGREEMENT
This Irrevocable Trust and Security Agreement, dated as of January 16,
1998 (this "Agreement"), is among TransAmerican Refining Corporation, a Texas
corporation (the "Company"), TransAmerican Energy Corporation, a Delaware
corporation ("TEC"), and First Union National Bank, formerly known as First
Fidelity National Association, as trustee (the "Trustee") under an Indenture
dated as of February 15, 1995, by and among the Company, TEC and the Trustee,
as amended and supplemented by a First Supplemental Indenture dated as of
February 24, 1997, among the Company, TEC and the Trustee, a Second
Supplemental Indenture, dated as of June 13, 1997, among the Company, TEC and
the Trustee, and a Third Supplemental Indenture, dated as of January 16, 1998
among the Company, TEC and the Trustee (as so amended and supplemented, the
"Indenture").
W I T N E S S E T H:
WHEREAS, the Company has previously issued its Guaranteed First
Mortgage Discount Notes due 2002 in the aggregate principal amount of
$340,000,000 (the "Discount Notes") and Guaranteed First Mortgage Notes due
2002 in the aggregate principal amount of $100,000,000 (the "Mortgage Notes"
and, together with the Discount Notes, the "1995 Notes"), pursuant to the terms
of the Indenture; and
WHEREAS, the Company offered to purchase the 1995 Notes pursuant to an
Offer to Purchase and Consent Solicitation dated May 15, 1997 and the
supplements thereto dated May 30, 1997 and June 6, 1997 (the "Tender Offer");
and
WHEREAS, pursuant to the Tender Offer, $92,235,000 principal amount of
Mortgage Notes and $295,777,013 accreted value of Discount Notes were tendered
to the Company and canceled; and
WHEREAS, by Notice dated January 14, 1998, the Company has called for
redemption on February 17, 1998 $1,580,000 principal amount of Mortgage Notes
and $5,377,000 principal amount of Discount Notes; and
WHEREAS, the Company intends to defease the Discount Notes that remain
outstanding after the foregoing redemption (the "Remaining Discount Notes") and
the Mortgage Notes that remain outstanding after the foregoing redemption (the
"Remaining Mortgage Notes" and, together with the Remaining Discount Notes, the
"Remaining 1995 Notes"); and
WHEREAS, the Company intends to redeem the Remaining 1995 Notes on
February 15, 1999 (the "Final Redemption Date"); and
<PAGE> 5
WHEREAS, the Indenture provides that if U.S. Legal Tender (as defined
in the Indenture), U.S. Government Obligations (as defined in the Indenture) or
a combination thereof in an amount sufficient to provide the entire amount
necessary for redemption of the Remaining 1995 Notes shall have been set aside
in trust with the Trustee as provided in the Indenture, and provisions
satisfactory to the Trustee shall have been made for the giving of notice of
redemption, from and after the date such assets are set aside in trust and the
Trustee receives a certification of independent certified public accountants,
an officers' certificate and an opinion of counsel, the Debt (as defined in the
Indenture) shall be deemed paid and the Company shall be released from all
liability under the Indenture other than as set forth in Sections 8.3 and 8.7
of the Indenture; and
WHEREAS, the Company wishes to deposit or cause to be deposited cash
in the Trust Fund (as defined below) created pursuant to this Agreement in
order to cause the Remaining 1995 Notes to be defeased and redeemed under the
Indenture; and
WHEREAS, the cash to be deposited, together with interest thereon, in
the Trust Fund, in the opinion of Coopers & Lybrand L.L.P., is sufficient to
pay interest on the Remaining 1995 Notes as it accrues and becomes payable and
the principal of the Remaining 1995 Notes when they are called for redemption
on the Final Redemption Date; and
WHEREAS, in order to facilitate the receipt and transfer of the cash
to be deposited, the Company desires to establish a trust at the principal
corporate trust office of the Trustee (the "Trust Fund");
NOW, THEREFORE, in consideration of the mutual undertakings, promises
and agreements herein contained, the sufficiency of which are hereby
acknowledged, and in order to secure the full and timely payment of principal
of and interest on the Remaining 1995 Notes which are to be defeased and
redeemed, the Company, TEC and the Trustee mutually undertake, promise, and
agree for themselves and their respective representatives and successors, as
follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.01. Definitions. All capitalized terms used in this
Agreement that are defined in the Indenture have the meanings assigned to them
therein, except to the extent such terms are defined in this Agreement or the
context clearly requires otherwise.
Section 1.02. Interpretations. The titles and headings of the
articles and sections of this Agreement have been inserted for convenience of
reference only and are not to be considered a part hereof and shall not in any
way modify or restrict the terms hereof. This
2
<PAGE> 6
Agreement and all of the terms and provisions hereof shall be liberally
construed to effectuate the purposes set forth herein and to achieve the
intended purpose of defeasing and redeeming the Remaining 1995 Notes in
accordance with applicable law. Except where the context otherwise requires
herein, words imparting the singular number shall include the plural number and
vice versa. Reference to any instrument or document shall include such
instrument or document as the same may be amended or supplemented from time to
time. Reference to any party to any instrument or document shall include any
successor or assign of such party.
ARTICLE II
INITIAL TRANSFER TO TRUST FUND
Section 2.01. Transfer to the Trust Fund. The Company shall
transfer, or cause to be transferred, $9,754,694.34 in cash constituting U.S.
Legal Tender (the "Trust Deposit") to the Trustee to be held in trust for the
benefit of the Holders from time to time of the Remaining 1995 Notes.
Section 2.02. Execution of Funding Certificate. Upon the receipt
by the Trustee of (i) the Trust Deposit, (ii) the payment of fees and all other
sums payable by the Company under the Indenture and described in Exhibit "A"
hereto and (iii) a final report prepared by Coopers & Lybrand, L.L.P., dated
January 15, 1998, regarding the sufficiency of the Trust Deposit and the
Permitted Investments (as defined in Section 4.01 hereof) made therewith to pay
amounts which will become due on the Remaining 1995 Notes, which is
incorporated herein for all purposes (the "Report"), the Trustee shall attach
to this Trust Agreement the Trust Funding Certificate (the form of which is
attached as Exhibit "B" hereto) fully executed by the Trustee.
Section 2.03. Sufficiency of Trust Fund. The Company represents
that the Trust Deposit and the Permitted Investments made therewith, together
with the proceeds thereof, will provide, not later than one day before each of
(i) the Interest Payment Dates and (ii) the Final Redemption Date, sufficient
moneys for transfer to the Paying Agent in the amounts required to pay the
accrued interest on the Remaining 1995 Notes and the principal of the Remaining
1995 Notes on the Final Redemption Date, all as more fully set forth in the
Report attached hereto. If, at any time and for any reason, the cash balances
on deposit in the Trust Fund shall be insufficient to transfer the amounts
required by the Paying Agent to make the payments set forth in Section 3.02
hereof, the Company shall timely deposit into the Trust Fund, from lawfully
available funds, additional funds in the amounts required to make such
payments. Notice of any such insufficiency shall be given promptly as
hereinafter provided, but the Trustee shall not in any manner be responsible
for any insufficiency of funds in the Trust Fund or the Company's failure to
make additional deposits thereto.
3
<PAGE> 7
ARTICLE III
CREATION AND OPERATION OF TRUST FUND
Section 3.01. Establishment of Trust Fund. The Trustee shall
create on its books a special trust fund to be known as the "TransAmerican
Notes due 2002 Trust Fund" (the "Trust Fund"). Upon receipt by the Trustee of
the Trust Deposit, the Trustee shall deposit the Trust Deposit in the Trust
Fund.
Section 3.02. Payment of Principal and Interest; Redemption of
Notes. (a) On or prior to February 15, 1998, the Trustee is hereby irrevocably
instructed to transfer to the Paying Agent from the funds in the Trust Fund
$510,262.50, which is the amount required to pay the interest which will have
accrued on such date on the Remaining Mortgage Notes. On or prior to August
15, 1998, the Trustee is hereby irrevocably instructed to transfer to the
Paying Agent from the funds in the Trust Fund $164,557.50 and $510,262.50,
which are the amounts required to pay the interest which will have accrued on
such date on the Remaining Discount Notes and Remaining Mortgage Notes,
respectively. On or prior to the Final Redemption Date, the Trustee is hereby
irrevocably instructed to transfer to the Paying Agent from the funds in the
Trust Fund $2,045,850.00 and $7,050,900.00, which are the amounts which will be
required to pay the principal of (including premium), and the interest which
will have accrued on, the Remaining Discount Notes and Remaining Mortgage
Notes, respectively, on the Final Redemption Date.
(b) The Trustee, in its capacity as Paying Agent for the Remaining
1995 Notes, agrees, to the extent required hereby, to apply the funds
transferred to it pursuant to Section 2.01 above, together with the proceeds
from the investment thereof pursuant to Section 4.01 below, solely for the
purpose of paying the principal of and interest on the Remaining 1995 Notes in
the manner provided in this Agreement. Except for amounts transferred to the
Paying Agents pursuant to Section 3.02(a) above or to the Company pursuant to
Section 3.04 below, and except as permitted in Article IV hereof, the Trustee
agrees that it shall never make any withdrawals from the Trust Fund or assert
any claims, liens or charges against the Trust Fund.
Section 3.03. Trust Fund. The Trust Deposit and all proceeds
therefrom shall be the property of the Trust Fund, and shall be applied only in
strict conformity with the terms and conditions of the Indenture and this
Agreement. All cash balances and other assets on deposit in the Trust Fund are
hereby irrevocably transferred to the Trustee in trust for the benefit of the
Holders from time to time of the Remaining 1995 Notes, subject to the
provisions of this Agreement, to provide for the payment of the principal of
and interest on the Remaining 1995 Notes, which payment shall be made by timely
transfers to the Paying Agent of such amounts at such times as are provided for
in Section 3.02 hereof, but solely from the sources specified in this Agreement
and the Indenture. The Trustee shall hold at all times the Trust Fund and the
Permitted Investments in trust for the benefit of the
4
<PAGE> 8
Holders from time to time of the Remaining 1995 Notes, wholly segregated from
all other funds and securities on deposit with the Trustee; it shall never
allow the assets of the Trust Fund to be commingled with any other funds or
securities of the Trustee; and it shall hold and dispose of the assets of the
Trust Fund only as set forth herein and in the Indenture. Nothing herein
contained shall be construed as requiring the Trustee to keep the identical
money, or any part thereof, received for the Company's account in the Trust
Fund, if it is impractical, but money of an equal amount, or investments
thereof permitted hereby, must be maintained on deposit in the Trust Fund and
held by the Trustee during the term of this Agreement for the benefit of the
Holders from time to time of the Remaining 1995 Notes.
Section 3.04. Return of Moneys. (a) In the event any Remaining
1995 Note shall not be presented for payment when the principal thereof becomes
due or is not thereafter presented for payment, any funds which shall be held
for such purpose by the Paying Agent and which remain unclaimed by the Holder
of the Remaining 1995 Note not presented for payment shall be held, without
liability for interest thereon, for the benefit of the owner of such Remaining
1995 Note who shall thereafter be restricted exclusively to such funds for any
claim of whatever nature on his part with respect to such Remaining 1995 Note;
provided that any funds which shall be so held by the Trustee and remain
unclaimed by the Holder of the Remaining 1995 Note not presented for payment
for a period of two years after the Final Redemption Date shall, subject to
Section 8.06 of the Indenture, be paid to the Company upon request and
thereafter the Holder of such Remaining 1995 Note shall look only to the
Company for payment, without any interest thereon, and the Trustee shall have
no responsibility with respect to such moneys.
(b) The Trustee shall maintain the Trust Fund until the date upon
which all of the payments required by Section 3.02(a) above have been made,
whereupon the Trustee shall remit, subject to Section 3.04(a) hereof, to the
Company the money, if any, then remaining in the Trust Fund.
ARTICLE IV
INVESTMENTS
Section 4.01. General. Except as provided in this Article IV, the
Trustee shall have no power or duty to invest or reinvest any funds held
hereunder. The Trustee will promptly invest the Trust Deposit in the
investments described on Exhibit "C" hereto (the "Permitted Investments").
Thereafter, at the request of the Company and upon compliance with the
conditions hereinafter stated, the Trustee shall reinvest the cash balances in
the Trust Fund, except as such proceeds are needed to make payments required to
be made pursuant to Sections 3.02(a) or 3.04 hereof, in U.S. Government
Obligations that mature the business day before any of the dates specified in
Section 3.02(a). Any reinvestment pursuant to this Section 4.01 may be
effected only if written instructions from the Company are accompanied by a
certificate from a nationally recognized firm of independent certified
5
<PAGE> 9
public accountants to the effect that, following the reinvestment, the funds on
deposit in the Trust Fund will be sufficient, without further investment or
reinvestment, to pay the principal and interest, as applicable, due on the
Remaining 1995 Notes as set forth in the Report. Unless otherwise directed by
the Company, the Trustee may use a broker-dealer of its own selection,
including a broker-dealer owned by or affiliated with the Trustee or any of its
affiliates. The Company shall be liable for all brokerage costs and related
expenses incurred hereunder. To the extent the Trustee invests the Trust Funds
in Permitted Investments or at the request of the Company, other U.S.
Government Obligations, the Trustee shall not be liable for any losses on any
investments made by it.
Section 4.02. Security for Cash Balances. Cash balances from time
to time held in the Trust Fund may be deposited by the Trustee in non-interest
bearing demand deposits with the Trustee to the extent not otherwise required
to be invested hereunder. Any such deposits shall, to the extent not insured
by the Federal Deposit Insurance Corporation or its successor, be continuously
secured in the manner provided by law for deposits or trust funds by a pledge
of direct obligations of, or obligations unconditionally guaranteed by, the
United States of America, having a market value at least equal to such cash
balances, and the Holders of the Remaining 1995 Notes shall be entitled to a
preferred lien and claim upon such obligations in the event of any insolvency,
receivership, conservatorship or liquidation of the Trustee.
ARTICLE V
SECURITY INTEREST
Section 5.01. Security Interest. Although it is the intention of
the Company to convey the Trust Deposit and any and all proceeds thereof to the
Trustee for the benefit of the Holders of the Remaining 1995 Notes and that
such assets constitute the property of the Trust Fund and not of the Company,
in the event the Trust Fund, for any reason, is revoked or the proceeds thereof
are, but for this Article V, to be returned to the Company prior to the payment
required by Section 3.02(a) above being made to the Paying Agent for the
redemption of the Remaining 1995 Notes, the Company hereby assigns, pledges and
grants to the Trustee for its benefit and the benefit of the Holders of the
Remaining 1995 Notes, a security interest in all of the Company's right, title
and interest in and to all money and securities (if any) in the Trust Fund and
all proceeds and products thereof (the "Collateral"). The Holders of the
Remaining 1995 Notes shall be entitled to a preferred claim and first lien upon
the Collateral. The amounts received by the Trustee under this Agreement shall
not be considered as a banking deposit by the Company and the Trustee shall
have no right or title with respect thereto except as set forth in this
Agreement.
Section 5.02. Security for Obligations. This Article V secures
the payment and performance of all debt, liabilities and obligations of the
Company to the Holders of the Remaining 1995 Notes and the Trustee.
6
<PAGE> 10
Section 5.03. Financing Statement. The Company agrees to deliver
to the Trustee, on the effective date of this Agreement, a fully executed
financing statement relating to the Collateral. The Company hereby authorizes
the Trustee to file one or more continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
the Company where permitted by law (provided that the Trustee furnishes to the
Company a copy of each such statement filed, promptly after the filing
thereof). A carbon, photographic or other reproduction of this Agreement or
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
Section 5.04. Remedies. In the event the Trust Fund, for any
reason, is revoked or the proceeds thereof are, but for this Article V, to be
returned to the Company prior to the payment required by Section 3.02(a) above
being made to the Paying Agent for the redemption of the Remaining 1995 Notes,
the Trustee may retain the Collateral pursuant to its security interest therein
and otherwise exercise its rights with respect to the Collateral, in addition
to other rights and remedies otherwise available to it, and the rights and
remedies of a secured party on default under the Uniform Commercial Code (the
"UCC") (whether or not the UCC applies to the Collateral). If the proceeds
have been returned to the Company, the Trustee may require the Company to, and
the Company hereby agrees that it will at its expense and upon request of the
Trustee, forthwith, assemble the Collateral as directed by the Trustee and make
it available to the Trustee.
ARTICLE VI
RECORDS AND REPORTS
Section 6.01. Records. The Trustee will keep books of record and
account in which complete and correct entries shall be made of all transactions
relating to the receipts, disbursements, allocations and application of the
money and any other assets deposited in the Trust Fund and all proceeds
thereof, and such books shall be available for inspection at reasonable hours
and under reasonable conditions by the Company and the Holders of the Remaining
1995 Notes.
Section 6.02. Reports. For the period beginning on the date
hereof and ending on December 31, 1998, and for each 12 month period thereafter
while this Agreement remains in effect, the Trustee shall prepare and send to
the Company within 30 days following the end of such period a written report
summarizing all transactions relating to the Trust Fund during such period
together with a detailed statement of the cash balance on deposit in the Trust
Fund as of the end of such period.
7
<PAGE> 11
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.01. Notices to be Given. As soon as permitted by the
Indenture following the date of the transfer described in Section 2.01 hereof,
but in any event not later than the date required by the Indenture, the Trustee
shall give notice in the manner required by the Indenture of the redemption of
the Remaining 1995 Notes on the Final Redemption Date.
Section 7.02. Moneys to be Held in Trust. All moneys and any
other assets received by the Trustee pursuant to this Agreement shall, until
used or applied as herein provided (including payment of moneys to the Company
under Section 3.04), be held in trust for the purposes for which they were
received, and be segregated from other funds. The Trustee shall be under no
liability for interest on any moneys received by it hereunder other than such
interest as it expressly agrees to pay.
Section 7.03. Concerning Compensation and Expenses of Trustee. In
consideration of the agreements of the Company contained in the Indenture with
respect to the compensation and indemnification of the Trustee and,
notwithstanding the provisions of Section 7.7 of the Indenture purporting to
give to the Trustee a first lien prior to payment on account of interest on or
principal of any 1995 Note under the Indenture with respect to certain amounts
due or claimed by the Trustee, the Trustee hereby agrees that it will not make
any claim to any amount on deposit in the Trust Fund and hereby waives any lien
or claim on such fund. To the extent that this Section 7.03 conflicts with any
other provisions contained herein or in the Indenture, this Section 7.03 shall
control.
Section 7.04. Responsibility of the Trustee. The Trustee shall
not be liable or responsible for any act done or step taken or omitted by it or
any mistake of fact or law or for anything which it may do or refrain from
doing, except for its own negligence or its default or failure in the
performance of any material obligation imposed upon it hereunder. The Trustee
shall not be responsible in any manner whatsoever for the recitals made herein
or the statements contained in the 1995 Notes or any proceedings taken in
connection therewith. The Trustee makes no representation as to the value,
conditions or sufficiency of the Trust Fund or as to the title of the Company
thereto, and the Trustee shall not incur any liability or responsibility with
respect to such matters. The Trustee shall not have any liability whatsoever
for the insufficiency of monies available in the Trust Fund or for any failure
of the obligors of the Permitted Investments, or any other U.S. Government
Obligations in which the Trust Funds are invested at the request of the
Company, to make timely payment thereon. It is the intention of the parties
hereto that the Trustee shall never be required to use or advance its own funds
or otherwise incur personal financial liability in the performance of any of
its duties or the exercise of any rights and powers hereunder.
8
<PAGE> 12
The Trustee, except with respect to the Indenture, the 1995 Notes, and
the Security Documents, is not a party to, nor is it bound by nor need it give
consideration to the terms or provisions of any other agreement or undertaking
between the Company and other persons, and (except as aforesaid) the Trustee is
to give consideration only to the terms and provisions of this Agreement. The
Trustee has no duty to determine or inquire into the happening or occurrence of
any event or contingency or the performance or failure of performance of the
Company with respect to arrangements or contracts with others. The Trustee's
sole duty hereunder is to safeguard the Trust Fund and to dispose of and
deliver the same in accordance with this Agreement. If, however, the Trustee
is called upon by the terms of this Agreement to determine the occurrence of
any event or contingency, the Trustee shall be obligated, in making such
determination, only to exercise reasonable care and diligence, and in the event
of error in making such determination the Trustee shall be liable only for its
own willful misconduct or its gross negligence in the light of all
circumstances, taking into consideration the time and facilities available to
the Trustee in the ordinary conduct of its business. In determining the
occurrence of any such event or contingency the Trustee may request from the
Company or any other person such reasonable additional evidence as the Trustee
in its discretion may deem necessary to determine any fact relating to the
occurrence of such event or contingency, and in this connection may inquire and
consult, among others, with the Company at any time, and the Trustee shall not
be liable for any damages resulting from its delay in acting hereunder pending
its examination of the additional evidence requested by it.
Section 7.05. Reliance by the Trustee. This Agreement is between
the Company, TEC and the Trustee only and in connection therewith the Trustee
is authorized by the Company and TEC to rely upon the representations, both
actual and implied, of the Company in connection with this Agreement, and the
Trustee shall not be liable to any person in any manner for such reliance. The
duty of the Trustee hereunder shall only be to the Company, TEC and the owners
of the Remaining 1995 Notes. The Trustee may act upon any written notice,
request, waiver, consent, certificate, receipt, authorization, opinion of
counsel, power of attorney, or other instrument or document which the Trustee
in good faith believes to be genuine and to be what it purports to be. The
Trustee may consult with legal counsel satisfactory to it concerning any
question relating to its duties or responsibilities hereunder or otherwise in
connection herewith and shall not be liable for any action taken, suffered or
omitted by it in good faith under the advice of such counsel.
Section 7.06. Resolution of Disagreements. In the event of any
disagreement or controversy hereunder or if conflicting demands or notices are
made upon the Trustee growing out of or relating to this Agreement or in the
event that the Trustee in good faith is in doubt as to what action it should
take hereunder, the Company expressly agrees and consents that the Trustee
shall have the absolute right to file a suit in interpleader and obtain an
order from a court of appropriate jurisdiction requiring all persons involved
to interplead and litigate in such court their several claims and rights among
themselves; provided that this Section 7.06 shall not apply to the
unconditional duty of the Trustee to
9
<PAGE> 13
hold the Trust Fund and to pay the principal of and interest on the Remaining
1995 Notes as the same come due and are payable, in accordance with this
Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notice. Any notice, authorization, request, or
demand required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given in the manner and to the address as
provided in the Indenture.
Section 8.02. Term. This Agreement shall be effective upon the
attachment hereto of an executed Trust Funding Certificate by the Trustee.
Upon the taking of all the actions as described herein by the Trustee, the
Trustee shall have no further obligations or responsibilities hereunder to the
Company, the Holders of the Remaining 1995 Notes or to any other person or
persons in connection with this Agreement except as otherwise provided in the
Indenture.
Section 8.03. Binding Agreement. This Agreement shall be binding
upon the Company, TEC and the Trustee and their respective successors and legal
representatives, and shall inure solely to the benefit of the Holders of the
Remaining 1995 Notes, the Company, the Trustee and their respective successors
and legal representatives. The purpose of this Agreement is to implement and
supplement the terms of the Indenture, and in the event of any conflict between
the provisions of the Indenture and the provisions of this Agreement, the
Indenture shall control; provided, that the Trustee and the Company recognize
that this Agreement is entered into for the benefit of the Holders of the
Remaining 1995 Notes from time to time and the Trustee hereby accepts the
benefits hereof on behalf of such Holders; provided, further, the Trustee and
the Company agree that this Agreement may be amended with the prior written
consent of each Holder of a Remaining 1995 Note who would be adversely affected
by such amendment , if any, (i) to cure any ambiguity, formal defect or
omission herein, (ii) to grant to or confer upon the Trustee, for the benefit
of the Holders of the Remaining 1995 Notes, any additional rights, remedies,
power or authority that may be conferred upon such Holders or the Trustee or
(iii) to subject additional funds, securities or other property to the terms of
this Agreement, but this Agreement shall never be amended for any other purpose
without the prior written consent of the Holders of all Remaining 1995 Notes
not theretofore finally paid.
Section 8.04. Severability. In case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement,
but this Agreement shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.
10
<PAGE> 14
Section 8.05. Texas Law Governs. This Agreement shall be governed
exclusively by the provisions hereof and by the applicable law of the State of
Texas.
Section 8.06. Time of the Essence. Time shall be of the essence
in the performance of obligations from time to time imposed upon the Trustee by
this Agreement.
Section 8.07. Performance on Business Days. Whenever under the
terms of this Agreement the performance date of any provision hereof shall fall
on a day which is not a legal banking day, and upon which the Trustee is not
open for business, the performance thereof on the next succeeding business day
of the Trustee shall be deemed to be in full compliance. Whenever time is
referred to in this Agreement it shall be time recognized by the Trustee in the
ordinary conduct of its normal business transactions.
Section 8.08. Inability of the Trustee. In case at any time the
Trustee or its legal successor or successors should become unable, through
operation of law or otherwise, to act as Trustee, or if its property and
affairs shall be taken under the control of any state or federal court or
administrative body because of insolvency or bankruptcy or for any other
reason, a vacancy shall forthwith and ipso facto exist in the office of
Trustee, and a successor Trustee shall be appointed as provided in the
Indenture.
11
<PAGE> 15
EXECUTED as of the date first written above.
FIRST UNION NATIONAL BANK, formerly known as
FIRST FIDELITY BANK, NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------------
----------------------------------------
TRANSAMERICAN REFINING CORPORATION
By:
----------------------------------------
Ed Donahue, Vice President and Secretary
TRANSAMERICAN ENERGY CORPORATION
By:
----------------------------------------
Ed Donahue, Chief Financial Officer,
Vice President and Secretary
12
<PAGE> 1
EXHIBIT 4.27
===============================================================================
$25,000,000
16% Senior Subordinated Notes due 2003
INDENTURE
between
TRANSAMERICAN REFINING CORPORATION,
as Issuer
and
First Union National Bank
as Trustee
Dated as of March 16, 1998
===============================================================================
<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).......................................................................... 13.03
(c).......................................................................... 13.03
313(a)............................................................................. 7.06
(b)(1)....................................................................... 7.06
(b)(2)....................................................................... 7.06
(c).......................................................................... 7.06; 13.02
(d).......................................................................... 7.06
314(a)............................................................................. 4.08; 13.02
(b).......................................................................... 12.03(b)
(c)(1)....................................................................... 2.02; 7.02;
13.04
(c)(2)....................................................................... 7.02; 13.04
(c)(3)....................................................................... N.A.
(d).......................................................................... 12.03(b);
12.04(b)
(e).......................................................................... 13.05
(f).......................................................................... N.A.
315(a)............................................................................. 7.01(b)
(b).......................................................................... 7.05; 13.02
(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)............................................................................. 13.01
</TABLE>
- --------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE.........................................................1
Section 1.1 Definitions.................................................................1
Section 1.2 Incorporation by Reference of TIA..........................................23
Section 1.3 Rules of Construction......................................................23
ARTICLE II
THE NOTES.........................................................................................24
Section 2.1 Form and Dating............................................................24
Section 2.2 Execution and Authentication...............................................24
Section 2.3 Registrar and Paying Agent.................................................25
Section 2.4 Paying Agent to Hold Assets in Trust.......................................25
Section 2.5 Noteholder Lists...........................................................26
Section 2.6 Transfer and Exchange......................................................26
Section 2.7 Replacement Notes..........................................................29
Section 2.8 Outstanding Notes..........................................................29
Section 2.9 Treasury Notes.............................................................30
Section 2.10 Temporary Notes............................................................30
Section 2.11 Cancellation...............................................................30
Section 2.12 Defaulted Interest.........................................................30
Section 2.13 Computation of Interest....................................................31
Section 2.14 Legends....................................................................31
Section 2.15 Separation of Notes and Warrants...........................................32
ARTICLE III
REDEMPTION........................................................................................32
Section 3.1 Right of Redemption........................................................32
Section 3.2 Notices to Trustee.........................................................32
Section 3.3 Selection of Notes to Be Redeemed..........................................33
Section 3.4 Notice of Redemption.......................................................33
Section 3.5 Effect of Notice of Redemption.............................................34
Section 3.6 Deposit of Redemption Price................................................34
Section 3.7 Notes Redeemed in Part.....................................................34
ARTICLE IV
COVENANTS.........................................................................................35
Section 4.1 Payment of Notes...........................................................35
Section 4.2 Maintenance of Office or Agency............................................35
Section 4.3 Limitation on Restricted Payments..........................................35
Section 4.4 Corporate Existence........................................................36
Section 4.5 Payment of Taxes and Other Claims..........................................36
</TABLE>
i
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<TABLE>
<S> <C>
Section 4.6 Maintenance of Properties and Insurance....................................37
Section 4.7 Compliance Certificate; Notice of Default..................................37
Section 4.8 SEC Reports................................................................38
Section 4.9 Limitation on Status as Investment Company or Public Utility
Company....................................................................38
Section 4.10 Limitation on Transactions with Related Persons............................38
Section 4.11 Limitation on Incurrences of Additional Debt and Issuances of
Disqualified Capital Stock.................................................39
Section 4.12 Limitations on Restricting Subsidiary Dividends............................41
Section 4.13 Liens......................................................................41
Section 4.14 Limitation on Asset Sales..................................................42
Section 4.15 Waiver of Stay, Extension or Usury Laws....................................45
Section 4.16 Guarantee by Subsidiaries..................................................45
Section 4.17 Intentionally Omitted......................................................46
Section 4.18 Limitations on Line of Business............................................46
Section 4.19 Separate Existence and Formalities.........................................46
Section 4.20 Accounts Receivable Subsidiary.............................................46
Section 4.21 Limitation on Ranking of Future Debt.......................................47
Section 4.22 Maintenance of Interest Reserve Account....................................47
Section 4.23 Restriction on Sale and Issuance of Subsidiary Stock.......................49
ARTICLE V
SUCCESSOR CORPORATION.............................................................................49
Section 5.1 When the Company May Merge, Etc............................................49
Section 5.2 Successor Corporation Substituted..........................................50
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES....................................................................51
Section 6.1 Events of Default..........................................................51
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment....................52
Section 6.3 Collection of Indebtedness and Suits for Enforcement by Trustee............53
Section 6.4 Trustee May File Proofs of Claim...........................................54
Section 6.5 Trustee May Enforce Claims Without Possession of Notes.....................54
Section 6.6 Priorities.................................................................55
Section 6.7 Limitation on Suits........................................................55
Section 6.8 Unconditional Right of Holders to Receive Principal, Premium and
Interest.....................................................................................55
Section 6.9 Rights and Remedies Cumulative.............................................56
Section 6.10 Delay or Omission Not Waiver...............................................56
Section 6.11 Control by Holders.........................................................56
Section 6.12 Waiver of Past Default.....................................................56
Section 6.13 Undertaking for Costs......................................................56
Section 6.14 Restoration of Rights and Remedies.........................................57
</TABLE>
ii
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<TABLE>
<S> <C>
ARTICLE VII
TRUSTEE...........................................................................................57
Section 7.1 Duties of Trustee..........................................................57
Section 7.2 Rights of Trustee..........................................................58
Section 7.3 Individual Rights of Trustee...............................................59
Section 7.4 Trustee's Disclaimer.......................................................59
Section 7.5 Notice of Default..........................................................59
Section 7.6 Reports by Trustee to Holders..............................................59
Section 7.7 Compensation and Indemnity.................................................59
Section 7.8 Replacement of Trustee.....................................................60
Section 7.9 Successor Trustee by Merger, Etc...........................................61
Section 7.10 Eligibility; Disqualification..............................................61
Section 7.11 Preferential Collection of Claims against Company..........................61
Section 7.12 No Bond....................................................................61
Section 7.13 Condition to Action........................................................61
Section 7.14 Investment.................................................................61
ARTICLE VIII
SATISFACTION AND DISCHARGE........................................................................61
Section 8.1 Satisfaction, Discharge of the Indenture and Defeasance of the Notes.......61
Section 8.2 Termination of Obligations Upon Cancellation of the Notes..................63
Section 8.3 Survival of Certain Obligations............................................63
Section 8.4 Acknowledgment of Discharge by Trustee.....................................63
Section 8.5 Application of Trust Assets................................................63
Section 8.6 Repayment to the Company...................................................63
Section 8.7 Reinstatement..............................................................64
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS...............................................................64
Section 9.1 Supplemental Indentures Without Consent of Holders.........................64
Section 9.2 Amendments, Supplemental Indentures and Waivers with Consent of
Holders......................................................................................64
Section 9.3 Compliance with TIA........................................................66
Section 9.4 Revocation and Effect of Consents..........................................66
Section 9.5 Notation on or Exchange of Notes...........................................66
Section 9.6 Trustee to Sign Amendments, Etc............................................66
ARTICLE X
MEETINGS OF NOTEHOLDERS...........................................................................67
Section 10.1 Purposes for Which Meetings May Be Called..................................67
Section 10.2 Manner of Calling Meetings.................................................67
Section 10.3 Call of Meetings by Company or Holders.....................................67
Section 10.4 Who May Attend and Vote at Meetings........................................67
</TABLE>
iii
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<TABLE>
<S> <C>
Section 10.5 Regulations May Be Made by Trustee; Conduct of the Meeting; Voting
Rights; Adjournment..........................................................................68
Section 10.6 Voting at the Meeting and Record to Be Kept................................68
Section 10.7 Exercise of Rights of Trustee or Noteholders May Not Be Hindered or
Delayed by Call of Meeting...................................................................69
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE.......................................................................69
Section 11.1 Repurchase of Notes at Option of the Holder Upon Change of Control.........69
ARTICLE XII
SUBORDINATION.....................................................................................70
Section 12.1 Notes Subordinated to Senior Indebtedness..................................70
Section 12.2 No Payment on Securities in Certain Circumstances..........................71
Section 12.3 Notes Subordinated to Prior Payment of All Senior Debt on Dissolution,
Liquidation or Reorganization................................................................72
Section 12.4 Securityholders to Be Subrogated to Rights of Holders of Senior Debt.......72
Section 12.5 Obligations of the Company Unconditional...................................73
Section 12.6 Trustee Entitled to Assume Payments Not Prohibited in Absence of
Notice.......................................................................................73
Section 12.7 Application by Trustee of Assets Deposited with It.........................73
Section 12.8 Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Debt............................................................74
Section 12.9 Holders of Notes Authorize Trustee to Effectuate Subordination of
Securities...................................................................................74
Section 12.10 Right of Trustee to Hold Senior Debt.......................................74
Section 12.11 Article XII Not to Prevent Events of Default...............................74
Section 12.12 No Fiduciary Duty of Trustee to Holders of Senior Debt.....................74
ARTICLE XIII
MISCELLANEOUS.....................................................................................75
Section 13.1 TIA Controls...............................................................75
Section 13.2 Notices....................................................................75
Section 13.3 Communications by Holders with Other Holders...............................76
Section 13.4 Certificate and Opinion as to Conditions Precedent.........................76
Section 13.5 Statements Required in Certificate or Opinion..............................76
Section 13.6 Rules by Trustee, Paying Agent, Registrar..................................76
Section 13.7 Legal Holidays.............................................................76
Section 13.8 Governing Law..............................................................76
Section 13.9 No Adverse Interpretation of Other Agreements..............................77
Section 13.10 No Recourse against Others.................................................77
Section 13.11 Successors.................................................................77
</TABLE>
iv
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<TABLE>
<S> <C>
Section 13.12 Duplicate Originals........................................................77
Section 13.13 Severability...............................................................77
Section 13.14 Table of Contents, Headings, Etc...........................................77
SIGNATURES............................................................................................78
</TABLE>
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Unit
Exhibit C - Certificate of Transferor
Note: This Table of Contents shall not, for any purpose, be deemed to be part of
this Indenture.
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<PAGE> 8
INDENTURE, dated as of March 16, 1998, between TRANSAMERICAN REFINING
CORPORA TION, a Texas corporation (the "Company"), and FIRST UNION NATIONAL
BANK, 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 16% Senior
Subordinated Notes due 2003:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Accounts Receivable Subsidiary" means a subsidiary of TEC designated
as an Accounts Receivable Subsidiary for the purpose of financing the accounts
receivable of the Company.
"Accounts Receivable Subsidiary Notes" means the notes to be issued by
the Accounts Receivable Subsidiary for the purchase of accounts receivable.
"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 Net Assets" of a Guarantor means the lesser of (a) the amount
by which the Guarantor's property, at a fair valuation, exceeds the sum of its
debts (including unliquidated or contingent debts), (b) the amount by which the
present fair salable value of the Guarantor's assets exceeds the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured, (c) the amount by which the Guarantor's assets
exceed the maximum amount that would constitute unreasonably small capital for
its business or (d) the amount by which the Guarantor's assets exceed the amount
that such Guarantor should reasonably retain to pay its debts (including
unliquidated or contingent debts) as they mature.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director or controlling shareholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 5% or more of the
voting power of the voting
<PAGE> 9
common equity of such Person (on a fully diluted basis) or of warrants or other
rights to acquire such equity (regardless of whether presently exercisable).
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Alkylation Unit" means the alkylation unit being constructed as part
of the Capital Improvement Program.
"Appraisal" means, when used with respect to the valuation of any
property, an appraisal prepared by an Appraiser as to the Appraised Value of
such property.
"Appraised Value" means, with respect to any property at any date, the
then current fair market value of such property as set forth in the most recent
Appraisal.
"Appraiser" means an independent appraiser of national recognition
qualified to appraise the property appraised.
"Asset Sale" means any direct or indirect conveyance, sale, transfer or
other disposition (including through damage or destruction for which Insurance
Proceeds are paid or by condemnation), in one transaction 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 Series A/B Issue Date or
thereafter acquired; provided, however, that "Asset Sale" shall not include (i)
any disposition of Receivables, Inventory or Equipment, or (ii) 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.
"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 interest borne by the Notes) 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.
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<PAGE> 10
"Capital Improvement Program" means the expansion and improvement
program at the Company as described in the Registration Statement on Form S-4,
as amended, of TEC under the heading "Business of TARC--Capital Improvement
Program" and including both Phase I and Phase II.
"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 or 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
Investors Service, Inc. or Standard & Poor's Corporation, Inc., 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), (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) above or an Eligible Institution, 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,
including deposits denominated in foreign currency, with any Eligible
Institution; provided that all such deposits do not exceed $10,000,000 in the
aggregate at any one time, and (i) demand or fully insured time deposits used in
the ordinary course of business with commercial banks insured by the Federal
Deposit Insurance Corporation.
"CATOFIN(R) Unit" means certain real property currently owned by the
Company as more specifically defined in the security documents relating to the
TEC Notes, together with all personal property of the Company now or hereinafter
located on such real property but only to the extent that such property is part
of a refining unit designed to produce propane and butane mono-olefins using the
CATOFIN(R) process.
"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 Section 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
3
<PAGE> 11
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-days 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."
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"Common Stock" means the Company's common stock, $0.01 par value.
"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 or the retirement of any Debt or 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
4
<PAGE> 12
period, unless such Person or any of its 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.
"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 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 Subsidiary of such Person other
than with respect to Debt of such Person or a Subsidiary of such Person shall be
deemed to be the interest expense attributable to the item guaranteed.
"Consolidated Net Income" of any Person for any period means the net
income (loss) of such Person and its consolidated Subsidiaries for such period,
determined in accordance with GAAP, excluding (without duplication) (i) all
extraordinary, unusual and nonrecurring gains, (ii) the net income, if positive,
of any other Person, other than a consolidated Subsidiary, in which such Person
or any of its consolidated Subsidiaries has an interest, except to the extent of
the amount of any dividends or distributions actually paid in cash to such
Person or a consolidated Subsidiary of such Person during such period, but not
in excess of such Person's pro rata share of such other Person's aggregate net
income earned during such period or earned during the immediately preceding
period and not distributed during such period, (iii) the net income, if
positive, of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition and (iv) the net income, if
positive, of any Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions is not at the time permitted by
5
<PAGE> 13
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule, or governmental regulation applicable to such
Subsidiary.
"Consolidated Net Tangible Assets" means, as of any date, the total
assets of the Company and its Subsidiaries on a consolidated basis as of such
date (less applicable reserves and other items properly deductible from total
assets) and after deduction therefrom: (i) total liabilities and total capital
items as of such date except the following: items constituting Debt,
paid-in-capital and retained earnings, provisions for deferred income taxes and
deferred gains, and reserves which are not reserves for any contingencies not
allocated to any particular purpose; (ii) good will, trade names, trademarks,
patents, unamortized debt discount and expense, and other intangible assets; and
(iii) all Investments other than Permitted Investments.
"Construction Supervisor" means Baker & O'Brien, Inc., as construction
supervisor of the Capital Improvement Program or any successor construction
supervisor appointed pursuant to the Disbursement Agreement.
"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 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 or (f) the Attributable Debt associated with any Sale and Leaseback
Transaction; (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) other than for endorsements, with recourse, of negotiable instruments
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.
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<PAGE> 14
"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.
"Definitive Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A, and that do not include the information called for
by footnotes 1 and 2 thereof.
"Delayed Coking Unit" means the delayed coking unit being constructed
as part of the Capital Improvement Program.
"Depository" means the Person specified in Section 2.3 hereof as the
Depository with respect to the Notes issuable in global form, until a successor
shall have been appointed and become such pursuant to the applicable provision
of this Indenture, and, thereafter, "Depository" shall mean or include such
successor.
"Disbursement Agreement" means the Disbursement Agreement, among TEC,
the Company, the disbursement agent named therein and the Construction
Supervisor, as amended pursuant to the terms thereof.
"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 June 30, 2003.
"DTC" means The Depository Trust Company.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500,000,000 and that is rated "A"
(or higher) according to Moody's Investors Service, Inc. or Standard & Poor's
Corporation, Inc. at the time as of which any investment or rollover therein is
made.
"Equipment" means and includes all of the Company's or any of its
Subsidiaries' now owned or hereafter acquired Vehicles, rolling stock and
related equipment and other assets accounted for as equipment by such Person in
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.
"Equity Offering" of any Person means any Public Equity Offering or any
private placement of any Capital Stock of such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Event of Default" shall have the meaning specified in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
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<PAGE> 15
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement, dated March 16, 1998 between the
Company and Jefferies & Company, Inc. to exchange Series D Notes for Series C
Notes.
"Expense Reimbursement Agreement" means an express reimbursement
agreement pursuant to which the Company will reimburse certain expenses of TEC,
including, without limitation, registration expenses under state and federal
securities laws, franchise taxes, directors' fees and litigation support
expenses.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the Series A/B Issue Date applied on a basis consistent
with that used in the preparation of the audited financial statements of the
Company included in the Offering Circular.
"Gas Purchase Agreement" means the Interruptible Gas Sales Terms and
Conditions between the Company and TransTexas, as in effect on the Series A/B
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.
"Global Note" means a Note in the form of the Note attached hereto as
Exhibit A and that contains the paragraph referred to in footnote 1 and the
additional schedule referred to in footnote 2.
"Guarantee" has the meaning set forth in Section 4.16 hereof.
"Guarantor" means each of the Company's future Subsidiaries that
becomes a guarantor of the Notes and the Company's obligations under this
Indenture in compliance with the provisions of this Indenture.
"Guarantor Senior Debt" means all Debt of a Guarantor created,
incurred, assumed or guaranteed by any Guarantor (and all renewals, extensions,
increases or refundings thereof) (including the principal of, interest on and
fees, premiums, expenses (including costs of collection), indemnities and other
amounts payable in connection with such Debt, and including any
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
Guarantee. Notwithstanding the foregoing, Guarantor Senior Debt does not include
any Debt of the Guarantor to the Company or any Subsidiary or any Unrestricted
Subsidiary.
"HDS Unit" means the hydrodesulfurization unit being constructed as
part of the Capital Improvement Program.
"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.
"Insurance Proceeds" means the interest in and to all proceeds (net of
costs of collection, including attorney's fees) which now or hereafter may be
paid under any insurance policies now or hereafter obtained by or on behalf of
the Company, TARC, TransTexas, or any Guarantor in connection with any assets
thereof,
8
<PAGE> 16
together with interest payable thereon and the right to collect and receive the
same, including, without limitation, proceeds of casualty insurance, title
insurance, business interruption insurance and any other insurance now or
hereafter maintained with respect to such assets.
"Intercompany Loan Redemption" means the redemption by the Company of
all or a portion of the principal amount then outstanding under the TARC
Intercompany Loan together with all accrued and unpaid interest, if any, to and
including the redemption date.
"Interest Payment Date" means the stated due date of an installment of
interest on the Notes.
"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 feedstocks, refined products, chemicals
and catalysts, other supplies and storeroom items and similar items accounted
for as inventory by the Company 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.
"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 if 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 Notes under this
Indenture.
"Junior Security" means any Qualified Capital Stock and any Debt of the
Company or a Guarantor, as applicable, that is subordinated in right of payment
to the Notes or the Guarantees, as applicable, and has no scheduled installment
of principal due, by redemption, sinking fund payment or otherwise, on or prior
to the Stated Maturity of the Notes.
"Legal Holiday" shall have the meaning provided in Section 13.7.
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<PAGE> 17
"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).
"Liquidated Damages" has the meaning provided in the registration
rights agreement relating to the Notes.
"Material Subsidiary" means any Subsidiary of the Company which, as of
the relevant date of determination, would be a "significant subsidiary" as
defined in Reg. ss. 230.405 promulgated pursuant to the Securities Act as in
effect on the Series A/B Issue Date, assuming the Company is the "registrant"
referred to in such definition, except that the 10% amounts referred to in such
definition shall be deemed to be 5%.
"Maturity Date," when used with respect to any Note, means the date on
which the principal of such Note 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.
"Mechanical Completion" means with respect to the Capital Improvement
Program, Phase I, Phase II or any specified unit or component thereof,
sufficient completion of the construction of the Capital Improvement Program,
Phase I, Phase II or any specified unit or component, as the case may be, in
accordance with the Plans, so that the Capital Improvement Program, Phase I,
Phase II or such unit or component, as the case may be, can be operated for its
intended purpose.
"Naphtha Pretreater" means the naphtha pretreater being constructed as
part of the Capital Improvement Program.
"Net Cash Proceeds" means, with respect to any Asset Sale of any
Person, an amount equal to the cash proceeds received (including any cash
proceeds received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, and
excluding any other consideration until such time as such consideration is
converted into cash) therefrom, in each case net of all legal, title and
recording tax expenses, commissions and other fees and expenses incurred, and
all federal, state or local taxes required to be accrued as a liability as a
consequence of such Asset Sale, and in each case net of all Debt secured by such
assets, in accordance with the terms of any Lien upon or with respect to such
assets, or which must, by its terms or in order to obtain a necessary consent to
such Asset Sale to prevent a default or event of default under Senior Debt or by
applicable law, be repaid out of the proceeds from such Asset Sale and that is
actually so repaid.
"Net Debt" of a Person means such Person's outstanding Debt to the
extent recorded in accordance with GAAP, less cash and Cash Equivalents of such
Person, in each case as measured on a consolidated basis and as of the last day
of the measuring period.
"Net Proceeds" means (a) in the case of any sale by a Person of
Qualified Capital Stock, the aggregate net cash proceeds received by such Person
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,
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<PAGE> 18
conversion or surrender of any outstanding securities or Debt of such Person for
or into shares of Qualified Capital Stock of such Person, the net book value of
such outstanding securities as adjusted on the books of such Person or Debt of
such Person 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 such
Person 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 such Person in connection therewith, in each case,
insofar as such payments or expenses are incident to such exchange, exercise,
conversion, or surrender).
"Net Working Capital" of any Person means (i) all current assets of
such Person and its consolidated Subsidiaries, minus (ii) all current
liabilities of such Person and its consolidated Subsidiaries other than the
current portion of long term 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 on 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 105 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 stockholder's 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.
"NNM" means the Nasdaq National Market.
"Non-Recourse Debt" of any Accounts Receivable Subsidiary means Debt of
such Accounts Receivable Subsidiary that (a) is not guaranteed by the Company or
any of its Subsidiaries (other than a guaranty by the Company limited in
recourse to the stock of the Accounts Receivable Subsidiary), (b) is not
recourse to and does not obligate the Company or any of its Subsidiaries (other
than as described in clause (a) above), and (c) does not subject any assets of
the Company (other than Capital Stock of such Accounts Receivable Subsidiary) or
any of its Subsidiaries, to the payment thereof.
"Noteholder" means the Person in whose name a Note is registered on the
Registrar's book.
"Note Redemption" means a redemption of Notes by the Company pursuant
to the redemption provisions of this Indenture.
"Note Repurchase" means a purchase of Notes by the Company, other than
pursuant to a Note Redemption or a Change of Control Offer; provided that all
Notes purchased are delivered to the Trustee for cancellation promptly upon
their receipt by the Company.
"Notes" means the 16% Series C Senior Subordinated Notes due 2003 and
the 16% Series D Senior Subordinated Notes due 2003, in each case as
supplemented from time to time in accordance with the terms hereof, issued under
this Indenture; provided, however, that at any time after, and for so long as,
the Requisite Percentage Amendment is in effect, in determining whether the
Holders of the required Value of Notes have concurred in any direction,
amendment, supplement, waiver or consent, the definition of Notes shall include
the Series A/B Notes.
"NYSE" means the New York Stock Exchange.
"Obligation" means any principal, premium, interest, penalties, fees,
reimbursements, damages, indemnification and other liabilities relating to
obligations of the Company or any Guarantor under the Notes
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<PAGE> 19
or the Indenture, including any liquidated damages pursuant to the registration
rights agreement relating to the Notes.
"Offer Price" shall have the meaning specified in Section 4.14.
"Offer to Purchase" means any offer made by the Company to Holders of
the Securities required by Section 4.14."
"Offering Circular" means the offering circular dated as of March 6,
1998 pursuant to which the Notes were offered.
"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 or by an Officer and an Assistant Secretary
of the Company and otherwise complying with the requirements of Sections 13.4
and 13.5.
"Old TARC Warrants" means the Common Stock Purchase Warrants of the
Company issued on February 23, 1995.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
13.4 and 13.5. Unless otherwise required by the Trustee, the counsel may be
outside counsel to the Company.
"Pari Passu Debt" means any other Debt of the Company that specifically
provides that such Indebtedness is to rank pari passu with the Notes in right of
payment.
"Paying Agent" shall have the meaning specified in Section 2.3.
"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 TARC Entities as part of
their normal business operations as a risk-management strategy or hedge against
adverse changes in the prices of natural gas, feedstock or refined products;
provided, that at the time of such transaction (i) the counter party to any such
transaction is an Eligible Institution or a Person that has an Investment Grade
Rating or has an issue of debt securities or preferred stock outstanding with an
Investment Grade Rating or (ii) such counter party's obligation pursuant to such
transaction is unconditionally guaranteed in full by, or secured by a letter of
credit issued by, 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.
"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
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<PAGE> 20
that are engaged in a Related Business; (iv) Swap Obligations; (v) the receipt
of Capital Stock in lieu of cash in connection with the settlement of
litigation; (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 million in the aggregate outstanding at any time; (vii) margin
deposits in connection with Permitted Hedging Transactions; (viii) an Investment
in one or more Unrestricted Subsidiaries of the Company in an aggregate amount
not in excess of $10,000,000 since the Series A/B Issue Date (net of returns on
investment) plus the assets comprising the CATOFIN(R) Unit owned by the Company
as of the date hereof, less the amount of any Unrestricted Non-Recourse Debt
outstanding of the Company or any of its Subsidiaries; (ix) deposits permitted
by the definition of Permitted Liens or any extension, renewal, or replacement
of any of them, (x) Investments in Accounts Receivables Notes by TARC in an
Accounts Receivable Subsidiary in amounts not to exceed the greater of $20
million or 20% of the TARC Borrowing Base at any one time (xi) Investments by
the Company in a reincorporation subsidiary in connection with the initial
capitalization thereof and not to exceed $1,000 since the Series A/B Issue Date,
(xii) Investments by the Company or any of its wholly owned Subsidiaries in an
aggregate amount not to exceed $250,000 since the Series A/B Issue Date, for the
purpose of facilitating a redemption, repurchase or other retirement for value
of the Old TARC Warrants or the conversion of the Old TARC Warrants into the
right to receive cash, (xiii) a guaranty by a Subsidiary of the Company
permitted under clause (h) of Section 4.11; (xiv) deposits permitted by the
definition of "Permitted Liens" or any extension, renewal, or replacement of any
of them; (xv) other Investments not in excess of $5 million at any time
outstanding, (xvi) loans made (X) 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 (Y) to refinance loans, together with accrued interest thereon made pursuant
to this clause, in each case not in excess of $3 million in the aggregate
outstanding at any one time and (xvii) Investments in money market mutual or
similar funds having assets in excess of $100,000,000.
"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 or any of its
Subsidiaries in accordance with GAAP; (b) statutory Liens of landlords,
carriers, warehousemen, mechanics, materialmen, repairmen, mineral interest
owners, or other like Liens arising by operation of law in the ordinary course
of business provided that (i) the underlying obligations are not overdue for a
period of more than 60 days, or (ii) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect thereto
are maintained on the books of the Company or any of its Subsidiaries in
accordance with GAAP; (c) deposits of cash or Cash Equivalents to secure (i) the
performance of bids, trade contracts (other than borrowed money), leases,
statutory obligations, surety 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 issued to secure such performance
or other obligations) in an aggregate amount outstanding at any one time not in
excess of $5 million or (ii) appeal or supersedeas bonds (or to secure
reimbursement obligations or letters of credit in support of such bonds); (d)
easements, servitudes, 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 any of the TARC Entities) or materially interfere
with the ordinary conduct of the business of any of the TARC Entities including
without limitation, any easement or servitude granted in connection with the
financing of the Storage Assets; (e) 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; (f) Liens securing
Debt or other obligations not in
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<PAGE> 21
excess of $3 million; (g) pledges or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance, other
types of social security legislation, property insurance and liability
insurance; (h) Liens on Equipment, Receivables and Inventory; (i) Liens on the
assets of any entity existing at the time such assets are acquired by any of the
TARC Entities, 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 any of the TARC Entities and (ii) do not extend
to any other assets of any of the TARC Entities; (j) Liens (including extensions
and renewals thereof) on real or personal property, acquired after the Series
A/B Issue Date ("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 improvement or construction) of the item 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 plus
reasonable financing fees and other associated reasonable out-of-pocket expenses
and (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;
(k) leases or subleases granted to others that do not materially interfere with
the ordinary course of business of any of the TARC Entities, taken as a whole;
(l) Liens on the assets of one of the TARC Entities in favor of another TARC
Entity; (m) Liens securing reimbursement obligations with respect to letters of
credit that encumber documents relating to such letters of credit and the
products and proceeds thereof; provided, that, such reimbursement obligations
are not matured for a period of over 60 days; (n) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (o) Liens encumbering
customary initial deposits and margin deposits securing Swap Obligations or
Permitted Hedging Transactions; (p) Liens on cash deposits to secure
reimbursement obligations with respect to letters of credit after the Delayed
Coking Unit is completed; (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 Lien (exclusive of the stock of the applicable
Unrestricted Subsidiary) shall not exceed the amount of allowed Unrestricted
Non-Recourse Debt of the Company; (r) Liens on the proceeds of any property
subject to a Permitted Lien and Liens on the proceeds of any Debt Incurred in
accordance with the provisions hereof, or on deposit accounts containing any
such proceeds; (s) Liens imposed in connection with Debt incurred pursuant to
clause (f) of Section 4.11; provided, that such liens, if not Permitted Liens,
do not extend to property other than the Storage Assets, the proceeds of
financing related to the Storage Assets or deposit accounts containing such
proceeds; and (t) any extension, renewal or replacement of the Liens created
pursuant to any of clauses (a) through (g), (i) through (s) or (u) provided that
such Liens would have otherwise been permitted under such clauses, and provided
further that the Liens, permitted by this clause (t) do not secure any
additional Debt or encumber any additional property; (u) Liens that secure
Senior Debt; and (v) Liens on any property of the Company (or any agreement to
grant such Liens) securing the Series A/B Notes or the Notes.
"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.
"Phase I "has the meaning given to it in the Registration Statement on
Form S-4, as amended, of TEC under the heading "Business of TARC--Capital
Improvement Program."
"Phase I Completion Date" means the date on which the Construction
Supervisor issues a written notice (the "Phase I Completion Notice") to the
Company and the Disbursement Agent certifying that (a) the process units and
supporting facilities included in the definition of "Phase I" have reached
Mechanical
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<PAGE> 22
Completion in accordance with the Plans, and (b) for a period of at least 15
consecutive days, the Company's refinery has sustained (i) the successful
performance of the Delayed Coking Unit, the HDS Unit and the Sulfur Recovery
System, (ii) an average feedstock throughput level of at least 150,000 barrels
per day, and (iii) no net production of vacuum tower bottoms when using as input
a combined feedstock slate with an average API Gravity of 22 degrees or less.
"Phase II" has the meaning given to it in the Registration Statement on
Form S-4, as amended, of TEC under the heading "Business of TARC--Capital
Improvement Program."
"Phase II Completion Date" means the date on which the Construction
Supervisor issues a written notice (the "Phase II Completion Notice") to the
Company and the Disbursement Agent certifying that (a) the process units and
supporting facilities included in the definition of "Phase II" have reached
Mechanical Completion in accordance with the Plans, and (b) for a period of at
least 72 uninterrupted hours, the Company's refinery has sustained (i) the
successful performance of all of the Phase I facilities plus the Fluid Catalytic
Cracking (FCC) Unit, the FCC Flue Gas Scrubber and the Alkylation Unit, (ii) an
average feedstock throughput level of at least 180,000 barrels per day, and
(iii) average production yields (measured as the liquid volume percent of
feedstock throughput) of refined products with a specific gravity of gasoline or
lighter of at least 40% and of middle distillates or lighter of at least 70%,
when using a combined Crude Unit feedstock slate with an average API Gravity of
22 degrees or less.
"Plans" means (a) the plans and specifications prepared by or on behalf
of the Company as used in the Disbursement Agreement, which describe and show
the proposed expansion and modification of the Company's refinery and (b) a
budget prepared by or on behalf of the Company as used in the Disbursement
Agreement.
"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.
"principal amount" when used with respect to a Note means the principal
amount of such Note as indicated on the face of such Note.
"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 any Person pursuant to an effective registration
statement filed with the SEC pursuant to the Securities Act.
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<PAGE> 23
"Publicly Traded Stock" means, with respect to any Person, Capital
Stock of such Person that is registered under Section 12 of the Exchange Act and
actively traded on the New York Stock Exchange or American Stock Exchange or
quoted in the National Association of Securities Dealers Automated Quotation
System (National Market System).
"QIB" shall mean "qualified institutional buyer" as defined in Rule
144A.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Rating Agency" means Standard & Poor's Ratings Group (or any successor
thereto) and Moody's Investors Service, Inc. (or any successor thereto) or, if
either of them shall have ceased to be a "nationally recognized statistical
rating organization" (as defined in Rule 436 under the 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.
"Record Date" means a Record Date specified in the Notes regardless of
whether such Record Date is a Business Day.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption pursuant to this Indenture and
Paragraph 5 in the forms of Note attached hereto as Exhibit A.
"Redemption Price" when used with respect to any Note to be redeemed,
means the redemption price for such redemption pursuant to Paragraph 5 in the
forms 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 this
Indenture.
"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreement" means the registration rights agreement
in connection with the registration under federal securities laws of the Capital
Stock of the Company pledged to the TEC Indenture Trustee under the TEC
Indenture, as in effect on the Series A/B 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 the business of (i) processing, blending,
terminalling, storing, marketing (other than through operating retail gasoline
stations), refining, or distilling crude oil, condensate, natural gas liquids,
petroleum blendstocks or refined products thereof and (ii) after the Phase II
Completion Date, the exploration for, acquisition of, development of,
production, transportation and gathering of crude oil, natural
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<PAGE> 24
gas, condensate and natural gas liquids from outside of the United States and
retail marketing of refined petroleum products.
"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 (whether or not
presently exercisable).
"Restricted Investment" means any direct or indirect Investment by the
Company or any Subsidiary of the Company other than a Permitted Investment.
"Restricted Notes" means the Notes required to bear the legends set
forth in Exhibit A hereto.
"Restricted Payment" means, with respect to any Person, (i) any
Restricted Investment, (ii) any dividend or other distribution on shares of
Capital Stock of such Person or any Subsidiary of such Person, (iii) any payment
on account of the purchase, redemption, or other acquisition or retirement for
value of any shares of Capital Stock of such Person, 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 Pari
Passu Debt or Subordinated 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 Pari Passu Debt or
Subordinated 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 from any of its Subsidiaries,
(iii) any defeasance, redemption, repurchase, or other acquisition or retirement
for value, in whole or in part, of any Pari Passu Debt or Subordinated 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
Services Agreement, the Expense Reimbursement Agreement, the Office Leases, the
Transfer Agreement or the Tax Allocation Agreement, (v) any redemption,
repurchase or other retirement for value of the Old TARC Warrants by the
Company, including any premium paid thereon, (vi) the redemption, purchase,
retirement or other acquisition of any Debt including any premium paid thereon,
with the proceeds of any refinancing Debt permitted to be incurred pursuant to
clause (o) of the covenant described herein under the heading "Limitation on the
Incurrences of Additional Debt and Issuances of Disqualified Capital Stock,"
(vii) the purchase by the Company of shares of Capital Stock of the Company,
TransTexas or TTXD in connection with each of its employee benefit plans,
including without limitation any employee stock ownership plans or any employee
stock option plans, in an aggregate amount not to exceed 7% of the aggregate
market value of the voting stock held by nonaffiliates of the issuer measured
from the date of the first such purchase, (viii) distributions of common stock
of TransTexas to TEC, and (ix) any dividend or other distribution on the Capital
Stock of any Subsidiary of the Company.
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<PAGE> 25
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.
"Sale and Leaseback Transaction" means an arrangement relating to
property owned on the Series A/B 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.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Debt" means, all Debt of the Company, including, without
limitation, the TARC Discount Notes, the TARC Mortgage Notes, the TARC Working
Capital Note and the TARC 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 Series A/B Notes or 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.
"Series A/B Guarantees" means those subsidiary guarantees of the Series
A/B Notes issued pursuant to the Series A/B Indenture.
"Series A/B Indenture" means the Indenture dated as of December 30,
1997 between the Company and First Union National Bank, as trustee, providing
for the issuance of the Series A/B Notes, as such may be amended and
supplemented from time to time.
"Series A/B Issue Date" means the date on which the Series A/B Notes
were originally issued under the Series A/B Indenture, as such may be amended or
supplemented from time to time.
"Series A/B Notes" means the Company's 16% Senior Subordinated Notes
due 2003 issued pursuant to the Series A/B Indenture.
"Series C Notes" means the Company's 16% Series C Senior Subordinated
Notes due 2003 issued pursuant to the Indenture.
"Series D Notes" means the Company's 16% Series D Senior Subordinated
Notes due 2003, issued in exchange for the Series C Notes pursuant to the
Indenture.
"Services Agreement" means the Services Agreement among TNGC Holdings
and its Subsidiaries, as in effect on the Series A/B 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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"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 June 30,
2003.
"Storage Assets" means the following assets existing or under
construction in or near the Company's refinery: (i) the Prospect Road tank farm
and other tanks; (ii) certain dock improvements; (iii) the dock vapor recovery
system; (iv) the coke handling system; (v) the refinery waste water treatment
facility; (vi) tankage for liquefied petroleum gas and (vii) the assets adjacent
to the refinery purchased on September 19, 1997.
"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 Notes is paid in full and (ii) is subordinate and junior in
right of payment to the Notes in the event of a 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 (i) for the purposes of
the Indenture provisions "Subsidiary Guarantees," and "Limitation on
Transactions with Related Persons" a joint venture an investment in which would
constitute a Permitted Investment, provided that, for purposes of the covenant
described herein under the heading "Limitation on Transactions with Related
Persons," such investment is not with a Related Person other than 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 or (ii) any Unrestricted Subsidiary of such Person.
"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,
and any successor corporation pursuant to the terms of the provision described
under Article V.
"TARC Borrowing Base" means, as of any date, an amount equal to the sum
of (a) 90% 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) 85% 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
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a specific date, the Company may utilize, to the extent reasonable, the most
recent available information for purposes of calculating the TARC Borrowing
Base.
"TARC Discount Notes" means the Guaranteed First Mortgage Discount
Notes due 2002 issued by TARC and guaranteed by TEC.
"TARC Entities" means TARC and each of its Subsidiaries.
"TARC Intercompany Loan" means the senior secured promissory note from
the Company to TEC in the fully accreted principal amount of $920,000,000 upon
substantially the terms described in the Registration Statement on Form S-4, as
amended, of TEC under the heading "Description of Existing Indebtedness--TARC
Intercompany Loan."
"TARC Mortgage Notes" means the Guaranteed First Mortgage Notes due
2002 issued by TARC and guaranteed by TEC.
"TARC Working Capital Note" means the promissory note from the Company
to TEC dated as of July 31, 1997.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated as
of August 24, 1993, among TNGC Holdings Corporation, the Company, TEC and other
subsidiaries of TNGC Holdings Corporation as in effect on the Series A/B 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 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.
"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, TransTexas Transmission Corporation, and John R.
Stanley, as in effect on the Series A/B 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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"TransTexas" means TransTexas Gas Corporation, a Delaware corporation.
"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.
"TTXD" means TransTexas Drilling Services, Inc., a Delaware corporation
or a newly formed corporation which is initially a wholly owned Subsidiary of
TransTexas formed for the purpose of receiving certain drilling assets of
TransTexas.
"Units" means the Units consisting of $25,000,000 aggregate principal
amount of Notes and 25,000 Warrants, issued by the Company. Each Unit consists
of one Note in the principal amount of $1000 and one Warrant to purchase
13.344257 shares of the Company's common stock, par value $.01 per share.
"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 clause (ii) below) 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 clause (ii) below) 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 the Indenture) and (ii) guarantees of the Debt of
Unrestricted Subsidiaries of such Person; provided, that the aggregate of all
Debt of such Person 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 20% of
TARC's Consolidated EBITDA since the Phase II Completion Date in the case of
TARC plus in the case of clause (ii) of this definition of Unrestricted Non-
Recourse Debt, 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 Series A/B 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 described under 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
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pursuant to the provisions described under 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 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.
"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.
"Value" means, as of any date, the outstanding principal amount of the
Notes, plus all accrued and unpaid interest thereon.
"Vehicles" means all trucks, automobiles, trailers and other vehicles
covered by a certificate of title.
"Voting Stock" means Capital Stock of a Person having generally the
right to vote in the election of directors of such Person.
"Warrant" means any one of the warrants to purchase shares of Common
Stock issued by the Company pursuant to the Warrant Agreement.
"Warrant Agent" means First Union National Bank, in its capacity as
Warrant Agent under the Warrant Agreement, and any successor thereto.
"Warrant Agreement" means the Warrant Agreement, dated March 16, 1998,
by and between the Company and the Warrant Agent.
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 Notes.
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"indenture securityholder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Notes means the Company and any other obligor on the
Notes.
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 accor dance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(7) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated
otherwise.
ARTICLE II
THE NOTES
Section 2.1 Form and Dating. Subject to Section 2.15, the Notes and the
Trustee's certificate of authentication, in respect thereof, shall be
substantially in the form of Exhibit A, the terms of which are incorporated in
and made a part of this Indenture. The Notes 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 Notes and any notation, legend or
endorsement on them. Any such notations, legends or endorsements not contained
in the forms of Note attached as Exhibit A hereto shall be delivered in writing
to the Trustee. Each Note shall be dated the date of its authentication.
The terms and provisions contained in the forms of Note 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 this Indenture,
this Indenture controls.
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The Notes will be issued (i) in global form (the "Global Note"),
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 2 thereto) and (ii) in definitive form (the
"Definitive Notes"), substantially in the form of Exhibit A attached hereto
(excluding the text referred to in footnotes 1 and 2 thereto). The Global Note
shall represent the aggregate amount of outstanding Notes from time to time
endorsed thereon; provided, that the aggregate amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the Global
Note to reflect the amount of any increase or decrease in the amount of
outstanding Notes represented thereby shall be made by the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
Section 2.2 Execution and Authentication. Two Officers shall sign, or
one Officer shall sign and one Officer or any Assistant Secretary shall attest
to, the Notes or the Units, as the case may be, for the Company by manual or
facsimile signature. The Company's seal shall be impressed, affixed, imprinted
or reproduced on the Notes or Units, as the case may be, and may be in facsimile
form.
If an Officer whose signature is on a Note or Unit, as the case may be,
was an Officer at the time of such execution but no longer holds that office at
the time the Trustee authenticates the Note or Unit, as the case may be, the
Note or Unit, as the case may be, shall be valid nevertheless and the Company
shall nevertheless be bound by the terms of the Notes or Units, as the case may
be and this Indenture.
A Note or Warrant, as the case may be, shall not be valid until an
authorized signatory of the Trustee manually signs the certificate of
authentication on the Note or Unit, as the case may be, but such signature shall
be conclusive evidence that the Note or Unit, as the case may be, has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Notes or Units, as the case may be, for
original issue in the aggregate principal amount of $25,000,000, upon a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Notes or Units, as the case may be, to
be authenticated and the date on which the Notes or Units, as the case may be,
are to be authenticated. The aggregate principal amount of Notes or Units, as
the case may be, outstanding at any time may not exceed $25,000,000 in aggregate
principal amount, 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 Notes or Units, as the case may be, in substitution of Notes or
Units, as the case may be, originally issued to reflect any name change of the
Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes or Units, as the case may be. Unless otherwise
provided in the appointment, an authenticating agent may authenticate Notes or
Units, as the case may be, 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.
Notes 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 Notes may be presented for registration
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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 Notes may be presented for
payment ("Paying Agent"). Notices and demands to or upon the Company in respect
of the Notes may be served as is provided in Section 13.2. The Company or any
Affiliate of the Company 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, neither
the Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Notes 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.
The Company initially appoints DTC to act as Depository with respect to
the Global Notes. The Trustee shall act as custodian for the Depository with
respect to the Global Notes.
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 Notes (whether such assets have been distributed to it by the Company or any
other obligor on the Notes), and shall notify the Trustee in writing of any
Default in making any such payment. If the Company or any 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 any Affiliate of
the Company) shall have no further liability for such assets.
Section 2.5 Noteholder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee on or before the third Business Day preceding each
Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee reasonably may
require of the names and addresses of Holders.
Section 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request (1) to register the
transfer of the Definitive Notes or (2) to exchange such Definitive Notes for an
equal principal amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such trans actions are met; provided, that the Definitive
Notes so presented (A) have been duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing; and (B) in the case
of a Restricted Note, such request shall be accompanied by the following
additional documents:
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(i) if such Restricted Note is being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification to that effect (in substantially the
form of Exhibit C attached hereto); or
(ii) if such Restricted Note is being transferred to a QIB in
accordance with Rule 144A or pursuant to an effective registration
statement under the Securities Act, a certification to that effect (in
substantially the form of Exhibit C attached hereto); or
(iii) if such Restricted Note is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially the
form of Exhibit C attached hereto) and an opinion of counsel reasonably
acceptable to the Company and the Registrar to the effect that such
transfer is in compliance with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a Global
Note. A Definitive Note may be exchanged for a beneficial interest in a Global
Note only upon receipt by the Trustee of a Definitive Note, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) written instructions directing the Trustee to make an
endorsement on the Global Note to reflect an increase in the aggregate
principal amount of the Notes represented by the Global Note, and
(ii) if such Definitive Note is a Restricted Note, a
certification (in substantially the form of Exhibit C attached hereto)
to the effect that such Definitive Note is being transferred to a QIB
in accordance with Rule 144A;
in which case the Trustee shall cancel such Definitive Note and cause the
aggregate principal amount of Notes represented by the Global Note to be
increased accordingly. If no Global Note is then outstanding, the Company shall
issue and the Trustee shall authenticate a new Global Note in the appropriate
principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depository in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a Definitive
Note. Upon receipt by the Trustee of written transfer instructions (or such
other form of instructions as is customary for the Depository), from the
Depository (or its nominee) on behalf of any Person having a beneficial interest
in a Global Note, the Trustee shall, in accordance with the standing
instructions and procedures existing between the Depository and the Trustee,
cause the aggregate principal amount of Global Notes to be reduced accordingly
and, following such reduction, the Company shall execute and the Trustee shall
authenticate and make available
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for delivery to the transferee a Definitive Note in the appropriate principal
amount; provided, that in the case of a Restricted Note, such instructions shall
be accompanied by the following additional documents:
(i) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial owner, a
certification to that effect (in substantially the form of Exhibit C
attached hereto); or
(ii) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A or pursuant to an effective registration
statement under the Securities Act, a certification to that effect (in
substantially the form of Exhibit C attached hereto); or
(iii) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit C attached hereto) and, if the Trustee deems it
appropriate, an opinion of counsel reasonably acceptable to the Company
and to the Registrar to the effect that such transfer is in compliance
with the Securities Act.
Definitive Notes issued in exchange for a beneficial interest in a
Global Note shall be registered in such names and in such authorized
denominations as the Depository shall instruct the Trustee.
(e) Transfer and Exchange of Global Notes. Notwithstanding any other
provision of this Indenture, the Global Note may not be transferred as a whole
except by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository; provided, that if:
(i) the Depository notifies the Company that the Depository
is unwilling or unable to continue as Depository and a successor
Depository is not appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of Definitive Notes
under this Indenture,
then the Company shall execute and the Trustee shall authenticate and make
available for delivery, Definitive Notes in an aggregate principal amount equal
to the aggregate principal amount of the Global Note in exchange for such Global
Note.
(f) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in the Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or cancelled, the Global Note shall be
returned to or retained and cancelled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in the Global Note is exchanged for
Definitive Notes, redeemed, repurchased
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or cancelled, the aggregate principal amount of Notes represented by such Global
Note shall be reduced accordingly and an endorsement shall be made on such
Global Note by the Trustee to reflect such reduction.
(g) General Provisions Relating to Transfers and Exchanges of Notes. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Definitive Notes and Global Notes at the
Registrar's request. All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes shall
be legal, valid and binding obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Definitive
Notes or Global Notes surrendered upon such registration of transfer or
exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange (without transfer to another person) pursuant to Sections
2.10, 3.1, 4.14, 4.21, 4.24, Article XI and 9.5 of this Indenture).
The Company shall not be required to (i) issue, register the transfer
of or exchange Notes during a period beginning at the opening of business 15
days before the day of any selection of Notes for redemption under Section 3.2
hereof and ending at the close of business on the day of selection; or (ii)
register the transfer of or exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part; or (iii) register the transfer of or exchange a Note between a record date
and the next succeeding interest payment date.
Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for all
purposes, and neither the Trustee, any Agent nor the Company shall be affected
by notice to the contrary.
(h) Exchange of Series C Notes for Series D Notes. The Series C Notes
may be exchanged for Series D Notes pursuant to the terms of the Exchange Offer.
The Trustee and Registrar shall make the exchange as follows:
The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(A) upon issuance of the Series D Notes, the transactions
contemplated by the Exchange Offer have been consummated; and
(B) the principal amount of Series C Notes properly tendered in
the Exchange Offer that are represented by a Global Note and
the principal amount of Series C Notes properly tendered in
the Exchange Offer that are represented by Definitive Notes,
the name of each Holder of such Definitive Notes, the
principal amount at maturity properly tendered in the Exchange
Offer by each such Holder and the name and address to which
Definitive Notes for Series D Notes shall be registered and
sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate and (ii) an
Opinion of Counsel (x) to the effect that the Series D Notes have been
registered under Section 5 of the Securities Act and this Indenture has been
qualified under the TIA and (y) with respect to the matters set forth in Section
6 of the registration rights agreement relating to the Notes, shall authenticate
(A) a Global Note for Series D Notes in an
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aggregate principal amount equal to the aggregate principal amount of Series C
Notes represented by a Global Note indicated in such Officers' Certificate as
having been properly tendered and (B) Definitive Notes representing Series D
Notes registered in the names of, and in the principal amounts indicated in such
Officers' Certificate.
If the principal amount at maturity of the Global Note for the Series D
Notes is less than the principal amount at maturity of the Global Note for the
Series C Notes, the Trustee shall make an endorsement on such Global Note for
Series C Notes indicating a reduction in the principal amount at maturity
represented thereby.
The Trustee shall deliver such Definitive Notes for Series D Notes to
the Holders thereof as indicated in such Officers' Certificate.
Section 2.7 Replacement Notes. If a mutilated Note is surrendered to
the Trustee or if the Holder of a Note claims and submits an affidavit or other
evidence, satisfactory to the Company and Trustee, to the Trustee to the effect
that the Note has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Note 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 Note is replaced. The
Company and the Trustee may charge such Holder for its reasonable, out-of-pocket
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company.
Section 2.8 Outstanding Notes. Notes outstanding at any time are all
the Notes that have been authenticated by the Trustee except those cancelled by
it, those delivered to it for cancellation, those reductions in the interest in
a Global Note effected by the Trustee in accordance with the provisions hereof,
and those described in this Section 2.8 as not outstanding. A Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note, except as provided in Section 2.9.
If a Note is replaced pursuant to Section 2.7 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note 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 Notes payable on that date, then on and after that date such Notes cease
to be outstanding and interest on them ceases to accrue.
Section 2.9 Treasury Notes. In determining whether the Holders of the
required Value of Notes have concurred in any direction, amendment, supplement,
waiver or consent, Notes owned by the Company and Affiliates of the Company
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 Notes that the Trustee knows or has reason
to know are so owned shall be disregarded.
Section 2.10 Temporary Notes. Until definitive Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the
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form of definitive Notes but may have variations that the Company reasonably and
in good faith considers appropriate for temporary Notes. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Notes in exchange for temporary Notes. Until so exchanged, the temporary Notes
shall in all respects be entitled to the same benefits under this Indenture as
permanent Notes authenticated and delivered hereunder.
Section 2.11 Cancellation. The Company at any time may deliver Notes to
the Trustee for cancellation. The Registrar and the Paying Agent shall forward
to the Trustee any Notes 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 any Affiliate of the Company, and no one else,
shall cancel and, at the written direction of the Company, shall dispose of all
Notes surrendered for transfer, exchange, payment or cancellation. Subject to
Section 2.7, the Company may not issue new Notes to replace Notes it has paid or
delivered to the Trustee for cancellation. No Notes shall be authenticated in
lieu of or in exchange for any Notes cancelled as provided in this Section 2.11,
except as expressly permitted in the forms of Note and as permitted by this
Indenture.
Section 2.12 Defaulted Interest. Interest on any outstanding 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 outstanding Note 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 Notes (or their respective predecessor Notes) 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 Note and the date of the proposed payment, and at
the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the persons entitled to such Defaulted Interest as
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 set forth upon the registry books of the Company 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 Notes (or their
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respective predecessor Notes) 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 Notes 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 Note
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Note shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Note.
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.
Section 2.14 Legends.
(a) Except as permitted by subsections (b) or (c) hereof, each Note
shall bear legends relating to restrictions on transfer pursuant to the
securities laws in substantially the form set forth on Exhibit A or Exhibit B
attached hereto, as applicable.
(b) Upon any sale or transfer of a Restricted Note (including any
Restricted Note represented by a Global Note) pursuant to Rule 144 under the
Securities Act or pursuant to an effective registration statement under the
Securities Act:
(i) in the case of any Restricted Note that is a Definitive
Note, the Registrar shall permit the Holder thereof to exchange such
Restricted Note for a Definitive Note that does not bear the legends
required by subsection (a) above; and
(ii) in the case of any Restricted Note represented by a
Global Note, such Restricted Note shall not be required to bear the
legends required by subsection (a) above, but shall continue to be
subject to the provisions of Section 2.6(c) or (k), as applicable,
hereof; provided, that with respect to any request for an exchange of a
Restricted Note that is represented by a Global Note for a Definitive
Note that does not bear the legends required by subsection (a) above,
which request is made in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar that such request is being
made pursuant to Rule 144.
(c) The Company shall issue and the Trustee shall authenticate Series D
Notes in exchange for Series C Notes accepted for exchange in the Exchange
Offer. The Series D Notes shall not bear the legends required by subsection (a)
above unless the Holder of such Series D Notes is either (A) a broker-dealer who
purchased such Series D Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act, (B) a
Person participating in the distribution of the Series D Notes or (C) a Person
who is an affiliate (as defined in Rule 144A) of the Company.
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Separation of Notes and Warrants. The Notes and the Warrants that
comprise the Units shall not be separately transferable until the earlier of (i)
one year from the Series A/B Issue Date, (ii) commencement of the Exchange Offer
and (iii) such other date as may be determined by Jefferies & Company, Inc.
The Units and the beneficial interest in the Notes and the Warrants
that comprise the Units shall be evidenced only by one or more certificates in
substantially the form of Exhibit B hereto, the terms of which are incorporated
in and made a part of this Indenture. The terms of the Warrants are governed by
the Warrant Agreement and are subject to the terms and provisions contained
therein. If any Units are presented for registration of transfer or exchange in
accordance with the terms of this Indenture and the Warrant Agreement, or if the
Warrants evidenced thereby are exercised, the Company shall cause the Trustee,
the Registrar or the Warrant Agent, as appropriate, to issue certificates
evidencing the Notes and the Warrants (to the extent unexercised) in lieu of
such Units. In accordance with the Warrant Agreement, fractional Warrants will
not be issued upon separation of the Notes and Warrants, but in lieu thereof, a
cash adjustment will be paid.
The provisions of Section 2.1 through 2.14, to the extent applicable to
the Notes, shall also apply to the Notes evidenced by any Units.
ARTICLE III
REDEMPTION
Section 3.1 Right of Redemption. Redemption of Notes, as permitted or
required by any provision of this Indenture, shall be made in accordance with
such provision and this Article III. The Company may redeem at its election, at
any time on or after the Issue Date, any or all of the Notes in cash at the
applicable Redemption Prices specified in Paragraph 5 of the forms of Note
attached as Exhibit A hereto, set forth therein under the caption "Optional
Redemption," including accrued and unpaid interest, if any, to the Redemption
Date.
Section 3.2 Notices to Trustee. If the Company elects to redeem Notes
pursuant to Paragraph 5 of the Notes, it shall notify the Trustee in writing of
the Redemption Date and the principal amount of Notes 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 Notes to Be Redeemed. If less than all of the
Notes are to be redeemed pursuant to Paragraph 5 thereof, the Trustee shall
select the Notes to be redeemed pro rata, by lot or in such other manner as in
its sole discretion it deems appropriate and fair, and in such manner as
complies with any applicable legal and stock exchange requirements.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption and shall promptly notify the Company in
writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the principal amount thereof to be redeemed.
Notes in denominations of $1,000 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 Notes that have denominations larger
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than $1,000. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes 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 Notes
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. 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 conditions determined by the Company in its sole discretion. Each
notice for redemption shall identify the Notes 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 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 Notes 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 Notes called for
redemption ceases to accrue and/or the original issue
discount ceases to accrete on Notes called for redemption
on and after the Redemption Date and the only remaining
right of the Holders of such Notes is to receive payment
of the Redemption Price, including accrued and unpaid
interest, upon surrender to the Paying Agent of the Notes
called for redemption and to be redeemed;
(6) if any Note is being redeemed in part, the portion of the
principal amount, equal to $1,000 or any integral
multiple thereof, of such Note that will not be redeemed
and that, after the Redemption Date, and upon surrender
of such Note, a new Note or Notes in aggregate principal
amount equal to the unredeemed portion thereof will be
issued;
(7) if less than all the Notes are to be redeemed, the
identification of the particular Notes (or portion
thereof) to be redeemed, as well as the aggregate
principal amount of such Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding
after such partial redemption;
(8) the CUSIP number of the Notes to be redeemed; and
(9) that the notice is being sent pursuant to this Section
3.4 and pursuant to the redemption provisions of
Paragraph 5 of the Notes.
Section 3.5 Effect of Notice of Redemption. Once notice of redemption
is mailed in accordance with Section 3.4, Notes called for redemption become due
and payable on the Redemption Date and at the
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Redemption Price, including accrued and unpaid interest; provided, however,
that 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 conditions determined by the Company in its
sole discretion. Upon surrender to the Trustee or Paying Agent, such Notes
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 through the date of redemption
shall be payable to the Holder of the redeemed Notes registered on the relevant
Record Date; and provided, further, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Upon compliance by the Company with the provisions of this Article
III, including but not limited to Section 3.6, 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 Notes
called for redemption will cease to accrue, and/or the original issue discount
will cease to accrete on the Notes called for redemption, on and after the
Redemption Date, regardless of whether such Notes 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 Notes to
be redeemed on such Redemption Date (other than Notes or portions thereof
called for redemption on that date that have been delivered by the Company to
the Trustee for cancellation). The Paying Agent shall promptly return to the
Company any U.S. Legal Tender so deposited which is not required for that
purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III, interest on the Notes to be redeemed will cease
to accrue on the applicable Redemption Date, and/or the original issue discount
will cease to accrete on the Notes to be redeemed on the applicable Redemption
Date, regardless of whether such Notes are presented for payment.
Notwithstanding anything herein to the contrary, if any Note surrendered for
redemption in the manner provided in the Notes 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 Note.
Section 3.7 Notes Redeemed in Part. Upon surrender of a Note 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 Note or
Notes equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE IV
COVENANTS
Section 4.1 Payment of Notes. The Company shall pay the principal of
and interest on the outstanding Notes on the dates and in the manner provided
in the Notes to the Trustee at its New York agent's office unless otherwise
instructed in writing by the Trustee. An installment of principal of or
interest on the
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Notes 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. The Company shall pay any and all amounts, including without
limitation, Liquidated Damages, if any, on the dates and in the manner required
under the registration rights agreement relating to the Notes.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Notes 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 Notes.
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 Notes may be presented or surrendered for payment, where
Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Notes 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 13.2.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan in the City of New York, New York, for such purposes. The
Company shall give prior written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency. The Company hereby initially designates the corporate trust office of
the Trustee in the Borough of Manhattan in the City of New York, New York, as
such office of the Company.
Section 4.3 Limitation on Restricted Payments. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, make
any dividend or other distribution on shares of Capital Stock of the Company or
any Subsidiary of the Company or make any payment on account of the purchase,
redemption, or other acquisition or retirement for value of any such shares of
Capital Stock unless such dividends, distributions, or payments are made in
cash or Capital Stock or a combination thereof. In addition, the Company shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
make any Restricted Payment; provided, however, that the Company may make a
Restricted Payment if, at the time or after giving effect thereto on a pro
forma basis no Default or Event of Default would occur or be continuing, and:
(a) the Company's Consolidated Fixed Charge Coverage Ratio
exceeds 2.25 to 1; and
(b) the aggregate amount of all Restricted Payments made by
all of the TARC Entities, including such proposed Restricted Payment and all
payments that may be made pursuant to the proviso at the end of this sentence
(if not made in cash, then the fair market value of any property used
therefor), from and after the Series A/B Issue Date and on or prior to the date
of such Restricted Payment, would not exceed an amount equal to (x) 50% of
Adjusted Consolidated Net Income of the Company accrued for the period
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(taken as one accounting period) from the first full fiscal quarter that
commenced after the Series A/B Issue Date to and including the fiscal quarter
ended immediately prior to the date of each calculation for which financial
statements are available (or, if the Company's Adjusted Consolidated Net Income
for such period is a deficit, then minus 100% of such deficit), plus (y) the
aggregate Net Proceeds received by the Company from the issuance or sale (other
than to a Subsidiary of the Company) of its Qualified Capital Stock from and
after the Series A/B Issue Date and on or prior to the date of such Restricted
Payment, minus (z) 100% of the amount of any write-downs, write-offs, other
negative revaluations, and other negative extraordinary charges not otherwise
reflected in the Company's Adjusted Consolidated Net Income during such period;
and
provided, that 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; 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.
Section 4.6 Maintenance of Properties and Insurance.
(a) Each of the Company and its Subsidiaries 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) Each of the Company and its Subsidiaries shall provide, or
shall cause to be provided, for itself and each of its Subsidiaries, 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 business of such Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as is customary, in its reasonable, good faith
opinion, and adequate and
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appropriate for the conduct of its business and the business of its
Subsidiaries in a prudent manner for companies engaged in a similar business.
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 (excluding those obligations addressed
by Section 12.3) 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,
4.11 or 4.14.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, immediately upon becoming aware of any Default or Event
of Default under this Indenture, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto. The Trustee shall not be deemed to have
knowledge of a Default or an Event of Default unless one of its trust officers
receives notice of the Default giving rise thereto from the Company or any of
the Holders.
(d) The Company shall deliver to the Trustee an Officers'
Certificate specifying any changes in the composition of the Board of Directors
of the Company or any of its Subsidiaries or of any amendment to the charter or
bylaws of the Company or any of its Subsidiaries. The Officers' Certificate
shall include a description in reasonable detail of such amendment or change
and an explanation why such amendment or change does not constitute a Default
or Event of Default.
Section 4.8 SEC Reports. The Company shall deliver to the Trustee and
each Holder, within 15 days after it files the same with the SEC, copies of all
reports and information (or copies of such portions of any of the foregoing as
the SEC may by rules and regulations prescribe), if any, which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. The Company shall include in all such reports and information a summary
of the status of the Company's Capital Improvement Program, including a
description of sources of funds available for the completion of the Capital
Improvements Program. The Company agrees to continue to be subject to and
comply with the filing and reporting requirements of the Commission as long as
any of the Notes are outstanding.
Concurrently with the reports delivered pursuant to the preceding
paragraph, the Company shall deliver to the Trustee and to each Holder annual
and quarterly financial statements with appropriate footnotes of the Company
and its Subsidiaries, all prepared and presented in a manner substantially
consistent with
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those of the Company required by the preceding paragraph. The Company shall
also comply with the other provisions of TIA Section 314(a).
So long as is required for an offer or sale of the Notes to qualify
for an exemption under Rule 144A, the Company shall, upon request, provide the
information required by clause (d)(4) thereunder to each Holder and to each
beneficial owner and prospective purchaser of Notes identified by any Holder of
Restricted Notes.
Section 4.9 Limitation on Status as Investment Company or Public
Utility Company. The Company shall not, and shall not permit any of its
Subsidiaries to, become an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or a "holding company," or "public
utility company" (as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended) or otherwise become subject to regulation
under the Investment Company Act or the Public Utility Holding Company Act.
Section 4.10 Limitation on Transactions with Related Persons.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, enter directly or indirectly into, or permit to exist, any
transaction or series of related transactions with any Related Person
(including, without limitation: (i) the sale, lease, transfer or other
disposition of properties, assets or securities to such Related Person, (ii)
the purchase or lease of any property, assets or securities from such Related
Person, (iii) an Investment in such Related Person (excluding Investments
permitted to be made pursuant to clauses (iii), (vi), (viii), (x), (xi), (xii),
and (xvi) of the definition of "Permitted Investment"), 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", (B) transactions made in good faith, the
terms of which are (x) fair and reasonable to the Company or such Subsidiary,
as the case may be, and (y) at least as favorable as the terms which could be
obtained by the Company or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with Persons who are not Related
Persons, (C) transactions between the Company and any of its Wholly Owned
Subsidiaries or transactions between Wholly Owned Subsidiaries of the Company,
(D) transactions pursuant to the Services Agreement, the Transfer Agreement,
the Tax Allocation Agreement, the Gas Purchase Agreement, the Expense
Reimbursement Agreement, the TARC Intercompany Loan and related security
documents, and the Registration Rights Agreement (E) the lease of office space
to the Company or an Affiliate of the Company by TransAmerican or an Affiliate
of TransAmerican, provided that payments thereunder do not exceed in the
aggregate $200,000 per year, (F) any employee compensation arrangement in an
amount which together with the amount of all other cash compensation paid to
such employee by the Company and its Subsidiaries does not provide for cash
compensation in excess of $5,000,000 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, (G) loans
to the Company which are permitted to be Incurred pursuant to the terms of
Section 4.11; (H) the amounts payable by the TEC and its Subsidiaries to
Southeast Contractors for employee services provided to the Company not
exceeding the actual costs to Southeast Contractors of the employees, which
costs consist solely of payroll and employee benefits, plus related
administrative costs and an administrative fee, not exceeding $2,000,000 per
year in the aggregate; and (I) 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, except for sales of accounts
receivable to an Accounts Receivable Subsidiary in accordance with Section
4.20, (i) with respect to any Related Person Transaction or series of Related
Person Transactions (other than any Related Person Transaction described in
clause (A) (with respect to Permitted Restricted Payments by virtue of clauses
(i), (ii), (iv), (vii), (ix), (x) or (xi) of the proviso contained in the
definition of "Restricted Payments"), (C), (D), (E), 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
which could be obtained by the Company or such Subsidiary, as the case may be,
on an arm's length basis with Persons who are not Related Persons, and (ii)
with respect to any Related Person Transaction or series of related Person
Transactions (other than any Related Person Transaction described in clause (A)
(with respect to permitted Restricted Payments by virtue of clauses (i), (ii),
(iv), (vii), (ix), (x) or (xi) of the proviso contained in the definition of
"Restricted Payments") (C), (D), (E) 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 Series A/B Issue Date, the Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume, guarantee, or otherwise become liable for, contingently or
otherwise (to "Incur" or, as appropriate, an "Incurrence"), any Debt or issue
any Disqualified Capital Stock, except : (a) Debt evidenced by the Series A/B
Notes, the Notes, the Series A/B Guarantees and the Guarantees in an aggregate
principal amount not to exceed $200 million; (b) Debt evidenced by the TARC
Intercompany Loan and any other Debt at any time owing by any of the TARC
Entities to TEC in an aggregate outstanding principal amount, when added to the
then outstanding principal amount of the TARC Intercompany Loan and any other
Debt incurred pursuant to this clause (b) or pursuant to clause (o) below to
replace, extend, renew or refund Debt incurred pursuant to this clause (b), at
any one time outstanding not in excess of $920 million less any amount repaid
pursuant to paragraph (c) (i) of the covenant described herein under Section
4.14 hereof; (c) Subordinated Debt of the Company solely to any wholly owned
Subsidiary of the Company, or Debt of any wholly owned Subsidiary of the
Company solely to the Company or to any wholly owned Subsidiary of the Company;
(d) Debt of the Company outstanding at any time in an aggregate principal
amount not to exceed the greater of (x) $100 million or (y) the TARC Borrowing
Base, less, in each case, the amount of any Debt of an Accounts Receivable
Subsidiary (other than Debt owed to the Company); (e) Debt in an aggregate
principal amount not to exceed at any one time $50 million; (f) Debt secured by
the Storage Assets in an aggregate amount outstanding at any one time not to
exceed $115 million; (g) Debt secured by a Permitted Lien that meets the
requirements of clause (c), (g), (m), (o) and (r) of the definition of
"Permitted Liens," to the extent that such Liens would give rise to Debt under
clauses (i), (ii), or (iii) of the definition of "Debt;" (h) Any guaranty of
Debt incurred pursuant to clauses (d), (e), (g) or (n) hereof which guaranty
shall not be included in the determination of the amount of Debt which may be
Incurred pursuant to (d), (e), (g) or (n) hereof; (i) Swap Obligations of the
Company; (j) Unrestricted Non-Recourse Debt of the Company; (k) Debt evidenced
by the TARC Mortgage Notes; (l) letters of credit and reimbursement obligations
relating thereto to the extent collateralized by cash or Cash Equivalents; (m)
Debt evidenced by the TARC Discount Notes; (n) Debt of TARC or any of its
Subsidiaries owed to TEC which is loaned pursuant to terms of the fourth
paragraph of either of the covenants contained
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under the headings "--Excess Cash" and "--Additional Interest Excess Cash
Offer" under the TEC Indenture in the aggregate not in excess of $50 million;
(o) the Company may Incur Debt as an extension, renewal, replacement, or
refunding of any of the Debt permitted to be Incurred by clauses (b) or (q)
hereof, or this clause (o) (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 (o) may not exceed the lesser of (x) the principal amount of the
Debt being extended, renewed, replaced, or refunded plus 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 and (2) 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; (p) Debt secured by Liens permitted pursuant to
clauses (h) and (j) of Permitted Liens, in an aggregate principal amount not to
exceed $35 million; (q) Debt of the Company Incurred in connection with the
acquisition, construction or improvement of a CATOFIN(R) Unit not in excess of
20% of the Company's Consolidated EBITDA accrued for the period (taken as one
accounting period) commencing with the first full fiscal quarter that commenced
after the Phase I Completion Date, to and including the fiscal quarter ended
immediately prior to the date of such calculation, provided, that, no such Debt
may be Incurred unless (i) the Phase II Completion Date has occurred or (ii)
the Construction Supervisor shall have provided the Trustee with written
certification that, based upon its bi-monthly evaluation of the Capital
Improvement Program, the amounts remaining in the disbursement accounts to
complete Phase II are sufficient to complete Phase II in accordance with the
Plans approved by the Construction Supervisor, and (r) Debt of the Company owed
to TEC that does not in the aggregate exceed $50 million principal amount
outstanding at any one time.
For the purpose 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 (o) above so as to refinance
or refund such Debt Incurred pursuant to such clause and any subsequent
refinancings or refundings thereof.
Notwithstanding the foregoing provisions of this covenant, (a) the
Company may Incur Senior Debt and the Company 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, and (ii) immediately after giving effect to the
Consolidated Fixed Charges in respect of such Debt being Incurred or such
Disqualified Capital Stock being issued and the application of the proceeds
therefrom to the extent used to reduce Debt or Disqualified Capital Stock, on a
pro forma basis, the Consolidated Fixed Charge Coverage Ratio of the Company
for the Reference Period is greater than 2.25 to l, and (b) the Company may
Incur Subordinated Debt if, at the time such Subordinated Debt is incurred, (i)
no Default or Event of Default shall have occurred and be continuing at the
time or immediately after giving effect to such transaction on a pro forma
basis, and (ii) immediately after giving effect to the Consolidated Fixed
Charges in respect of such Subordinated Debt being incurred and the application
of the proceeds therefrom to the extent used to reduce Debt, on a pro forma
basis, the Consolidated Fixed Charge Coverage Ratio of the Company for the
Reference Period is greater than 2.0 to I.
Debt Incurred and Disqualified Capital Stock issued by any Person that
is not a Subsidiary of the Company as the case may be, which Debt or
Disqualified Capital Stock is outstanding at the time such Person becomes a
Subsidiary of, or is merged into, or consolidated with the Company or one of
its Subsidiaries, as
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the case may be, shall be deemed to have been Incurred or issued, as the case
may be, at the time such Person becomes a Subsidiary of, or is merged into, or
consolidated with or one of its Subsidiaries.
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 or the Subsidiary in question 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.
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, except encumbrances and restrictions existing under
this Indenture and 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. Notwithstanding anything contained herein to the
contrary, the Company may not create an encumbrance or restriction on their
ability to pay premium, if any, principal of, or interest on, the TARC
Intercompany Loan.
Section 4.13 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 respective property or assets, whether now owned
or hereafter acquired, 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 or the Subsidiary in
question shall have the right to determine in its sole discretion the category
of Permitted Lien to which such Lien applies, shall not be required to include
such Lien in more than one of such categories, and may elect to apportion such
Lien between or among any two or more categories otherwise applicable. The
Company covenants to grant to the Trustee on behalf of the Holders a Lien on
the assets of the Company currently subject to a Lien in favor of TEC;
provided, that the Company is then permitted under the Series A/B Indenture to
grant such Lien and further provided that the Company shall not be required to
grant such Lien until the TARC Intercompany Loan has been paid in full and has
not been refinanced, refunded or replaced with the proceeds of Other Debt
("Other Debt"), which Other Debt has a lower cost of capital to TARC than the
TARC Intercompany Loan and the principal amount of such Other Debt (or, if such
Other Debt is issued with original issue discount, the original issue amount of
such Other Debt) is equal to or less than the original issue price of, plus
amortization of the original issue discount on, the TARC Intercompany Loan at
the time of the incurrence of such Other Debt.
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:
(i) the Company (or its Subsidiaries, as the case may be)
receives consideration at the time of such sale or other disposition
at least equal to the fair market value thereof (as determined in good
faith by the Company's Board of Directors and evidenced by a board
resolution in the case
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of any Asset Sales or series of related Asset Sales having a fair
market value of $15 million or more);
(ii) at least 85% of the proceeds received by the Company (or
its Subsidiaries, as the case may be) from each such Asset Sale
consists of (A) cash, (B) Cash Equivalents, (C) Publicly Traded Stock
or (D) any combination of the foregoing; provided, however, that (l)
the amount of (x) any liabilities (as shown on the Company's or such
Subsidiary's most recent balance sheet or in the notes thereto) of the
Company or such Subsidiary (other than liabilities that are by their
terms expressly subordinated to the Notes or any guarantee thereof)
that are assumed by the transferee of any such assets and (y) any
notes or other obligations received by the Company or any such
Subsidiary from such transferee that, within 90 days following the
closing of such sale or disposition, are converted by the Company or
such Subsidiary into cash (to the extent of the cash received), shall
be deemed to be cash for purposes of this provision and (2) the
aggregate fair market value (as determined in good faith by the Board
of Directors of the Company, evidenced by a board resolution) of all
consideration of the type specified in clause (C) above received by
the Company and its Subsidiaries from all Asset Sales after the Series
A/B Issue Date shall not exceed 15% of Consolidated Net Tangible
Assets at the time of such Asset Sale; and
(iii) the Net Cash Proceeds received by the Company (or its
Subsidiaries, as the case may be) from such Asset Sales are applied in
accordance with subsection (c) below.
(b) Notwithstanding the foregoing limitations on Asset Sales and
restrictions on the use of Net Cash Proceeds therefrom:
(A) The Company or any Guarantor may convey, sell, lease,
transfer, or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Company or any Guarantor;
(B) the Company and its Subsidiaries may engage in Asset Sales
in the ordinary course of business;
(C) the Company and its Subsidiaries may engage in Asset Sales
not otherwise permitted in clauses (A), (B) or (D) through (K) of this
sentence provided that the aggregate proceeds from all such Asset
Sales do not exceed $10 million in any twelve-month period;
(D) the Company and its Subsidiaries may engage in Asset Sales
pursuant to and in accordance with the provisions described under
Article V hereof;
(E) the Company and its Subsidiaries may sell, assign, lease,
license, transfer, abandon or otherwise dispose of (a) damaged, worn
out, unserviceable or other obsolete property in the ordinary course
of business or (b) other property no longer necessary for the proper
conduct of their business;
(F) The Company and its Subsidiaries may sell accounts
receivable to an Accounts Receivable Subsidiary in accordance with the
provisions described under Section 4.20;
(G) The Company and its Subsidiaries may convey, sell,
transfer or otherwise dispose of crude oil and refined products in the
ordinary course of business;
(H) The Company and its Subsidiaries may engage in Asset Sales
(a) the Net Cash Proceeds of which are used for (i) payment of cash
interest on the Series A/B Notes or the Notes or (ii) a one-time
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payment of cash interest on the TARC 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 assets transferred pursuant to
clauses (b) and (c) above from and after the Series A/B Issue Date
does not exceed $25,000,000;
(I) The Company may transfer the Storage Assets in connection
with the financing thereof pursuant to clause (f) of the covenant
described herein under Section 4.11 hereof;
(J) The Company and its Subsidiaries may dispose of assets of
the Company or its Subsidiaries in exchange for capital assets that
(i) are for use in a Related Business and (ii) have an aggregate fair
market value which, when added to the fair market value of any cash,
Cash Equivalents or Publicly Traded Stock received by the Company or
any of its Subsidiaries in exchange for such capital assets, is equal
to or greater than the aggregate fair market value of the property and
assets being disposed of, provided, however, that (A) in no event may
the Company and its Subsidiaries, in any 12-month period, dispose of
assets pursuant to this paragraph having an aggregate fair market
value of in excess of $10 million;
(K) The Company may sell common stock of TransTexas to
TransTexas; and
(L) Unless otherwise required by the foregoing clauses (A)
through (K), the proceeds of any Asset Sale permitted thereby shall be
used by the Company or its Subsidiaries for purposes not otherwise
prohibited by the Indenture.
(c) The Company may, within 360 days following the receipt of Net Cash
Proceeds from any Asset Sale, apply an amount equal to such Net Cash Proceeds
to: (i) the repayment of Senior Debt of the Company or any Guarantor that
results in a permanent reduction in the principal amount of such Senior Debt in
an amount equal to the principal amount so repaid or (ii) make Capital
Expenditures for use in a Related Business or (iii) make cash payments in the
ordinary course of business that are not otherwise prohibited by the Indenture,
provided that the aggregate amount so used from and after the Series A/B Issue
Date does not exceed $20,000,000 (without duplication of amounts used for
Capital Expenditures in clause (ii) above).
If, upon completion of the 360-day period (the "Trigger Date"), an
amount equal to any portion of the Net Cash Proceeds of any Asset Sale shall
not have been applied by the Company as described in clauses (i), (ii) or (iii)
of the preceding paragraph and such amount together with an amount equal to any
remaining net cash proceeds from any prior Asset Sale (such aggregate
constituting "Excess Proceeds"), exceeds $10 million, then the Company shall
make an offer (the "Offer to Purchase") to purchase from all Holders of the
Notes, the Series A/B Notes and holders of any then outstanding Pari Passu Debt
required to be repurchased or repaid on a permanent basis in connection with an
Asset Sale, an aggregate principal amount of Notes, the Series A/B Notes and
any then outstanding Pari Passu Debt equal to such Excess Proceeds as follows:
(l) (i) the Company shall make an offer to purchase from all
Holders of the Notes in accordance with the procedures set forth in
the Indenture the maximum principal amount (expressed as a multiple of
$1000) of Notes that may be purchased out of an amount (the "Offer
Amount") equal to the product of such Excess Proceeds multiplied by a
fraction, the numerator of which is the outstanding principal amount
of the Notes and the denominator of which is the sum of the
outstanding principal amount of the Notes, the Series A/B Notes and
such Pari Passu Debt, if any and (ii) to the extent required by the
Series A/B Notes and such Pari Passu Debt and provided there is a
permanent reduction in the
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principal amount of such Series A/B Notes or Pari Passu Debt and a
corresponding permanent reduction in the Company's ability to incur
Pari Passu Debt or Subordinated Debt, the Company shall make an offer
to purchase the Series A/B Notes and such Pari Passu Debt (the "Pari
Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the
excess of the Excess Proceeds over the Offer Amount.
(2) The offer price for the Notes shall be payable in cash in
an amount equal to 100% of the principal amount of the Notes tendered
pursuant to an Offer to Purchase, plus accrued and unpaid interest, if
any, to the date such Offer to Purchase is consummated (the "Offer
Price"), in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate Offer Price of the Notes tendered
pursuant to an Offer to Purchase is less than the Offer Amount
relating thereto or the aggregate amount of the Series A/B Notes or
Pari Passu Debt that is purchased or repaid pursuant to the Pari Passu
Offer is less than the Pari Passu Debt Amount (such shortfall
constituting a "Net Proceeds Deficiency"), the Company may use such
Net Proceeds Deficiency, or any portion thereof, for general corporate
purposes, subject to the "Limitation on Restricted Payments" covenant
set forth in Section 4.3.
(3) If the aggregate Offer Price of Notes validly tendered and
not withdrawn by Holders thereof exceeds the Offer Amount, Notes to be
purchased will be selected on a pro rata basis. Upon completion of an
Offer to Purchase and a Pari Passu Offer, the amount of Excess
Proceeds shall be reset to zero.
The Company, to the extent applicable and if required by law, will
comply with Section 14 of the Exchange Act and the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act and any other federal
and state securities laws, rules and regulations which may then be applicable
to any offer by the Company to purchase the Notes at the option of the holders
pursuant to an Offer to Purchase.
It is expected that agreements with respect to Senior Debt the Company
may enter into would prohibit, and the TARC Intercompany Loan currently
prohibits, the repurchase of Debt subordinated to such Senior Debt, which would
include the Notes. Failure of the Company to repurchase the Notes validly
tendered to the Company pursuant to an Offer to Purchase would create an Event
of Default with respect to the Notes. In addition, the subordination provisions
of the Indenture prohibit, subject to certain conditions, the repurchase or
repayment of the Notes if there is a default under Senior Debt. As a result,
the Company may be prohibited from making payment pursuant to an Offer to
Purchase in connection with an Asset Sale.
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 Notes 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 Notes 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
Notes or in any of the documents securing the payment thereof or
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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 Notes.
Section 4.16 Guarantee by Subsidiaries. All future Material
Subsidiaries and Subsidiaries that guarantee any pari passu Debt, Series A/B
Notes or Subordinated Debt of the Company or of any other Subsidiary of the
Company shall jointly and severally guarantee irrevocably and unconditionally
all principal, premium, if any, and interest on the Notes on a senior
subordinated unsecured basis (a "Guarantee"). The Company covenants to cause
each of such Subsidiaries promptly to execute and deliver to the Trustee a
Guarantee pursuant to which such Subsidiary will guarantee payment of the Notes
and the performance of the Company's other obligations under this Indenture to
the extent set forth in this Section 4.16.
The liability of each Guarantor under its Guarantee will be limited to
the amount of its Adjusted Net Assets.
Section 4.17 Intentionally Omitted.
Section 4.18 Limitations on Line of Business. The Company shall
not 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 or incidental 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 funds of the Company, its Subsidiaries' and 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 separate
records and books of account and such records and books of account shall be
separate from those of TransAmerican in each case in accordance with generally
accepted accounting principles;
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(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 mislead
any other Person as to the identity or authority of the Company and its
Subsidiaries; and
(f) the Company and its Subsidiaries will provide for all of their
operating expenses and liabilities from their own separate funds, other than
pursuant to the Services Agreement.
Section 4.20 Accounts Receivable Subsidiary.
(a) Notwithstanding the provisions of Section 4.3, the Company
may, and may permit any of its Subsidiaries to, make Investments in an Accounts
Receivable Subsidiary (i) the proceeds of which are applied within five
Business Days of the making thereof solely to finance the purchase of accounts
receivable of the Company and its Subsidiaries and (ii) in the form of Accounts
Receivable Subsidiary Notes to the extent permitted by clause (b) below;
provided that the aggregate amount of such Investments shall not exceed the
greater of $20 million or 20% of the TARC Borrowing Base at any time;
(b) The Company may not, nor may it permit any of its Subsidiaries
to, sell accounts receivable to an Accounts Receivable Subsidiary except for
consideration in an amount not less than that which would be obtained in an
arm's length transaction and solely in the form of cash or Cash Equivalents;
provided that an Accounts Receivable Subsidiary may pay the purchase price for
any such accounts receivable in the form of Accounts Receivable Subsidiary
Notes so long as, after giving effect to the issuance of any such Accounts
Receivable Subsidiary Notes, the aggregate principal amount of all Accounts
Receivable Subsidiary Notes outstanding shall not exceed the greater of $20
million or 20% of the aggregate purchase price paid for all outstanding
accounts receivable purchased by an Accounts Receivable Subsidiary since the
date of this Indenture (and not written off or required to be written off in
accordance with the normal business practice of an Accounts Receivable
Subsidiary);
(c) The Company may not, nor may it permit any of its Subsidiaries
to, enter into any guarantee, subject any of their respective properties or
assets (other than the accounts receivable sold by them to an Accounts
Receivable Subsidiary) to the satisfaction of any liability or obligation or
otherwise incur any liability or obligation (contingent or otherwise), in each
case, on behalf of an Accounts Receivable Subsidiary or in connection with any
sale of accounts receivable or participation interests therein by or to an
Accounts Receivable Subsidiary, other than obligations relating to breaches of
representations, warranties, covenants, and other agreements of the Company or
any of its Subsidiaries with respect to the accounts receivable sold by the
Company or any of its Subsidiaries to an Accounts Receivable Subsidiary or with
respect to the servicing thereof; provided that neither the Company nor any of
its Subsidiaries shall at any time guarantee or be otherwise liable for the
collectibility of accounts receivable sold by them; and
(d) The Company may not, nor may it permit any of its Subsidiaries
to, sell accounts receivable to, or enter into any such transaction with or for
the benefit of, an Accounts Receivable Subsidiary (i) if such Accounts
Receivable Subsidiary pursuant to or within the meaning of any Bankruptcy Law
(A) commences a voluntary case, (B) consents to the entry of an order for
relief against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes
general assignment for the benefit of its creditors, or (E) generally is not
paying its debts as they become due; or (ii) if a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for
relief against such
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Accounts Receivable Subsidiary in an involuntary case, (B) appoints a Custodian
of such Accounts Receivable Subsidiary or for all or substantially all of the
property of such Accounts Receivable Subsidiary, or (C) orders the liquidation
of such Accounts Receivable Subsidiary, and, with respect to clause (ii)
hereof, the order or decree remains unstayed and in effect for 60 consecutive
days.
Section 4.21 Limitation on Ranking of Future Debt. The Company
shall not, directly or indirectly, incur, create, or suffer to exist any Debt
(other than the Series A/B Notes) 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. The
Guarantors will not, directly or indirectly, issue, assume, guarantee, incur or
otherwise become liable for any Debt which is both subordinate or junior in
right of payment to any Guarantor Senior Debt and senior or superior in right
of payment to the Guarantees.
Section 4.22 Maintenance of Interest Reserve Account.
(a) The Company shall establish and maintain with and at the
Trustee a custodial account in the name of the Trustee (or any agent thereof)
(the "Interest Reserve Account"), under the sole dominion and control of the
Trustee. Funds shall be released from the Interest Reserve Account only in
accordance with this Section 4.22.
(b) The Company shall, out of the proceeds received by it from the
issuance of the Notes, make an initial deposit into the Interest Reserve
Account in the amount of $6,000,000 (the "Interest Reserve Amount"), such
deposit being of sufficient amount to pay for the first three (3) semi-annual
interest payments on the Notes issued on the date hereof that will become due
and payable on June 30, 1998, December 30, 1998 and June 30, 1999 (the "Subject
Interest Payment Dates").
(c) The Interest Reserve Account will be held in trust by the
Trustee for the equal and ratable benefit of the Holders and not commingled
with any ordinary deposit or commercial bank account, will be maintained with
the corporate trust department of the Trustee for the equal and ratable benefit
of the Holders and, to the extent expressly provided herein, for the Company,
and will be subject to the provisions of this Agreement; provided, however,
that if the Series A/B Indenture has been amended to permit the "Interest
Reserve Account" (as defined therein) to be commingled with the Interest
Reserve Account hereunder, then such Interest Reserve Accounts may be
commingled. In accordance with written instructions received from the Company,
the Trustee shall, subject to the Trustee's rights under this Section 4.22, (i)
invest amounts on deposit in the Interest Reserve Account in Cash Equivalents
in the name of the Trustee as the Company may select, (ii) invest interest paid
on the Cash Equivalents referred to in clause (i) above, and reinvest other
proceeds of any such Cash Equivalents that may mature or be sold, in Cash
Equivalents in the name of the Trustee as the Company may select (the Cash
Equivalents referred to in clauses (i) and (ii) above being, collectively,
"Reserve Account Investments") and (iii) deposit and hold in the Interest
Reserve Account all interest and proceeds that are not invested or reinvested
in Reserve Account Investments. All disbursements made to the Holders pursuant
to this Agreement shall be made by the Trustee irrespective of, and without
deduction for, any counterclaim, defense, recoupment or setoff and shall be
final, and the Trustee will not seek to recover from any Holder for any reason
any such payment once made. All service charges and fees with respect to the
Interest Reserve Account shall be paid by the Company.
(d) The Company has no right to direct the Trustee to disburse the
funds in the Interest Reserve Account, other than the rights, exercisable upon
the giving by the Company of not less than one Business Day prior written
notice to the Trustee, (i) from time to time during the term of this Agreement,
to direct the Trustee to disburse to or for the account of the Company all or
any portion of the interest and other earnings on the funds on deposit in the
Interest Reserve Account and on Reserve Account Investments and (ii) if the
Company optionally redeems the
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Notes, from time to time during the term of this Agreement, to direct the
Trustee to disburse to or for the account of the Company all or any portion of
the funds on deposit in the Interest Reserve Account in an aggregate amount
that bears the same proportion to the aggregate amount of funds in the Interest
Reserve Account immediately prior to the release of such proceeds as the
aggregate principal amount of the Notes so redeemed by the Company bears to the
aggregate principal amount of Notes outstanding immediately prior to such
redemption; provided, however, that the Trustee shall not be required to
disburse any funds pursuant to this paragraph (d) after the occurrence and
during the continuance of an Event of Default. The amount of funds that may be
released by the Trustee to the Company in connection with any such optional
redemption shall be net of any costs, fees and expenses (such as breakage
costs) incurred to permit such release.
(e) The Trustee shall liquidate part or all of the Reserve Account
Investments, as necessary, to provide the availability of such funds in the
Investment Reserve Account as may be necessary to pay (and shall to the extent
funds are in the Interest Reserve Account pay therefrom) each of the first
three (3) semi-annual interest payments on the Notes, when and as they come
due, and to make such disbursements as may from time to time be requested by
the Company as permitted hereby. The Trustee shall disburse funds from the
Interest Reserve Account solely for the purposes of making the payments and
distributions described hereunder.
(f) Promptly after the payment in full of the interest accrued
through and including the installment of interest payable on the June 30, 1999
interest payment, the Trustee shall liquidate all Reserve Account Investments
remaining and shall disburse the full amount of the funds then on deposit in
the Interest Reserve Account to or for the account of the Company, whereupon
the Interest Reserve Account shall be closed; provided, however, that the
Trustee shall not disburse any funds pursuant to this paragraph (f) after the
occurrence and during the continuance of an Event of Default. If any such Event
of Default is continuing at the Interest Payment Date following the Subject
Interest Payment Dates, the funds in the Interest Reserve Account shall be
applied to (and the Trustee shall, to the extend of such funds, pay therefrom)
the interest payment due on such Interest Payment Date.
Section 4.23 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).
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1 When the Company May Merge, Etc.
(a) The Company shall not, and shall not permit any Guarantor to,
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 or the Guarantor, as the case may be,
shall be the continuing Person, or (b) the Person (if other than the Company)
formed by such consolidation or into which the Company or the Guarantor,
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as the case may be, is merged or to which all or substantially all of the
properties and assets of the Company, or the Guarantor, as the case may be, are
transferred as an entirety or substantially as an entirety (the Company or the
Guarantor, as the case may be, 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 or the Guarantor, as the case may be, under the
Notes and this Indenture;
(2) No Default or Event of Default shall exist or shall occur
immediately after giving effect to such transaction;
(3) 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
such predecessor or transferring entity immediately prior to such transaction
and (y) except for a merger of the Company into a wholly owned Subsidiary of
TEC or its wholly owned Subsidiary incorporated in the State of Delaware solely
for the purpose of facilitating a reincorporation in Delaware or a repurchase
of the Old TARC Warrants into a right to receive cash, which conversion or
reincorporation would not require cash payments by the Company in excess of
$250,000 in the aggregate, the Surviving Person could incur $1.00 of additional
Senior Debt pursuant to the third paragraph of Section 4.11, as applicable (in
all cases for this purpose only, as if the Phase I Completion Date has
occurred);
(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) except for a merger of the Company into a wholly owned
Subsidiary of TEC or its wholly owned Subsidiary incorporated in the State of
Delaware solely for the purpose of facilitating a reincorporation in Delaware
or a repurchase of the Old TARC Warrants into a right to receive cash, which
conversion or reincorporation would not require cash payments by the Company in
excess of $250,000 in the aggregate, at the time of or within 45 days after the
occurrence of the event specified above, the Notes, if then rated, have not
been or are not downgraded by Standard & Poor's Corporation, Inc., Moody's
Investors Service, Inc. or any successor rating agencies to either entity to a
rating below that which existed immediately prior to the time the event
specified above is first publicly announced.
For purposes of this Section 5.1, the Consolidated Fixed Charge
Coverage Ratio shall be determined on a pro forma consolidated basis (giving
effect to such transaction) for the four fiscal quarters immediately preceding
such transaction.
(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.
(c) Notwithstanding anything contained in the foregoing to the
contrary, any Subsidiary of the Company with a Net Worth greater than zero, may
merge into the Company (or a wholly owned Subsidiary of the Company) at any
time, provided, that the Company, shall have delivered to the Trustee an
Officers' Certificate stating that
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such Subsidiary has a Net Worth greater than zero and such merger does not
result in a Default or an Event of Default hereunder. Notwithstanding anything
contained in the foregoing, an Accounts Receivable Subsidiary may merge into
the Company, provided, that such merger does not result in a Default or Event
of Default hereunder.
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, or a
Guarantor, as the case may be, 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, or such Guarantor, as the case may be, under this
Indenture with the same effect as if such Surviving Person had been named as
the Company, or such Guarantor, as the case may be, herein. When a Surviving
Person duly assumes all of the obligations of the Company pursuant hereto and
pursuant to the Notes, 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 Note 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 Notes when and as the same becomes due
and payable at maturity, redemption, by acceleration, or otherwise, including
default in the payment of the Offer Price in accordance with Section 4.14 or
the Change of Control Purchase Price in accordance with Article XI;
(c) default in the observance or performance of, or breach of, any
covenant, agreement or warranty of the Company or any of its Subsidiaries
contained in the Notes or this Indenture, and continuance of such default or
breach for the period and after the notice, if any, specified below;
(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under any mortgage,
indenture or instrument under which there is outstanding any Debt of the
Company or any of its Subsidiaries with an aggregate principal amount in excess
of $20,000,000, or 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 such default continues beyond any
applicable cure, forebearance 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 or
acceleration continues for a period of 10 days; provided, that a rescission or
annulment of such default or acceleration (prior to any action taken by the
Trustee with respect to the acceleration of the Obligations under the Notes)
pursuant to the agreement governing such Debt shall constitute a waiver
hereunder for the same period;
(e) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudging the Company or any of
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its Subsidiaries as bankrupt or insolvent, or ordering relief against the
Company or any of its Subsidiaries in response to the commencement of an
involuntary bankruptcy case, or approving as properly filed a petition seeking
reorganization or liquidation of the Company or any of its Subsidiaries under
any bankruptcy or similar law, and such decree or order shall have continued
undischarged and unstayed for a period of 60 days; or a decree or order of a
court of competent jurisdiction over the appointment of a receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency of the Company, any of its
Subsidiaries, or of the property of any such Person, or for the winding up or
liquidation of the affairs of any such Person, shall have been entered, and
such decree, judgment, or order shall have remained in force undischarged and
unstayed for a period of 60 days;
(f) the Company or any of its Subsidiaries shall institute
voluntary bankruptcy proceedings, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or consent
seeking reorganization or liquidation under any bankruptcy or similar law or
similar statute, or shall consent to the filing of any such petition, or shall
consent to the appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any of its assets or property, or
shall make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due, or shall,
within the meaning of any Bankruptcy Law, become insolvent, fail generally to
pay its debts as they become due, or take any corporate action in furtherance
of or to facilitate, conditionally or otherwise, any of the foregoing;
(g) final judgments not covered by insurance for the payment of
money, or the issuance of any warrant of attachment against any portion of the
property or assets of the Company or any Subsidiary, which, in the aggregate,
equal or exceed $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); or
(h) a Guarantee shall cease to be in full force and effect (other
than a release of a Guarantee by designation of a Guarantor as an Unrestricted
Subsidiary or otherwise in accordance with this Indenture) or any Guarantor
shall deny or disaffirm its obligations with respect thereto.
If a default occurs and is continuing and if it is known to the
Trustee, the 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 the Change of
Control Purchase Price as required by this 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 Holders.
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 Notes 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 Notes
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 Notes 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 Notes pursuant to Paragraph
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5 of the Notes, 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 Notes 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 Notes to the
contrary notwithstanding.
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
6.1(e) or (f) relating to the Company or its Subsidiaries) occurs and is
continuing, then, and in every such case, unless the principal of all of the
Notes shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate Value of then outstanding Notes, 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 Notes (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 Notes shall be immediately due and payable on all outstanding
Notes 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 Value of then outstanding Notes, 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 accrued but unpaid interest on all Notes,
(2) the principal of (and premium, if any, applicable to) any Notes
which would become due otherwise than by such declaration of acceleration, and
accrued but unpaid interest thereon at the rate borne by the Notes,
(3) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Notes,
(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 Notes 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 (x) 66
2/3% in aggregate Value of the Notes or (y) the affected Holder of each of the
outstanding Notes, unless (x) 66 2/3% in aggregate Value of the Notes or (y)
all such affected Holders, respectively, 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.
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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 Notes, the whole amount then due and
payable on such Notes 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 Notes, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including
compensation to, and expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Company fails to pay such amounts within 10 days of such
demand, the Trustee, in its own name and as trustee of an express trust in
favor of the Holders, may institute a judicial proceeding for the collection of
the sums so due and unpaid, may prosecute such proceeding to judgment or final
decree and may enforce the same against the Company or any other obligor upon
the Notes 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 Notes, 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
Notes.
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 Notes or the property of the Company
or of such other obligor or their creditors, the Trustee (irrespective of
whether the principal of the Notes 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 Notes 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 or other similar official in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the Trustee any amount due
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7.
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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 Notes 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 Notes.
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Notes in respect of which such
judgment has been recovered.
Section 6.6 Priorities. 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
Notes 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 Notes 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 Notes 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 Note 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 Notes 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 Notes;
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
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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 Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of, and premium (if any) and
interest on, such Note on the Maturity Dates of such payments as expressed in
such Note 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 Notes in Section 2.7, no right or remedy herein conferred upon
or reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 6.10 Delay or Omission Not Waiver. No delay or
omission by the Trustee or by any Holder of any Note 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 Value of then outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred upon the
Trustee, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such direction
or that such action may involve the Trustee in personal liability, and
(c) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 6.12 Waiver of Past Default. Subject to Section
6.8, the Holder or Holders of not less than a majority in aggregate Value of
the outstanding Notes may, on behalf of all Holders, prior to the declaration
of the maturity of the Notes, 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 Note 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 Note affected or 66 2/3% in aggregate Value of the Notes at
the time outstanding, as the case may be; provided that such a default may be
waived by the consent of Holders of each outstanding Note affected or 66 2/3%
in aggregate value of the Notes outstanding, as the case may be.
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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 Note 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 Notes, or to any suit instituted
by any Holder for enforcement of the payment of principal of, or premium (if
any) or interest on, any Note on or after the respective Maturity Date
expressed in such Note (including, in the case of redemption, on or after the
Redemption Date).
Section 6.14 Restoration of Rights and Remedies. If the Trustee
or any Holder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such Holder,
then and in every case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.1 Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(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 whether or not
they conform to the requirements of this Indenture.
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(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(2) 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
negligent in ascertaining the pertinent facts.
(3) 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.
(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.
(g) The Trustee shall execute and deliver the Intercreditor
Agreements and any Subordination Agreements as provided in Section 12.2.
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 13.4 and 13.5. 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.
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(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 Notes 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
Notes and it shall not be accountable for the Company's use of the proceeds
from the Notes, and it shall not be responsible for (i) the use or application
of any funds received by a Paying Agent other than the Trustee, (ii) any
statement in the Notes, other than the Trustee's certificate of authentication
or (iii) the sufficiency of the collateral for the Notes.
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 Company 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 Noteholder notice of the uncured Default
or Event of Default within 90 days after such Default or Event of Default
occurs. Except in the case of a Default or an Event of Default in payment of
principal (or premium, if any,) of, or interest on, any Note (including all
payments due on any Maturity Date), the Trustee may withhold the notice if and
so long as the board of directors, the executive committee or a trust committee
of directors and/or responsible officers of the Trustee in good faith
determines that 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 Noteholder 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 Noteholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if
any, on which the Notes are listed.
Section 7.7 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time compensation for its services (in whatever capacity
rendered) in accordance with the Trustee's fee schedule, as may be amended from
time to time. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and counsel.
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The Company shall indemnify the Trustee (in its capacity as Trustee)
and each of its officers, directors, attorneys-in-fact and agents for, and hold
it harmless against, any claim, demand, expense (including but not limited to,
compensation, disbursements and expenses of the Trustees' agents and counsel),
loss or liability incurred by it without negligence or bad faith on its part,
arising out of or in connection with the administration of this trust and its
rights or duties hereunder including the reasonable costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the Trustee for which
it may seek indemnity. The Company shall defend the claim and the Trustee
shall provide reasonable cooperation at the Company's expense in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel; provided that the Company will not be
required to pay such fees and expenses if it assumes the Trustee's defense and
there is no conflict of interest as reasonably determined by the Trustee
between the Company and the Trustee in connection with such defense. The
Company need not pay for any settlement made without its written consent, which
shall not be unreasonably withheld. The Company need not reimburse any expense
or indemnify against any loss or liability to the extent incurred by the
Trustee through its 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 Notes 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 Notes.
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 Notes may remove the Trustee by so
notifying the Company and the Trustee in writing and may appoint a successor
trustee with the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver, Custodian, or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holder or Holders of a majority in principal amount of the Notes 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
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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
Notes 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 Noteholder 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 Notes or
any other action within the purview of this Indenture, any showings,
certificates, opinions, or other information, or corporate action or evidence
thereof in addition to that by the terms hereof required, as a condition of
such action by the Trustee if reasonably deemed desirable by the Trustee for
the purpose of establishing the right to the authentication of any Notes 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 Notes. The Company shall be deemed to have paid and discharged the
entire Debt on the Notes and the provisions of this Indenture shall cease to be
of further effect (subject to Sections 8.3 and 8.7), if:
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(a) The Company irrevocably deposits in trust for the benefit of
the Holders of the Notes with the Trustee, pursuant to an irrevocable trust
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 Notes, 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 Notes then outstanding, on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes 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 relating to clauses (e) or (f)
of Section 6.1 shall have occurred or be continuing on the date of such deposit
or shall occur on or before the 91st day (or one day after such greater period
of time in which any such deposit of trust funds may remain subject to set
aside or avoidance under bankruptcy or insolvency laws) after the date of such
deposit, and such deposit will not result in a Default or Event of Default
under this Indenture or a breach or violation of, or constitute a default
under, any other instrument to which the Company or any Subsidiary of the
Company is a party or by which it or its property is bound;
(d) The deposit, defeasance and discharge will not be deemed, or
result in, a Federal income taxable event to the Holders of the Notes 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 set aside or avoidance under Bankruptcy Laws affecting
creditors' rights generally; and
(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.
In the event all or any portion of the Notes 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 Notes 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 Notes at the time of
acceleration resulting from such Event of Default in excess of the
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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 Notes.
In addition to the Company's rights under Section 8.1, the Company may
terminate all of its respective obligations under this Indenture (subject to
Sections 8.3 and 8.7) when:
(a) all Notes theretofore authenticated and delivered (other than
Notes 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 Notes 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
Notes 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 the Company'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 Notes.
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
Notes 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
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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 Company's obligations under this
Indenture, the Security Documents and the Notes 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 Notes because of the reinstatement of its obligations, the
Company shall be surrogated to the rights of the Holders of such Notes 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 and the Guarantors, if any, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto in form
satisfactory to the Trustee, for any of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency, or to make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause (a) shall not adversely
affect the interests of any Holder in any respect;
(b) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company or
to make any other change that does not adversely affect the rights of any
Holder, provided that the Company has delivered to the Trustee an Opinion of
Counsel stating that such change does not adversely affect the rights of any
Holder;
(c) to 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 Notes in accordance with Article V; or
(d) to comply with the TIA.
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 Value of then outstanding Notes, by
written act of said Holders (including an electronic mechanism utilized by the
Depository Trust Company as a means of receiving consents or tenders of
securities) delivered to the Company and the Trustee, the Company, when
authorized by Board Resolutions, and the Trustee may amend or supplement this
Indenture, the Notes or enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or
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changing in any manner or eliminating any of the provisions of this Indenture
or the Notes or of modifying in any manner the rights of the Holders under this
Indenture or the Notes; provided, that no such modification may, without the
consent of the Holders of not less than 66 2/3 in aggregate Value of the Notes
at the time outstanding, (i) prior to a Change of Control, reduce the Change of
Control Purchase Price or alter the provisions of Article XI or (ii) prior to
the date upon which an Offer to Purchase is required to be made, reduce the
Offer Price or alter the provisions of Section 4.14 in a manner adverse to the
Holders. Subject to Section 6.8, the Holder or Holders of not less than a
majority, in aggregate Value of then outstanding Notes may waive compliance by
the Company with any provision of this Indenture or the Notes; provided, that
no such waiver may, without the consent of the Holders of not less than 66 2/3
in aggregate Value of the Notes at the time outstanding, have the effect of (i)
prior to a Change of Control, reducing the Change of Control Purchase Price or
altering the provisions of Article XI or (ii) prior to the date upon which an
Offer to Purchase is required to be made, reduce the Offer Price or alter the
provisions of Section 4.14 in a manner adverse to the Holders. Notwithstanding
any of the above, however, no such amendment, supplemental indenture or waiver
shall, without the consent of the Holder of each outstanding Note affected
thereby:
(a) reduce the percentage of Value of Notes whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture or the Notes;
(b) reduce the rate or extend the time for payment of interest on
any Note;
(c) (i) reduce the principal amount of any Note or (ii) after the
date upon which a Change of Control Offer is required to be made, reduce the
Change of Control Purchase Price or (iii) after the date upon which an Offer to
Purchase is required to be made, reduce the to Purchase Offer Price or (iv)
reduce the Redemption Price;
(d) change the Stated Maturity or the payment date of any
installment of principal of, or the payment date of any installment of interest
on, any Note;
(e) (i) alter the redemption provisions of Article III or of
paragraph 5 of the Notes or (ii) after the date upon which a Change of Control
Offer is required to be made, alter the terms or provisions of Article XI;
(f) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Notes (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
Note affected thereby) or the rights of Holders to recover the principal or
premium of, interest on, or redemption payment with respect to, any Note;
(g) make any changes in Section 6.4, 6.7 or this third sentence of
this Section 9.2; or
(h) make the principal of, or the interest on, any Note 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 Note or any premium or the interest thereon is payable) and the
Notes as in effect on the date hereof.
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
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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 Notes 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 Note or
portion of a Note that evidences the same debt as the consenting Holder's Note,
even if notation of the consent is not made on any Note. However, any such
Holder or subsequent Holder may revoke the consent as to his Note or portion of
his Note 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 Notes 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 Noteholder; 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 Note, on or after the respective dates set for such amounts
to become due and payable expressed in such Note, 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 Notes. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder of the Note to deliver it to the Trustee or require the Holder to put an
appropriate notation on the Note. The Trustee may place an appropriate
notation on the Note 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 Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms. Any failure to make the appropriate notation
or to issue a new Note shall not affect the validity of such amendment,
supplement or waiver.
Section 9.6 Trustee to Sign Amendments, Etc. The Trustee shall
execute any amendment, supplement or waiver authorized pursuant to this Article
IX, provided that the Trustee may, but shall not be obligated to, execute any
such amendment, supplement or waiver which affects the Trustee's own rights,
duties or immunities under this Indenture. The Trustee at the expense of the
Company shall be entitled to receive, and shall be fully
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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 NOTEHOLDERS
Section 10.1 Purposes for Which Meetings May Be Called. A
meeting of Noteholders 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 Noteholders 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 Notes 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 Noteholders 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 Noteholders, 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 Noteholders shall be valid without notice if the
Holders of all Notes then outstanding are present in Person or by proxy, or if
notice is waived before or after the meeting by the Holders of all Notes
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 Notes then outstanding,
shall have requested the Trustee to call a meeting of Noteholders 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 Notes in the amount
above specified may determine the time and place in the City of New York, New
York or elsewhere for such meeting and may call such meeting for the purpose of
taking such action, by mailing or causing to be mailed notice thereof as
provided in Section 10.2, or by causing notice thereof to be published at least
once in each of two successive calendar weeks (on any Business Day during such
week) in a newspaper or newspapers printed in the English language, customarily
published at least five days a week of
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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 Noteholders, a Person shall (a) be a
registered Holder of one or more Notes, or (b) be a Person appointed by an
instrument in writing as proxy for the registered Holder or Holders of Notes.
The only Persons who shall be entitled to be present or to speak at any meeting
of Noteholders 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 Noteholders, in regard to proof
of the holding of Notes 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 Notes entitled to vote at such meeting, in which case
those and only those Persons who are Holders of Notes 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 Noteholders as provided in Section 10.3, in which case the
Company or the Noteholders 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 Notes represented at the meeting and entitled to
vote.
At any meeting each Noteholder or proxy shall be entitled to one vote
for each $1,000 Value of Notes held or represented by him; provided, however
that no vote shall be cast or counted at any meeting in respect of any Notes
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 Notes held by him or instruments in writing as
aforesaid duly designating him as the proxy to vote on behalf of other
Noteholders. Any meeting of Noteholders 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 Value of the Notes 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 Noteholders shall be
by written ballots on which shall be subscribed the signatures of the Holders
of Notes or of their representatives by proxy and the principal amount of the
Notes 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
Noteholders 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 Noteholders 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 Noteholders 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 Noteholders
under any of the provisions of this Indenture or of the Notes.
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
Section 11.1 Repurchase of Notes at Option of the Holder Upon
Change of Control.
(a) In the event that a Change of Control occurs, each Holder of
Notes 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 (provided that the principal amount of such Notes
at maturity must be $1,000 or an integral multiple thereof) 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, on 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 Notes 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 Notes 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,
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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 Purchase" 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 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 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 Notes 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 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 shall 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 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 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
Section 12.1 Notes Subordinated to Senior Indebtedness.
The Company and each Holder, by its acceptance of Notes, agree that
(a) the payment of the principal of and interest on the Notes and (b) any other
payment in respect of the Notes, including on account of the acquisition or
redemption of the Notes by the Company (including, without limitation,
pursuant to Article XI) is subordinated, to the extent and in the manner
provided in this Article XII, to the prior payment in full of all Senior Debt
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of the Company, whether outstanding at the date of this Indenture or thereafter
created, incurred, assumed or guaranteed, and that these subordination
provisions are for the benefit of the holders of Senior Debt.
This Article XII shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Debt, and such provisions are made for the benefit of the holders of
Senior Debt, and such holders are made obligees hereunder and any one or more
of them may enforce such provisions.
Section 12.2 No Payment on Securities in Certain Circumstances.
(a) No payment may be made by the Company 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 (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.
(b) Upon (i) the happening of an event of default (other than a
Payment Default) that permits the holders of Senior Debt to declare such Senior
Debt to be due and payable (or, in the case of letters of credit, require cash
collateralization thereof) and (ii) written notice of such event of default
given to the Company and the Trustee by the lenders' agent under the Company's
working capital facility, if any, secured by Receivables and Inventory
(provided that such working facility constitutes Senior Debt) or holders of an
aggregate of at least $30 million principal amount outstanding of any Senior
Debt or their representative (a "Payment Notice"), then, unless and until such
event of default has been cured or waived or otherwise has ceased to exist, no
payment (by set-off or otherwise) may be made by or on behalf of the Company or
any Guarantor which is an obligor under such Senior Debt on account of any
Obligation in respect of the Notes, including the principal of, premium, if
any, or interest on the Notes, or to repurchase any of the Notes, or on account
of the redemption provisions of the Notes (or liquidated damages pursuant to
the registration rights agreement relating to the Notes), in any such case,
other than payments made with Junior Securities. Notwithstanding the
foregoing, unless the Senior Debt in respect of which such event of default
exists has been declared due and payable in its entirety within 179 days after
the Payment Notice is delivered as set forth above (the "Payment Blockage
Period") (and such declaration has not been rescinded or waived), at the end of
the Payment Blockage Period, the Company and the Guarantors shall be required
to pay all sums not paid to the Holders of the Notes during the Payment
Blockage Period due to the foregoing prohibitions and to resume all other
payments as and when due on the Notes. Any number of Payment Notices may be
given; provided, however, that (i) not more than one Payment Notice shall be
given within a period of any 360 consecutive days, and (ii) no default that
existed upon the date of such Payment Notice or the commencement of such
Payment Blockage Period (whether or not such event of default is on the same
issue of Senior Debt) shall be made the basis for the commencement of any other
Payment Blockage Period unless such other Payment Blockage Period is commenced
by a Payment Notice from the Representative and such event of default shall
have been cured or waived for a period of at least 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company or any Guarantor (other than Junior
Securities) shall be received by the Trustee or the Holders at a time when such
payment or distribution is prohibited by the foregoing provisions, such payment
or distribution shall be held in trust for the benefit of the holders of such
Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as
the case may be, to the holders of such Senior Debt remaining unpaid or
unprovided for or to their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing
any of such Senior Debt may have issued, ratably according to the aggregate
principal
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amounts remaining unpaid on account of such Senior Debt held or represented by
each, for application to the payment of all such Senior Debt remaining unpaid,
to the extent necessary to pay or to provide for the payment of all such Senior
Debt in full in cash or Cash Equivalents or otherwise to the extent holders
accept satisfaction of amounts due by settlement in other than cash or Cash
Equivalents after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt.
Section 12.3 Notes Subordinated to Prior Payment of All Senior Debt
on Dissolution, Liquidation or Reorganization.
Upon any distribution of assets of the Company or any Guarantor upon
any dissolution, winding up, total or partial liquidation or reorganization of
the Company or a Guarantor, whether voluntary or involuntary, in bankruptcy,
insolvency, receivership or a similar proceeding or upon assignment for the
benefit of creditors or any marshalling of assets or liabilities, (i) the
holders of all Senior Debt of the Company or such Guarantor, as applicable,
will first be entitled to receive payment in full in cash or Cash Equivalents
or otherwise to the extent holders accept satisfaction of amounts due by
settlement in other than cash or Cash Equivalents (or have such payment duly
provided for) before the Holders are entitled to receive any payment on account
of any Obligation in respect of the Notes, including the principal of, premium,
if any, and interest on the Notes (or liquidated damages pursuant to the
registration rights agreement relating to the Notes) (other than Junior
Securities) and (ii) any payment or distribution of assets of the Company or
such Guarantor of any kind or character from any source, whether in cash,
property or securities (other than Junior Securities) to which the Holders or
the Trustee on behalf of the Holders would be entitled (by set-off or
otherwise) but for the subordination provisions contained in the Indenture,
will be paid by the liquidating trustee or agent or other person making such a
payment or distribution directly to the holders of such Senior Debt or their
representative to the extent necessary to make payment in full in Cash or Cash
Equivalents (or have such payment duly provided for) on all such Senior Debt
remaining unpaid, after giving effect to any concurrent payment or distribution
to the holders of such Senior Debt.
Section 12.4 Securityholders to Be Subrogated to Rights of Holders
of Senior Debt.
Subject to the payment in full of all Senior Debt of the
Company as provided herein, the Holders of Notes shall be subrogated to the
rights of the holders of such Senior Debt to receive payments or distributions
of assets of the Company applicable to the Senior Debt until all amounts owing
on the Notes shall be paid in full, and for the purpose of such subrogation no
such payments or distributions to the holders of such Senior Debt by the
Company, or by or on behalf of the Holders by virtue of this Article XII, which
otherwise would have been made to the Holders shall, as between the Company and
the Holders, be deemed to be payment by the Company or on account of such
Senior Debt, it being understood that the provisions of this Article XII are
and are intended solely for the purpose of defining the relative rights of the
Holders, on the one hand, and the holders of such Senior Debt, on the other
hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article XII shall
have been applied, pursuant to the provisions of this Article XII, to the
payment of amounts payable under Senior Debt of the Company, then the Holders
shall be entitled to receive from the holders of such Senior Debt any payments
or distributions received by such holders of Senior Debt in excess of the
amount sufficient to pay all amounts payable under or in respect of such Senior
Debt in full.
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<PAGE> 79
Section 12.5 Obligations of the Company Unconditional.
Nothing contained in this Article XII or elsewhere in this
Indenture or in the Notes is intended to or shall impair as between the Company
and the Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any,
interest on, and Liquidated Damages with respect to, the notes as and when the
same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Debt, nor shall anything
herein or therein prevent the Trustee or any Holder from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article XII, of the
holders of Senior Debt in respect of cash, property or securities of the
Company received upon the exercise of any such remedy. Notwithstanding
anything to the contrary in this Article XII or elsewhere in this Indenture or
in the Notes, upon any distribution of assets of the Company referred to in
this Article XII, the Trustee, subject to the provisions of Sections 7.1 and
7.2, and the Holders shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior 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 XII so long as such court has been apprised of the provisions
of, or the order, decree or certificate makes reference to, the provisions of
this Article XII. Nothing in this Section 12.5 shall apply to the claims of,
or payments to, the Trustee under or pursuant to Section 7.7.
Section 12.6 Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice.
The Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee unless and until a Trust Officer of the Trustee or any Paying
Agent shall have received, no later than one Business Day prior to such
payment, written notice thereof from the Company or from one or more holders of
Senior Indebtedness or from any representative therefor and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, shall be entitled in all respects conclusively to assume
that no such fact exists.
Section 12.7 Application by Trustee of Assets Deposited with It.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of the Holders of
the Notes and, to the extent allocated for the payment of Notes, shall not be
subject to the subordination provisions of this Article XII. Otherwise, any
deposit of assets with the Trustee or the Agent (whether or not in trust) for
the payment of principal of or interest on any Notes shall be subject to the
provisions of Sections 12.1, 12.2, 12.3 and 12.4; provided that, if prior to
one Business Day preceding the date on which by the terms of this Indenture any
such assets may become distributable for any purpose (including, without
limitation, the payment of either principal of or interest on any Note) the
Trustee or such Paying Agent shall not have received with respect to such
assets the written notice provided for in Section 12.6, then the Trustee or
such Paying Agent shall have full power and authority to receive such assets
and to apply the same to the purpose for which they were received, and shall
not be affected by any notice to the contrary which may be received by it on or
after such date.
72
<PAGE> 80
Section 12.8 Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination provisions contained in this Article XII 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 of this
Indenture, regardless of any knowledge thereof which any such holder may have
or be otherwise charged with. The holders of Senior Debt may extend, renew,
modify or amend the terms of the Senior Debt or any security therefor and
release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties
to this Indenture or the Holders.
Section 12.9 Holders of Notes Authorize Trustee to Effectuate
Subordination of Securities.
Each Holder of the Notes by his acceptance thereof authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained
in this Article XII and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors of
the Company), the immediate filing of a claim for the unpaid balance of his
Notes in the form required in said proceedings and cause said claim to be
approved. If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes. Nothing herein contained shall be deemed to authorize
the Trustee or the holders of Senior Debt or their representative to authorize
or consent to or accept or adopt on behalf of any Holder of Notes any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Debt or their representative to vote in respect of the claim of any
Holder of Note in any such proceeding.
Section 12.10 Right of Trustee to Hold Senior Debt.
The Trustee shall be entitled to all of the rights set forth
in this Article XII in respect of any Senior Debt at any time held by it to the
same extent as any other holder of Senior Debt, and nothing in this Indenture
shall be construed to deprive the Trustee of any of its rights as such holder.
Section 12.11 Article XII Not to Prevent Events of Default.
The failure to make a payment on account of principal of,
premium, if any, interest on, or Liquidated Damages with respect to, the Notes
by reason of any provision of this Article XII shall not be construed as
preventing the occurrence of a Default or an Event of Default under Section 6.1
or in any way prevent the Holders from exercising any right hereunder other
than the right to receive payment on the Notes.
Section 12.12 No Fiduciary Duty of Trustee to 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 (other
than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Securities or the Company
or any other Person, cash, property
73
<PAGE> 81
or securities to which any holders of Senior Debt shall be entitled by virtue
of this Article XII or otherwise. Nothing in this Section 12.12 shall affect
the obligation of any other such Person to hold such payment for the benefit
of, and to pay such payment over to, the holders of Senior Debt or their
representative.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 TIA Controls. If any provision of this
Indenture limits, qualifies, or conflicts with the duties imposed by operation
of, or otherwise conflicts with any of the provisions of, the TIA, the imposed
duties, or provisions upon qualification of this Indenture under the TIA, shall
control.
Section 13.2 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:
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East, Suite 320
Houston, Texas 77032
Attention: Edwin B. Donahue
if to the Trustee:
First Union National Bank
Corporate Trust Department
10 State House Square CT 5845
Hartford, CT 06103-3698
Attention: W. Jeffrey Kramer
The Company or the Trustee by notice to each other party may
designate additional or different addresses as shall be furnished in writing by
such party. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered, if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and five Business Days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address
shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Noteholder 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 Noteholder or any
defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication is mailed in the manner provided
above, it is duly given, regardless of whether the addressee receives it.
74
<PAGE> 82
Section 13.3 Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).
Section 13.4 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 13.5 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 13.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
Section 13.7 Legal Holidays. A "Legal Holiday" used with
respect to a particular place of payment is a Saturday, a Sunday or a day on
which banking institutions at such place are not required to be open. If a
payment date is a Legal Holiday at such place, payment may be made at such
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.
Section 13.8 Governing Law. THIS INDENTURE, THE NOTES AND THE
GUARANTEES 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 NOTES AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND
75
<PAGE> 83
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 NOTEHOLDER 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 13.9 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 13.10 No Recourse against Others. A director, officer,
employee, stockholder or incorporator, as such, of the Company or any of its
Subsidiaries shall not have any liability for any obligations of the Company or
such Subsidiary under the Notes or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creations. Each
Noteholder by accepting a Note waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of the Notes.
Section 13.11 Successors. All agreements of the Company in this
Indenture and the Notes shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 13.12 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 13.13 Severability. In case any one or more of the
provisions in this Indenture or in the Notes 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 13.14 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.
76
<PAGE> 84
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
TRANSAMERICAN REFINING CORPORATION
By:
-------------------------------------------
Ed Donahue, Vice President and Secretary
[Seal]
Attest:
------------------------------------
Tim Moore, Assistant Secretary
FIRST UNION NATIONAL BANK
as Trustee
By:
-------------------------------------------
Diane M. Welsh, Vice President
<PAGE> 85
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Unit
Exhibit C - Certificate of Transferor
<PAGE> 86
EXHIBIT A
(FACE OF NOTE)
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY
TRUST COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE
OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY
THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DEPOSITORY (AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) AS PERMITTING
RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY
PREDECESSOR OF SUCH NOTE) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING THE NOTE FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE.
- ------------------------
1 This paragraph should be included only if the Note is issued in global form.
A-1
<PAGE> 87
[FORM OF NOTE]
TRANSAMERICAN REFINING CORPORATION
16% SENIOR SUBORDINATED NOTE DUE 2003
No. $
THIS NOTE WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") WITHIN THE
MEANING OF SECTION 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE
ISSUE DATE OF THIS NOTE IS MARCH 16, 1998. INFORMATION REGARDING THE ISSUE
PRICE, THE TOTAL AMOUNT OF OID, AND THE YIELD TO MATURITY MAY BE OBTAINED BY
WRITTEN REQUEST OF THE HOLDERS OF THIS NOTE FROM THE COMPANY, 1300 NORTH SAM
HOUSTON PARKWAY EAST, SUITE 320, HOUSTON, TEXAS 77032, ATTENTION: INVESTOR
RELATIONS MANAGER, TELEPHONE NUMBER (281) 986-8811.
CUSIP [ ]
TransAmerican Refining Corporation, a Texas 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 June 30, 2003.
Interest Payment Dates: June 30 and December 30,
commencing June 30, 1998
Record Dates: June 15 and December 15
Reference is made to the further provisions of this Note on
the reverse side, which will, for all purposes, have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated:
TRANSAMERICAN REFINING CORPORATION
By:
------------------------------------
Name:
Title:
Attest:
- ---------------------------
Secretary
[Seal]
A-2
<PAGE> 88
Trustee's Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
First Union National Bank
By:
-------------------------------------
Authorized Signature
A-3
<PAGE> 89
(BACK OF NOTE)
TRANSAMERICAN REFINING CORPORATION
16% SENIOR SUBORDINATED NOTE DUE 2003
1. Interest.
TransAmerican Refining Corporation, a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at a
rate of 16% 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 18% per annum compounded semi- annually.
The Company will pay interest semi-annually on June 30 and December
30 of each year (each, an "Interest Payment Date"), commencing June 30, 1998.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from December 30, 1997.
Interest on the Notes 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 Notes (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 Notes 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, First Union National Bank (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
it may, subject to certain exceptions, act as Paying Agent, Registrar or
co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of March
16, 1998 (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 Notes 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 Notes are subject to all such
terms, and Holders of Notes are referred to the Indenture and said Act for a
statement of them. The Notes are senior subordinated obligations of the
Company limited in aggregate principal amount to $25,000,000.
A-4
<PAGE> 90
5. Optional Redemption.
The Notes may be redeemed in whole or from time to time in part at
any time 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 to
the Redemption Date.
<TABLE>
<CAPTION>
If redeemed during
the period
indicated below Redemption Price
------------------------ ----------------
<S> <C>
December 30, 1997 - June 29, 20.0. . . . . . . 116.00%
June 30, 2000 - June 29, 2001 . . . . . . . . 110.67%
June 30, 2001 - June 29, 2002 . . . . . . . . 105.33%
June 30, 2002 - and thereafter . . . . . . . . 100.00%
</TABLE>
Any such redemption 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
Notes to be redeemed at his registered address. Notes in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Notes called for redemption shall
have been deposited with the Paying Agent on such Redemption Date the Notes
called for redemption will cease to bear interest and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price and
any accrued and unpaid interest to the Redemption Date.
7. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder may register the transfer
of, or exchange Notes 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 Notes selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Note 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.
A-5
<PAGE> 91
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 Notes 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 Notes (including
the financial covenants, but excluding its obligation to pay the principal of
and interest on the Notes).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate Value of the Notes 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 Value of the Notes then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes 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 Note).
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
Notes 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 (in integral multiples of $1,000) of such
Holder's Notes at a Change of Control Purchase Price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any, on
and including the Change of Control Payment Date.
14. Successors.
When a successor assumes all the obligations of its predecessor under
the Notes 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 combined Value of the Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority
in aggregate Value of the Notes then
A-6
<PAGE> 92
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Notes 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 of its Subsidiaries or any
successor corporation shall have any liability for any obligation of the
Company or such Subsidiary under the Notes 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 Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Note
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 Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Note, by his acceptance thereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, dated as of
March 16, 1998, among the Company and the Jefferies & Company, Inc. (the
"Registration Rights Agreement"), including but not limited to the obligations
of the Holders with respect to a registration and the indemnification of the
Company and the Purchasers (as defined therein) to the extent provided therein.
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to: TransAmerican Refining Corporation, 1300
North Sam Houston Parkway East, Suite 320, Houston, Texas 77032.
A-7
<PAGE> 93
21. Ranking.
Payment of principal, premium, if any, interest on and Liquidated
Damages with respect to the Notes is subordinated, to the extent set forth in
the Indenture, to the prior payment of all Senior Debt. The Notes rank pari
passu with the Series A/B Notes in right of payment.
A-8
<PAGE> 94
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note 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 Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Signature
----------------- ------------------------------
(Sign exactly as your name
appears on the face of
this Note)
Signature Guarantee*
- ----------------------------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agents Medallion Program
(STAMP);
(2) The New York Stock Exchange Medallion Signature
Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
A-9
<PAGE> 95
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.14 or Article XI of the Indenture, check the
appropriate box below:
[ ] Section 4.14 [ ] Article XI
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.14 or Article XI of the Indenture, as the
case may be, state the principal amount (in integral multiples of $1,000) you
want to be purchased: $_____________
Date: Signature
----------------- ------------------------------
(Sign exactly as your name
appears on the face of
this Note)
Your Social Security or Tax Identification Number:
------------------------
Signature Guarantee:*
- ------------------------------
* NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee
programs:
(1) The Securities Transfer Agents Medallion Program
(STAMP);
(2) The New York Stock Exchange Medallion Signature
Program (MSP);
(3) The Stock Exchange Medallion Program (SEMP).
A-10
<PAGE> 96
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES2
The following exchanges of a part of this Global Note for
Definitive Notes have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of increase Principal Amount Signature of
in Principal Amount in Principal Amount of this Global Note authorized signatory
Date of Exchange of this Global Note of this Global Note decrease (or increase)of Trustee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------------
2 This should be included only if the Note is issued in global form.
A-11
<PAGE> 97
EXHIBIT B
[Form of Unit]
TRANSAMERICAN REFINING CORPORATION
UNITS
CONSISTING OF 16% SENIOR SUBORDINATED NOTES DUE 2003
AND COMMON STOCK PURCHASE WARRANTS
No. Units
CUSIP [ ]
Each Unit consists of $1,000 principal amount of 16%
Senior Subordinated Notes due 2003 of TransAmerican Refining Corporation, a
Texas corporation (hereinafter called the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to) and one
Warrant to purchase 13.344257 shares of Common Stock, par value $0.01 per share,
of the Company for $0.01 per share (subject to adjustment) at any time before
5:00 p.m., New York City time, on June 30, 2003 (the "Expiration Date"). The
Notes and the Warrants are not separately transferable until the earlier of (i)
December 30, 1998, (ii) commencement of the Exchange Offer (as defined in the
Indenture) and (iii) such other date as determined by Jefferies & Company, Inc.
The terms of the Warrants are governed by a Warrant Agreement dated as of March
16, 1998 (the "Warrant Agreement") between the Company and First Union National
Bank, as Warrant Agent (the "Warrant Agent"), and are subject to the terms and
provisions contained therein, to all of which terms and provisions the holder of
this Unit consents by acceptance hereof. Copies of the Warrant Agreement are on
file at the office of the Warrant Agent at First Union National Bank, 10 State
House Square CT 5845, Hartford CT 06103-3698, Attention: Corporate Trust
Department, and are available to any Warrant holder on written request and
without cost. The Warrant shall be void unless exercised before 5:00 p.m. New
York City time on the Expiration Date.
The Company, for value received, hereby promises to
pay to ____________, or registered assigns, the principal sum of ____________
Dollars, on June 30, 2003.
Interest Payment Dates: June 30 and December 30,
commencing June 30, 1998
Record Dates: June 15 and December 15
Reference is made to the further provisions of the
Note evidenced by this Unit on the reverse side, which will, for all purposes,
have the same effect as if set forth at this place.
B-1
<PAGE> 98
IN WITNESS WHEREOF, the Company has caused this Unit to be
signed manually or by facsimile by its duly authorized officers..
Dated:
TRANSAMERICAN REFINING CORPORATION
By:
----------------------------------
Attest:
- --------------------------
Secretary
[Seal]
B-2
<PAGE> 99
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Unit evidences one of those Notes described in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
as Trustee
By:
-------------------------------
Authorized Signatory
Dated:
B-3
<PAGE> 100
TRANSAMERICAN REFINING CORPORATION
UNITS
CONSISTING OF 16% SENIOR SUBORDINATED NOTES DUE 2003
AND COMMON STOCK PURCHASE WARRANTS
1. Interest.
TransAmerican Refining Corporation, a Texas corporation (the
"Company"), promises to pay interest on the principal amount of the Notes at a
rate of 16% per annum (subject to adjustment). 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 18% per annum (subject to adjustment) compounded
semi-annually.
The Company will pay interest semi-annually on June 30 and
December 30 of every year (each, an "Interest Payment Date"), commencing June
30, 1998. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from December 30,
1997. Interest 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 Notes (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 Notes 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 may deliver any such interest payment to the Paying Agent or the
Company may mail any such interest payment to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar.
Initially, First Union National Bank (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or so-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act as Paying Agent,
Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of
March 16, 1998 (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 Notes include those stated in the Indenture
and those made part of the Indenture by reference to the TIA, as in effect on
the date of the Indenture. The Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and said Act for a statement of
them. The Notes are senior subordinated obligations of the Company limited in
aggregate principal amount to $25,000,000.
B-4
<PAGE> 101
5. Optional Redemption.
The Notes may be redeemed in whole or from time to time in
part at any time at the option of the Company, at the Redemption Price
(expressed as a percentage of the principal amount thereof) set forth below
with respect to the indicated Redemption Date, in each case, together with any
accrued but unpaid interest to the Redemption Date.
<TABLE>
<CAPTION>
If redeemed during the
period indicated below Redemption Price
---------------------- ----------------
<S> <C>
December 30, 1997 - June 29, 2000 . . . . . . 116.00%
June 30, 2000 - June 29, 2001 . . . . . . . . 110.67%
June 30, 2001 - June 29, 2002 . . . . . . . . 105.33%
June 30, 2002 and thereafter . . . . . . . . 100.00%
</TABLE>
Any such redemption 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 Notes to be redeemed at his registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Notes called for
redemption shall have been deposited with the Paying Agent on such Redemption
Date the Notes called for redemption will cease to bear interest and the only
right of the Holders of such Notes will be to receive payment of the Redemption
Price and any accrued and unpaid interest to the Redemption Date.
7. Denominations; Transfer: Exchange.
The Notes are in registered form, without coupons, in
denominations of $l,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Notes 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 Notes selected for redemption.
8. Persons Deemed Owners.
The registered Holder of a Note 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. After that, all liability of the
Trustee and such Paying Agent(s) with respect to such money shall cease.
B-5
<PAGE> 102
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 Government Securities sufficient to pay
the principal of and interest on the Notes 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
Notes (including the financial covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the written consent of the Holders of at least
a majority in aggregate value of the Notes 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 value of the Notes 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 Note).
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 Notes 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 (in integral multiples of $1,000)
of such Holder's Notes 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 Notes 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 value of the Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority
in aggregate value of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of Notes
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.
B-6
<PAGE> 103
16. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator,
as such, past, present or future, of the Company or any of its Subsidiaries or
any successor corporation shall have any liability for any obligation of the
Company or such Subsidiary under the Notes 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 Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
17. Authentication.
The Note evidenced by this Unit shall not be valid until the
Trustee or authenticating agent signs the certificate of authentication on the
other side of this Unit.
18. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Note 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).
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 Notes and the Units as a convenience to the
holders of the Notes and holders of the Units. No representation is made as to
the accuracy of such numbers as printed on the Notes or the Units and reliance
may be placed only on the other identification numbers printed thereon and
hereon.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Note evidenced by this Unit, by his
acceptance thereof, acknowledges and agrees to the provisions of the
Registration Rights Agreement, dated as of March 16, 1998, between the Company
and Jefferies & Company, Inc. (the "Registration Rights Agreement"), including
but not limited to the obligations of the Holders with respect to a
registration and the indemnification of the Company and the Purchasers (as
defined therein) to the extent provided therein.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to: TransAmerican Refining Corporation, 1300
North Sam Houston Parkway East, Suite 320, Houston, Texas 77032.
21. Ranking.
Payments of principal, premium, if any, interest on and
Liquidated Damages with respect to, the Notes is subordinated, to the extent
set forth in the Indenture, to the prior payment of all Senior Debt. The Notes
rank pari passu with the Series A/B Notes in right of payment.
B-7
<PAGE> 104
TRANSAMERICAN REFINING CORPORATION
DEPOSIT OF WARRANTS TO PURCHASE COMMON STOCK OF TRANSAMERICAN REFINING
CORPORATION
Under the terms of the Warrant Agreement, and until such time as the
Holder of this Unit shall have surrendered this Unit to the Warrant Agent for
the exchange of this Unit, in whole or in part, for one or more Warrant
Certificates (as defined in the Warrant Agreement) and one or more Notes of a
like aggregate principal amount and of authorized denominations, the Holder of
this Unit is for each Unit evidenced by this certificate, the beneficial owner
of one Warrant expiring June 30, 2003, entitling the holder thereof initially
to purchase 13.344257 shares of Common Stock, par value $0.01 per share (the
"Common Stock"), of the Company (subject to adjustment as provided in the
Warrant Agreement).
The Company has deposited with the Warrant Agent, as custodian for
Holders of Units, certificates for such Warrants. Prior to the exchange of this
Unit for one or more Warrant Certificates and one or more Notes, beneficial
ownership of such Warrants is transferable only by the transfer of this Unit
pursuant to the Indenture. After such exchange, ownership of a Warrant is
transferable only by the transfer of the certificate representing such Warrant
in accordance with the provisions of the Warrant Agreement.
By accepting a Unit, each Holder of this Unit shall be bound by all of
the terms and provisions of the Warrant Agreement (a copy of which is available
on request to the Company or the Warrant Agent) as fully and effectively as if
such Holder had signed the same.
B-8
<PAGE> 105
ELECTION TO EXERCISE WARRANTS
The undersigned registered Holder of this Unit hereby irrevocably
elects to exercise Warrants (evidenced by Warrant Certificates deposited with
the Warrant Agent the beneficial ownership of which is evidenced by this Unit)
representing the right to receive ___ shares of Common Stock, and in payment of
the Warrant Price (as defined in the Warrant Agreement) the undersigned
herewith tenders payment in money of the United States of America or by
certified or official bank check in lawful money of the United States of
America to the order of TransAmerican Refining Corporation in the amount of
$__________. The undersigned requests that a certificate representing the
Common Stock issuable upon exercise of such Warrants be registered in the name
of __________________________ whose address is ___________________________ and
that such certificate be delivered to ________________ whose address is
_________________________. All payments to be made in lieu of issuing a
fractional share should be made by check payable to
__________________________________ whose address is
______________________________________.
The undersigned hereby irrevocably instructs the Warrant Agent (A) to
deliver this Note to the Trustee pursuant to the provisions of the Indenture
with instructions to issue in the name of the registered Holder a Note in
principal amount equal to the principal amount of the Note evidenced by this
Unit; (B) to issue in the name of the undersigned registered Holder a Warrant
Certificate representing the number of Warrants equal to the difference between
(x) the number of Warrants represented by this Unit and (y) the Warrants
exercised hereby on behalf of the undersigned registered Holder; and (C) as
custodian of the Warrants on behalf of such registered Holder, to cause such
Warrants to be exercised on behalf of the undersigned Holder as provided in the
Warrant Agreement.
Dated:
Name of Holder of this Note:
--------------------------------------
Address:
--------------------------------
Signature:
------------------------------
[Note: the above signature must correspond with the name as written upon the
face of this Unit in every particular, without alteration or enlargement
whatever.]
B-9
<PAGE> 106
ASSIGNMENT
I or we assign this Unit to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee:
--------------------------------------
and irrevocably appoint ____________________ agent to transfer this Unit on the
books of the Company. The agent may substitute another to act for him.
Dated:
----------
Signature:
---------------------------------------------
(Sign exactly as name appears on the other side of this Unit)
B-10
<PAGE> 107
EXCHANGE
I or we assign the Note evidenced by this Unit to:
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East
Suite 320
Houston, Texas 77032
I.R.S. Employer Identification No.: 76-0229632
and irrevocably appoint ____________________ agent to transfer the Note
evidenced by this Unit on the books of the Company. The agent may substitute
another to act for him.
Dated:
----------
Signature:
---------------------------------------------
(Sign exactly as name appears on the other side of this Unit)
B-11
<PAGE> 108
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have the Note evidenced by this Unit
purchased by the Company pursuant to Section 4.14 or Article XI of the
Indenture, check the appropriate box below:
[ ] Section 4.14 [ ] Article XI
If you want to elect to have only part of the Note evidenced
by this Unit purchased by the Company pursuant to Section 4.14 or Article XI of
the Indenture, as the case may be, state the amount you want to be purchased:
$____________
Dated:
-----------------
Signature:
-----------------------------------
(Sign exactly as your name appears
on the other side of this Unit)
Your Social Security or Tax Identification Number:
----------------
Signature Guarantee***:
-------------------------------------------
- ---------------------------
***NOTICE: The signature must be guaranteed by an institution which is a
member of one of the following recognized signature guarantee programs:
(1) The Securities Transfer Agents Medallion Program (STAMP)
(2) The New York Stock Exchange Medallion Signature Program (MSP)
(3) The Stock Exchange Medallion Program (SEMP)
B-12
<PAGE> 109
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF NOTES
Re: [Series C] [Series D] 16% Senior Subordinated Notes due 2003 (the
"Notes") of TransAmerican Refining Corporation
This Certificate relates to $_______________ principal amount of
Notes held in * [ ] book-entry or * [ ] definitive form by
________________________________________ (the "Transferor").
The Transferor, by written order, has requested the Trustee:
[ ] to deliver in exchange for its beneficial interest in the Global
Note held by the depository, a Note or Notes in definitive,
registered form of authorized denominations and an aggregate
principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above); or
[ ] to exchange or register the transfer of a Note or Notes. In
connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above captioned Notes and, the transfer
of this Note does not require registration under the Securities Act
of 1933, as amended (the "Securities Act") because such Note:
[ ] is being acquired for the Transferor's own account, without
transfer;
[ ] is being transferred pursuant to an effective registration
statement;
[ ] is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act), in reliance on such
Rule 144A;
[ ] is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;**
[ ] is being transferred pursuant to Rule 144 under the Securities
Act;** or
[ ] is being transferred pursuant to another exemption from the
registration requirements of the Securities Act
(explain: __________________________________).**
---------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------
Date:
------------------------
- -----------------------
* Check applicable box.
** If this box is checked, this certificate must be accompanied by an opinion
of counsel to the effect that such transfer is in compliance with the
Securities Act.
C-1
<PAGE> 1
EXHIBIT 4.28
WARRANT AGREEMENT
Dated as of
March 16, 1998
Between
TRANSAMERICAN REFINING CORPORATION
and
FIRST UNION NATIONAL BANK
as the Warrant Agent
----------------------------------
Warrants for
Common Stock of
TransAmerican Refining Corporation
----------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions...............................................................................2
SECTION 1.1 Definitions..................................................................2
SECTION 1.2 Rules of Construction........................................................5
ARTICLE II
Warrant Certificates......................................................................5
SECTION 2.1 Form of Warrant Certificates.................................................5
SECTION 2.2 Legends......................................................................6
SECTION 2.3 Execution and Delivery of Warrant Certificates...............................7
SECTION 2.4 Loss or Mutilation...........................................................8
ARTICLE III
Exercise Terms............................................................................9
SECTION 3.1 Exercise Price...............................................................9
SECTION 3.2 Exercise Period..............................................................9
SECTION 3.3 Expiration...................................................................9
SECTION 3.4 Manner of Exercise...........................................................9
SECTION 3.5 Issuance of Warrant Shares..................................................10
SECTION 3.6 Fractional Warrant Shares...................................................10
SECTION 3.7 Reservation of Warrant Shares...............................................10
SECTION 3.8 Cancellation of Warrant Certificates........................................11
SECTION 3.9 Compliance with Law.........................................................11
ARTICLE IV
Antidilution Provisions..................................................................11
SECTION 4.1 Adjustment of Exercise Price and Warrant Number.............................11
SECTION 4.2 Adjustment for Change in Capital Stock......................................12
SECTION 4.3 Adjustment for Rights Issue.................................................12
SECTION 4.4 Adjustment for Other Distributions..........................................13
SECTION 4.5 Adjustment for Common Stock Issue...........................................14
SECTION 4.6 Adjustment for Convertible Securities Issue.................................15
SECTION 4.7 [INTENTIONALLY OMITTED.]....................................................16
SECTION 4.8 Consideration Received......................................................16
SECTION 4.9 When De Minimis Adjustment May Be Deferred..................................17
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 4.10 Adjustment to Exercise Price...............................................17
SECTION 4.11 When No Adjustment Required................................................18
SECTION 4.12 Notice of Adjustment.......................................................18
SECTION 4.13 Voluntary Reduction........................................................18
SECTION 4.14 Reorganizations............................................................18
SECTION 4.15 Form of Warrants...........................................................19
SECTION 4.16 Other Dilutive Events......................................................19
SECTION 4.17 Miscellaneous..............................................................19
SECTION 4.18 Non-applicability of Article IV............................................20
ARTICLE V
Transferability..........................................................................20
SECTION 5.1 Transfer and Exchange.......................................................20
SECTION 5.2 Registration, Registration of Transfer and Exchange.........................21
SECTION 5.5 Surrender of Warrant Certificates...........................................24
ARTICLE VI
Warrant Agent............................................................................25
SECTION 6.1 Appointment of Warrant Agent................................................25
SECTION 6.2 Rights and Duties of Warrant Agent..........................................25
SECTION 6.3 Individual Rights of Warrant Agent..........................................26
SECTION 6.4 Warrant Agent's Disclaimer..................................................26
SECTION 6.5 Compensation and Indemnity..................................................26
SECTION 6.6 Successor Warrant Agent.....................................................27
ARTICLE VII
Miscellaneous............................................................................28
SECTION 7.1 [INTENTIONALLY OMITTED.]....................................................28
SECTION 7.2 SEC Reports and Other Information...........................................28
SECTION 7.3 Rule 144A...................................................................29
SECTION 7.4 Persons Benefitting.........................................................29
SECTION 7.5 Rights of Holders...........................................................29
SECTION 7.6 Amendment...................................................................29
SECTION 7.7 Notices.....................................................................30
SECTION 7.8 Governing Law...............................................................30
SECTION 7.9 Successors..................................................................31
SECTION 7.10 Multiple Originals.........................................................31
</TABLE>
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<TABLE>
<S> <C>
SECTION 7.11 Table of Contents..........................................................31
SECTION 7.12 Severability...............................................................31
SECTION 7.13 Further Assurances.........................................................31
</TABLE>
<PAGE> 5
THIS WARRANT AGREEMENT (this "Agreement"), dated as of March 16, 1998, is
between TRANSAMERICAN REFINING CORPORATION, a Texas corporation (together with
its permitted successors and assigns, the "Company"), and FIRST UNION NATIONAL
BANK, as warrant agent (together with its permitted successors and assigns, the
"Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement, dated March 6,
1998 (the "Purchase Agreement"), with Jefferies & Company, Inc. (the
"Purchaser"), pursuant to which the Company has agreed to issue and sell to the
Purchaser 25,000 Units (as defined below), consisting of (i) $25,000,000
aggregate principal amount of 16% Series C Senior Subordinated Notes due 2003
(the "Notes") and (ii) 25,000 warrants (the "Warrants" or "Unit Warrants") to
purchase initially an aggregate of 333,606 shares (the "Warrant Shares") of the
Company's common stock, $0.01 par value per share (the "Common Stock"), at an
exercise price of $0.01 per share;
WHEREAS, the Notes will be issued pursuant to an indenture (the
"Indenture") to be dated as of March 16, 1998 between the Company and First
Union National Bank, as trustee (the "Trustee");
WHEREAS, the Warrants are to be issued pursuant to this Agreement;
WHEREAS, the Notes and the Warrants will be sold in Units, each Unit
consisting of (i) one Note in the principal amount of $1,000 and (ii) one
Warrant to purchase initially 13.344257 Warrant Shares at an exercise price of
$0.01 per share (the "Units");
WHEREAS, prior to Separation (as defined below), record ownership of the
Notes and beneficial ownership of the Unit Warrants will be evidenced by record
ownership of the Units;
WHEREAS, definitive certificates (the "Custodian Warrants") evidencing the
Unit Warrants will be held by the Warrant Agent as custodian for the registered
holders of the Units;
WHEREAS, the Company further desires the Warrant Agent to act on behalf of
the Company in connection with the issuances, division, transfer, exchange,
substitution and exercise of the Warrants, and the Warrant Agent is willing to
so act; and
NOW, THEREFORE, each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the holders of Warrants (or until
Separation (as defined below), the registered holders of Units) (each a
"Holder"):
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ARTICLE I
Definitions
SECTION 1.1 Definitions. Capitalized terms used but not defined herein
shall have the respective meanings given to such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, is controlling or controlled by or under direct or
indirect common control with such specified Person, or (ii) any other Person who
is a director or executive officer (A) of such Person, (B) of any subsidiary of
such specified Person, or (C) of any Person described in clause (i) above. For
purposes of this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. Affiliate shall also mean any beneficial
owner of shares representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or warrants to purchase such
Voting Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Agent Member" has the meaning given to such term in Section 5.3.
"Board" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means any day other than (i) Saturday or Sunday, (ii) or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
"Common Stock" has the meaning given to such term in the recitals to this
Agreement.
"Company" has the meaning given to such term in the preamble to this
Agreement.
"Current Market Value" per share of Common Stock or any other security at
any date means, on any date of determination (a) the average of the daily
closing sale prices for each of 15 trading days immediately preceding such date
(or such shorter number of days during which such security has been listed or
traded), if the security has been listed on the New York Stock Exchange, the
American Stock Exchange or other national securities exchange or the NASDAQ
National Market for at least 10 trading days prior to such
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date, (b) if such security is not so listed or traded, the average of the daily
closing bid prices for each of the 15 trading days immediately preceding such
date (or such shorter number of days during which such security had been
quoted), if the security has been quoted on a national over-the-counter market
for at least 10 trading days, and (c) otherwise, the value of the security most
recently determined as of a date within the six months preceding such day by the
Board.
"Definitive Warrants" has the meaning given to such term in Section 2.1.
"DTC" means The Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC pursuant thereto.
"Exercise Date" has the meaning given to such term in Section 3.2.
"Exercise Price" has the meaning given to such term in Section 3.1.
"Expiration Date" has the meaning given to such term in Section 3.2.
"Global Warrant" has the meaning given to such term in Section 2.1.
"Global Warrants" has the meaning given to such term in Section 2.1.
"Holders" has the meaning given to such term in the recitals to this
Agreement.
"Indenture" has the meaning given to such term in the recitals to this
Agreement.
"Institutional Accredited Investor" has the meaning given to such term in
Section 2.3.
"Issue Date" means the date on which Warrants are initially issued, which
is March 16, 1998.
"Notes" has the meaning given to such term in the recitals to this
Agreement.
"Offering Circular" means the final Offering Circular of the Company dated
March 6, 1998 relating to the issuance and sale of the Units.
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"Officer" means the Chief Executive Officer, the President, the Chief
Financial Officer, any Vice President or the Treasurer of the Company.
"Old Warrants" means the common stock purchase warrants of the Company
issued pursuant to the warrant agreement, dated as of February 23, 1995, between
the Company and First Union National Bank, or successor warrant agent, as
amended.
"Person" means any individual, corporation, company (including any limited
liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redeemable Stock" means, with respect to any Person, any capital stock
that by its terms (or by the terms of any security into which it is convertible
or exchangeable) or otherwise (i) matures or is mandatorily redeemable pursuant
to a sinking fund obligation or otherwise, (ii) is or may become redeemable or
repurchasable at the option of the holder thereof, in whole or in part, or (iii)
is convertible or exchangeable for indebtedness.
"Restricted Definitive Warrant" has the meaning given to such term in
Section 2.3.
"Restricted Warrant" means a Global Warrant or a Restricted Definitive
Warrant.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Warrants" means the warrants issued on December 30, 1997 pursuant
to the warrant agreement, dated December 30, 1997 between the Company and First
Union National Bank.
"Stock Transfer Agent" has the meaning given to such term in Section 3.5.
"Voting Stock" means all classes of capital stock of such corporation then
outstanding and normally entitled to vote in the election of directors.
"Warrant Agent" has the meaning given to such term in the Recitals.
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<PAGE> 9
"Warrant Certificates" has the meaning given to such term in Section 2.1.
"Warrant Number" has the meaning given to such term in Article IV.
"Warrant Shares" means the Common Stock (and other securities) issuable
upon the exercise of the Warrants.
"Warrants" has the meaning given to such term in the Recitals.
SECTION 1.2 Rules of Construction. Unless the text otherwise requires: (i)
a term has the meaning assigned to it; (ii) an accounting term not otherwise
defined has the meaning assigned to it in accordance with generally accepted
accounting principles as in effect from time to time; (iii) "or" is not
exclusive; (iv) "including" means including, without limitation; (v) references
to "Section" and "Article" refer to Sections and Articles of this Agreement,
unless the context clearly requires otherwise; and (vi) words in the singular
include the plural and words in the plural include the singular.
ARTICLE II
Warrant Certificates
SECTION 2.1 Form of Warrant Certificates. Prior to Separation, beneficial
ownership of the Unit Warrants will be evidenced by record ownership of the
Units. From and after Separation, the Unit Warrants will be issued (a) in global
form (the "Global Warrant"), substantially in the form of Exhibit A attached
hereto (including the text accompanying the footnotes thereto), and (b) in
definitive form (the "Definitive Warrants"), substantially in the form of
Exhibit A (excluding the text accompanying the footnotes thereto). The Global
Warrant shall represent the aggregate amount of outstanding Warrants from time
to time endorsed thereon; provided that the aggregate amount of outstanding
Warrants represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the Global
Warrant to reflect the amount of any increase or decrease in the amount of
outstanding Warrants represented thereby shall be made by the Warrant Agent in
accordance with instructions given by the holder thereof.
The Depository with respect to the Global Warrant (the "Depository") shall
be The Depository Trust Company until a successor shall be appointed by the
Company and become such Depository. The Global Warrant shall be registered in
the name of the Depository, or the nominee of such Depository. So long as the
Depository or its nominee is the registered owner of such Global Warrant it will
be deemed the sole owner and holder of such Global Warrant for all purposes
hereunder and under such Global Warrant. The certificates (the "Warrant
Certificates") evidencing the Global Warrant and the Definitive
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<PAGE> 10
Warrants to be delivered pursuant to this Agreement shall be substantially in
the form set forth in Exhibit A attached hereto. Neither the Company nor the
Warrant Agent will have any responsibility or liability for any aspects of the
records relating to beneficial ownership interest of the Global Warrant in the
name of the Depository or its nominee or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
SECTION 2.2 Legends. Unless and until a Warrant or Warrant Share is
sold under an effective registration statement, each Warrant Certificate
evidencing the Global Warrants and the Definitive Warrants (and all Warrant
Certificates issued in exchange therefor or substitution thereof) and each
certificate representing the Warrant Shares shall bear a legend in substantially
the following form (with any appropriate modification for the Warrant Shares):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO YEARS
(OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) UNDER
THE SECURITIES ACT AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH TRANSAMERICAN REFINING CORPORATION ("THE
COMPANY") OR ANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN
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INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN
EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT.
SECTION 2.3 Execution and Delivery of Warrant Certificates. Warrant
Certificates evidencing Warrants to purchase initially an aggregate of up to
333,606 Warrant Shares may be executed, on or after the Issue Date, by the
Company and delivered to the Warrant Agent for countersignature, and the Warrant
Agent shall thereupon countersign and deliver such Warrant Certificates upon the
order and at the direction of the Company to the purchasers thereof on the date
of issuance. The Warrant Agent is hereby authorized to countersign and deliver
Warrant Certificates as required by this Agreement.
The Warrant Certificates shall be executed on behalf of the Company by
an Officer of the Company either manually or by facsimile signature printed
thereon. The Warrant Certificates shall be countersigned manually by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. In case
any Officer of the Company whose signature shall have been placed upon any of
the Warrant Certificates shall cease to be such Officer of the Company before
countersignature by the Warrant Agent and issuance and delivery thereof, such
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such Officer of the Company.
Subject to Section 2.5, Warrants offered and sold in their initial
distribution to a limited number of institutions that are accredited investors
(which are not QIBs) within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act (and institutions in which all the equity owners are such
accredited investors) (together referred to as "Institutional Accredited
Investors") in transactions exempt from registration under the Securities Act
will be delivered, after separation, in certificated fully registered form (a
"Restricted Definitive Warrant") substantially in the form set forth in Exhibit
A. Such Warrants shall be delivered to such Institutional Accredited Investors
only upon the execution and delivery to the Company and the Purchaser of an
institutional accredited investor transferee compliance letter (an "Investor
Letter") substantially in the form of Annex A to the Offering Circular.
Restricted Definitive Warrants may not be transferred or exchanged for interests
in the Global Warrant or another Restricted Definitive Warrant, except as
provided herein.
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SECTION 2.4 Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership and the loss,
theft, destruction or mutilation of any Warrant Certificate and of indemnity
satisfactory to them and (in the case of mutilation) upon surrender and
cancellation thereof, then, in the absence of notice to the Company or the
Warrant Agent that the Warrants represented thereby have been acquired by a bona
fide purchaser, the Company shall execute and the Warrant Agent shall
countersign and deliver to the registered Holder of the lost, stolen, destroyed
or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new
Warrant Certificate of the same tenor and for a like aggregate number of
Warrants. Upon the issuance of any new Warrant Certificate under this Section
2.4, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and other
expenses (including the reasonable fees and expenses of the Warrant Agent and of
counsel to the Company) in connection therewith. Every new Warrant Certificate
executed and delivered pursuant to this Section 2.4 in lieu of any lost, stolen
or destroyed Warrant Certificate shall constitute a contractual obligation of
the Company, whether or not the allegedly lost, stolen or destroyed Warrant
Certificates shall be at any time enforceable under applicable law, and shall be
entitled to the benefits of this Agreement equally and proportionately with any
and all other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Section 2.4 are exclusive and shall preclude (to the extent
lawful) all other rights or remedies, notwithstanding any law or statute
existing or hereafter enacted to the contrary, with respect to the replacement
of mutilated, lost, stolen or destroyed Warrant Certificates.
Section 2.5. Transfers of Notes and Warrants Prior to Separation;
Separation.
The Custodian Warrants will be held by the Warrant Agent, as custodian for
the holders of the Units, until such time as the registered holder of a Unit
shall have surrendered such Unit to the Warrant Agent for the exchange of such
Unit, in whole or in part, for a Definitive Warrant or Warrants and for a Note
or Notes of a like aggregate principal amount of authorized denominations (such
surrender and exchange, together with the exchange for the Global Warrant
referred to below, are herein referred to as a "Separation" and the related
Warrants are referred to as being "Separated"); provided, that Separation may
not occur until the earlier of (i) December 30, 1998, (ii) commencement of the
Exchange Offer (as defined in the Registration Rights Agreement, dated the date
hereof, between the Company and the Purchaser) and (iii) such other date as may
be determined by the Purchaser. Each Unit presented for Separation shall be duly
endorsed by the registered holder thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney-in-fact. The Warrant
Agent shall deliver such Unit to the Trustee pursuant to the provisions of the
Indenture, with instructions to issue Notes in authorized denominations for an
aggregate principal amount equal to the aggregate principal amount of the Notes
surrendered in the name of each registered holder or holders. The Warrant Agent,
as custodian, shall deliver (or cause to be delivered) the Notes so received
from the Trustee and a Warrant Certificate or Certificates executed by the
Company and countersigned by the Warrant Agent in the name of such
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registered holder or holders for such aggregate number of Warrants as shall
equal Warrants so exchanged for Separation, in each case, bearing numbers or
other distinguishing symbols not contemporaneously outstanding to the holder or
holders entitled thereto.
ARTICLE VI
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall initially entitle the
Holder thereof, subject to adjustment pursuant to the terms of this Agreement,
to purchase 13.344257 shares of Common Stock for an exercise price of $0.01 per
share of Common Stock (the "Exercise Price"). The Warrant Number and Exercise
Price are both subject to adjustment as set forth in Article IV.
SECTION 3.2 Exercise Period. (a) Subject to the terms and conditions
set forth herein, the Warrants shall only be exercisable at any time or from
time to time on any Business Day on or after December 30, 1998 (the "Exercise
Date").
(b) No Warrant shall be exercisable after June 30, 2003 (the
"Expiration Date").
SECTION 3.3 Expiration. A Warrant shall terminate and become void as of
the earlier of (i) the close of business on the Expiration Date or (ii) the date
such Warrant is exercised. The Company shall give notice not less than 90, and
not more than 120, days prior to the Expiration Date to the Holders of all then
outstanding Warrants to the effect that the Warrants will terminate and become
void as of the close of business on the Expiration Date; provided, however, that
notwithstanding that the Company may fail to give notice as provided in this
Section 3.3, the Warrants will terminate and become void on the Expiration Date.
SECTION 3.4 Manner of Exercise. Warrants may be exercised at any time
on or after the Exercise Date by surrendering to the Warrant Agent the Warrant
Certificates at any office or agency maintained for that purpose, together with
the form of election to purchase Common Stock on the reverse thereof duly
completed and signed by the Holder thereof and paying in full the Exercise Price
for each Warrant exercised and any other amounts required to be paid pursuant to
Section 5.2 hereof. Payment of the Exercise Price (and any other required
amounts) shall be made in the form of cash or a certified or official bank check
payable to the order of the Company. Subject to Section 3.2, the rights
represented by the Warrants shall be exercisable at the election of the Holders
thereof either in full at any time or from time to time in part and in the event
that a Warrant Certificate is surrendered for exercise in respect of less than
all the Warrant Shares purchasable on such exercise at any time prior to the
expiration of the Exercise Period a new Warrant Certificate
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exercisable for the remaining Warrant Shares will be issued. The Warrant Agent
shall countersign and deliver the required new Warrant Certificates, and the
Company, at the Warrant Agent's request, shall supply the Warrant Agent with
Warrant Certificates duly signed on behalf of the Company for such purpose.
SECTION 3.5 Issuance of Warrant Shares. Upon the surrender of Warrant
Certificates, as set forth in Section 3.4, the Company shall issue and cause the
Warrant Agent or, if appointed, a transfer agent for the Common Stock ("Stock
Transfer Agent") to countersign and deliver to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise, to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.6 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price, as aforesaid.
SECTION 3.6 Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.6, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in cash
equal to the same fraction of the Current Market Value for one share of Common
Stock less the portion of the Exercise Price attributable thereto, rounded to
the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. The Company shall at all
times keep reserved out of its authorized shares of Common Stock, a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The registrar for the Common Stock (the "Registrar") shall at all
times until the expiration of the Exercise Period reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with the Stock Transfer Agent. The Company will
supply such Stock Transfer Agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be payable as provided in Section 3.6. The Company will furnish to such Stock
Transfer Agent a copy of all notices of adjustments and certificates related
thereto transmitted to each Holder.
The Company covenants that all shares of Common Stock that may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of
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preemptive rights, free from all taxes and free from all liens, charges and
security interests, created by or through the Company, with respect to the issue
thereof.
SECTION 3.8 Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates properly surrendered for exchange, substitution,
transfer or exercise. The Warrant Agent shall destroy canceled Warrant
Certificates held by it and deliver a certificate of destruction to the Company.
The Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of Warrant Shares through the exercise of such Warrants.
SECTION 3.9 Compliance with Law. (a) Notwithstanding anything in this
Agreement to the contrary, in no event shall a Holder be entitled to exercise a
Warrant, unless (i) a registration statement filed under the Securities Act in
respect of the issuance of the Warrant Shares is then effective or (ii) in the
opinion of counsel addressed to the Warrant Agent an exemption from the
registration requirements is available under the Securities Act for the issuance
of the Warrant Shares (and the delivery of any other securities for which the
Warrants may at the time be exercisable) at the time of such exercise.
(b) If any shares of Common Stock required to be reserved for purposes
of exercise of Warrants require, under any other Federal or state law or
applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing on any
such national securities exchange before such shares may be issued upon
exercise, the Company will in good faith and as expeditiously as possible
endeavor also to cause such shares to be duly registered or approved by such
governmental authority or listed on the relevant national securities exchange,
as the case may be.
ARTICLE VIII
Antidilution Provisions
SECTION 4.1 Adjustment of Exercise Price and Warrant Number. The number
of shares of Common Stock issuable upon the exercise of each Warrant (the
"Warrant Number") is initially 13.344257. The Warrant Number is subject to
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Article IV .
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SECTION 4.2 Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides or reclassifies its outstanding shares of Common Stock
into a greater number of shares;
(3) combines or reclassifies its outstanding shares of Common Stock
into a smaller number of shares;
(4) makes a distribution on Common Stock in shares of its capital
stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of its
capital stock (other than reclassifications arising solely as a result of a
change in the par value or no par value of the Common Stock);
then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which it would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed above
shall occur. If the occurrence of any event listed above results in an
adjustment under Section 4.3 or 4.4 below, no further adjustment shall be made
under this Section 4.2.
The Company shall not issue shares of Common Stock as a dividend or
distribution on any class of capital stock other than Common Stock unless (i)
such dividend or distribution is not prohibited by the Indenture and (ii) the
Warrant Holders also receive such dividend or distribution on a ratable basis or
the appropriate adjustment to the Warrant Number is made under this Article IV.
13
<PAGE> 17
SECTION 4.3 Adjustment for Rights Issue.
If the Company distributes (and receives no consideration therefor) any
rights, options or warrants (whether or not immediately exercisable) to holders
of any class of its Common Stock entitling them to purchase shares of Common
Stock at a price per share less than the Current Market Value per share on the
record date relating to such distribution, the Warrant Number shall be adjusted
in accordance with the formula:
W(') = W x O + N
---------
O + N x P
-----
M
where:
W(') = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date for
any such distribution.
O = the number of shares of Common Stock outstanding on the
record date for any such distribution.
N = the number of additional shares of Common Stock issuable upon
exercise of such rights, options or warrants.
P = the exercise price per share of such rights, options or
warrants.
M = the Current Market Value per share of Common Stock on the
record date for any such distribution.
The adjustment shall be made successively whenever any such rights, options
or warrants are issued and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
options or warrants. If at the end of the period during which such rights,
options or warrants are exercisable, not all rights, options or warrants shall
have been exercised, the adjusted Warrant Number shall be immediately readjusted
to what it would have been if "N" in the above formula had been the number of
shares actually issued.
SECTION 4.4 Adjustment for Other Distributions.
If the Company distributes to holders of any class of its Common Stock (as
such) (i) any evidences of indebtedness of the Company or any of its
subsidiaries, (ii) any assets of the Company or any of its subsidiaries, or
(iii) any rights, options or warrants to acquire any of
14
<PAGE> 18
the foregoing or to acquire any other securities of the Company, the Warrant
Number shall be adjusted in accordance with the formula:
W' = W x M
------
M - F
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date
mentioned below.
M = the Current Market Value per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date mentioned below of the
shares, indebtedness, assets, rights, options or warrants
distributable to the holder of one share of Common Stock.
The adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. If an
adjustment is made pursuant to this subsection (c) as a result of the issuance
of rights, options or warrants and at the end of the period during which any
such rights, options or warrants are exercisable, not all such rights, options
or warrants shall have been exercised, the adjusted Warrant Number shall be
immediately readjusted as if "F" in the above formula was the fair market value
on the record date of the indebtedness or assets actually distributed upon
exercise of such rights, options or warrants divided by the number of shares of
Common Stock outstanding on the record date.
In the event that "F" in the above formula is greater than or equal to "M"
in the above formula, then each Holder of the Warrants, notwithstanding that
such Holder's Warrants have not been exercised, shall receive the distribution
referred to in this Section 4.4 on the basis of number of Warrant Shares
underlying the Warrants held by each such Holder.
This subsection does not apply to rights, options or warrants referred to
in Section 4.3.
SECTION 4.5 Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a consideration per share
less than the Current Market Value per share on the date the Company fixes the
offering price of such additional shares, the Warrant Number shall be adjusted
in accordance with the formula:
15
<PAGE> 19
W' = W x A
-----
O + P
---
M
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common
Stock.
P = the aggregate consideration received for the issuance of such
additional shares of Common Stock.
M = the Current Market Value per share of Common Stock on the date
of issuance of such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares of Common Stock.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
This Section 4.5 does not apply to any of the transactions described in
Section 4.2 or to the issuance of Common Stock upon exercise of the Old
Warrants.
SECTION 4.6 Adjustment for Convertible Securities Issue.
If the Company issues any options, warrants or other securities convertible
into or exchangeable or exercisable for Common Stock (other than securities
issued in transactions described in Sections 4.3 or 4.4) for a consideration per
share of Common Stock initially deliverable upon conversion, exchange or
exercise of such securities less than the Current Market Value per share on the
date of issuance of such securities, the Warrant Number shall be adjusted in
accordance with this formula:
W' = W x O + D
-----
O + P
---
M
where:
16
<PAGE> 20
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the sum of the aggregate consideration received for the
issuance of such securities and the aggregate minimum
consideration receivable by the Company for issuance of Common
Stock upon conversion or in exchange for, or upon exercise of,
such securities.
M = the Current Market Value per share of Common Stock on the date
of issuance of such securities.
D = the maximum number of shares of Common Stock deliverable upon
conversion or in exchange for or upon exercise of such
securities at the initial conversion, exchange or exercise
rate.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion, exchange or
exercise of such securities has not been issued when the conversion, exchange or
exercise rights of such securities have expired or been terminated, then the
adjusted Warrant Number shall promptly be readjusted to the adjusted Warrant
Number which would then be in effect had the adjustment upon the issuance of
such securities been made on the basis of the actual number of shares of Common
Stock issued upon conversion, exchange or exercise of such securities. If the
aggregate minimum consideration receivable by the Company for issuance of Common
Stock upon conversion or in exchange for, or upon exercise of, such securities
shall be increased by virtue of provisions therein contained or upon the arrival
of a specified date or the happening of a specified event, then the Warrant
Number shall promptly be readjusted to the Warrant Number which would then be in
effect had the adjustment upon the issuance of such securities been made on the
basis of such increased minimum consideration.
This Section 4.6 does not apply to the issuance of the Warrants or to any
of the transactions described in Section 4.3.
17
<PAGE> 21
SECTION 4.7 [INTENTIONALLY OMITTED.]
SECTION 4.8 Consideration Received.
For purposes of any computation respecting consideration received
pursuant to Sections 4.4, 4.5 and 4.6, the following shall apply:
(1) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash (without any deduction
being made for any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in connection
therewith);
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof (irrespective
of the accounting treatment thereof) as determined in good faith by the
Board; and
(3) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares of
Common Stock, the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion, exchange or exercise thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
SECTION 4.9 When De Minimis Adjustment May Be Deferred.
No adjustment in the Warrant Number need be made unless the adjustment
would require an increase or decrease of at least 0.5% in the Warrant Number.
Any adjustment that is not made shall be carried forward and taken into account
in any subsequent adjustment, provided that no such adjustment shall be deferred
beyond the date on which a Warrant is exercised.
All calculations under this Article IV shall be made to the nearest 1/100th
of a share.
SECTION 4.10 Adjustment to Exercise Price.
Upon each adjustment to the Warrant Number pursuant to this Article IV, the
Exercise Price shall be adjusted so that it is equal to the Exercise Price in
effect immediately prior to such adjustment multiplied by a quotient, the
numerator of which is the Warrant Number in effect immediately prior to such
adjustment, and the denominator of which is the Warrant Number
18
<PAGE> 22
in effect immediately after such adjustment; provided, that the Exercise Price
shall not be adjusted below the lesser of $0.01 per share of Common Stock and
the then par value per share of Common Stock.
SECTION 4.11 When No Adjustment Required.
If an adjustment is made upon the establishment of a record date for a
distribution subject to Sections 4.2, 4.3 or 4.4 hereof and such distribution is
subsequently cancelled, the Warrant Number and Exercise Price then in effect
shall be readjusted, effective as of the date when the Board determines to
cancel such distribution, to that which would have been in effect if such record
date had not been fixed.
To the extent the Warrants become convertible into cash, no adjustment need
be made thereafter as to the amount of cash into which such Warrants are
exercisable. Interest will not accrue on the cash.
SECTION 4.12 Notice of Adjustment.
Whenever the Warrant Number or Exercise Price is adjusted, The Company
shall provide the notices required by Section 7.7 hereof.
SECTION 4.13 Voluntary Reduction.
The Company from time to time may reduce the Exercise Price by any amount
for any period of time (including, without limitation, permanently) if the
period is at least 20 days and if the reduction is irrevocable during the
period.
Whenever the Exercise Price is reduced, the Company shall mail to the
Holders a notice of the reduction. The Company shall mail the notice at least 15
days before the date the reduced Exercise Price takes effect. The notice shall
state the reduced Exercise Price and the period it will be in effect.
A reduction of the Exercise Price under this Section 4.13 (other than a
permanent reduction) does not change or adjust the Exercise Price otherwise in
effect for purposes of Sections 4.2, 4.3, 4.4, 4.5 or 4.6.
SECTION 4.14 Reorganizations.
In case of any capital reorganization, other than in the cases referred to
in Sections 4.2, 4.3, 4.4, 4.5 or 4.6 hereof, or the consolidation or merger of
the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock
into shares of other stock or other securities or property), or the sale of the
property of the
19
<PAGE> 23
Company as an entirety or substantially as an entirety (collectively, such
actions being hereinafter referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of any Warrant (in lieu of the number of
shares of Common Stock theretofore deliverable) the amount of cash, the number
of shares of stock or other securities or property to which a holder of the
number of shares of Common Stock that would otherwise have been deliverable upon
the exercise of such Warrant would have been entitled upon such Reorganization
if such Warrant had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of the Company, whose determination shall
be described in a duly adopted resolution certified by The Company's Secretary
or Assistant Secretary, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Holders so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to or
simultaneously with the consummation thereof the successor corporation (if other
than the Company) resulting from such Reorganization or the corporation
purchasing or leasing such assets or other appropriate corporation or entity
shall expressly assume, by a supplemental Warrant Agreement or other
acknowledgment executed and delivered to the Holder(s), the obligation to
deliver to each such Holder such cash, such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to purchase, and all other obligations and liabilities under this
Agreement.
SECTION 4.15 Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the number or kind
of shares purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
SECTION 4.16 Other Dilutive Events.
In case any event shall occur as to which the provisions of this Article IV
are not strictly applicable but the failure to make any adjustment would not
fairly protect the purchase rights represented by the Warrants in accordance
with the essential intent and principles of such sections, then, in each such
case, the Company shall make a good faith adjustment to the Exercise Price and
Warrant Number into which each Warrant is exercisable in accordance with the
intent of this Article IV and, upon the written request of the holders of a
majority of the Warrants, shall appoint a firm of independent certified public
accountants of recognized national standing (which may be the regular auditors
of the Company), which shall give their opinion upon the adjustment, if any, on
a basis consistent with the essential intent and principles established in this
Article IV, necessary to preserve, without dilution, the purchase rights
represented by these Warrants. Upon
20
<PAGE> 24
receipt of such opinion, the Company shall promptly mail a copy thereof to the
Holder of each Warrant and shall make the adjustments described therein.
SECTION 4.17 Miscellaneous.
For purpose of this Article IV the term "shares of Common Stock" shall mean
(i) shares of any class of stock designated as Common Stock of the Company as of
the date of this Agreement, (ii) shares of any other class of stock resulting
from successive changes or reclassification of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value and (iii) shares of Common Stock of the Company issuable upon exercise
of options, warrants or rights to purchase Common Stock of the Company or upon
conversion or exchange of securities convertible into or exchangeable for shares
of Common Stock of the Company outstanding at the date of determination. In the
event that at any time, as a result of an adjustment made pursuant to this
Article IV, the holders of Warrants shall become entitled to purchase any
securities of The Company other than, or in addition to, shares of Common Stock,
thereafter the number or amount of such other securities so purchasable upon
exercise of each Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in Sections 4.2 through 4.16 of this
Article IV, inclusive, and the provisions of this Agreement with respect to the
Warrant Shares or the Common Stock shall apply on like terms to any such other
securities.
SECTION 4.18 Non-applicability of Article IV.
The provisions of this Article IV do not apply to (i) a change solely in
the par value or no par value of the Common Stock, provided that the Company
shall not increase the par value to exceed the Exercise Price, (ii) the
conversion or exchange (other than pursuant to a reclassification), in any case
on a share-for-share basis, of Common Stock for non-voting common stock that has
rights (other than voting rights) identical to the Common Stock, or of such
non-voting stock for Common Stock, (iii) the issuance to employees of
Transamerican Energy Corporation or any of its subsidiaries of stock or stock
options in an amount which, upon purchase or exercise, as the case may be, would
represent in the aggregate, less than 10% of the Company's Common Stock on a
fully-diluted basis, (iv) any distribution by the Company of Capital Stock of
TransTexas Gas Corporation to a holder or holders of Common Stock, or (v) any
exercise of Warrants or the Series A Warrants.
ARTICLE X
Transferability
SECTION 5.1 Transfer and Exchange. The Company shall cause to be kept
at the office of the Warrant Agent a register in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Warrant Certificates and transfers
21
<PAGE> 25
or exchanges of Warrant Certificates as herein provided. All Warrant
Certificates issued upon any registration of transfer or exchange of Warrant
Certificates shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefit under this Agreement, as the
Warrant Certificates surrendered for such registration of transfer or exchange.
A Holder may transfer its Warrants only by complying with the terms of this
Agreement. No such transfer shall be effected until, and such transferee shall
succeed to the rights of a Holder only upon, final acceptance and registration
of the transfer by the Warrant Agent in the register. Prior to the registration
of any transfer of Warrants by a Holder as provided herein, the Company, the
Warrant Agent, any agent of the Company or the Warrant Agent may treat the
Person in whose name the Warrants are registered as the owner thereof for all
purposes and as the Person entitled to exercise the rights represented thereby,
any notice to the contrary notwithstanding. Furthermore, any Holder of a Global
Warrant shall, by acceptance of such Global Warrant, agree that transfers of
beneficial interests in such Global Warrant may be effected only through a
book-entry system maintained by the Holder of such Global Warrant (or its
agent), and that ownership of a beneficial interest in the Warrants represented
thereby shall be required to be reflected in a book entry. When Warrant
Certificates are presented to the Warrant Agent with a request to register the
transfer or to exchange them for an equal amount of Warrants of other authorized
denominations, the Warrant Agent shall register the transfer or make the
exchange in accordance with the provisions hereof.
To permit registrations of transfer and exchanges, the Company shall make
available to the Warrant Agent a sufficient number of executed Warrant
Certificates to effect such registrations of transfers and exchanges. No service
charge shall be made to the Holder for any registration of transfer or exchange
of Warrants, but the Company may require from the transferring or exchanging
Holder payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable upon exchanges pursuant to Section 2.4 and exchanges
in respect of portions of Warrants not exercised and the Company may deduct such
taxes from any payment of money to be made and such transfer or exchange shall
not be consummated (if such taxes are not deducted in full) unless or until the
Holder shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company and the Warrant Agent that such
tax has been paid.
SECTION 5.2 Registration, Registration of Transfer and Exchange.
(a) Transfer and Exchange of Definitive Warrants. When Definitive Warrants
are presented to the Warrant Agent with a request (i) to register the transfer
of the Definitive Warrant or (ii) to exchange such Definitive Warrants for an
equal number of Definitive Warrants of other authorized denominations, the
Warrant Agent shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Warrants so presented have been duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Warrant Agent, duly
executed by the holder thereof or by his attorney, duly authorized in writing;
22
<PAGE> 26
(b) Transfer of a Definitive Warrant for a Beneficial Interest in Global
Warrant. A Definitive Warrant may be exchanged for a beneficial interest in the
Global Warrant only upon receipt by the Warrant Agent of a Definitive Warrant,
duly endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Warrant Agent, together with written instructions directing
the Warrant Agent to make an endorsement on the Global Warrant to reflect an
increase in the number of Warrants and Warrant Shares represented by the Global
Warrant, and then the Warrant Agent shall cancel such Definitive Warrant and
cause the number of Warrants and Warrant Shares represented by the Global
Warrant to be increased accordingly. If no Global Warrant is then outstanding,
the Company shall issue and the Warrant Agent shall countersign a new Global
Warrant representing the appropriate number of Warrants and Warrant Shares.
(c) Transfer and Exchange of Global Warrant. The transfer and exchange of
the Global Warrant or beneficial interests therein shall be effected through the
Depository, in accordance with this Warrant Agreement and the procedures of the
Depository therefor. Notwithstanding any other provisions of this Warrant
Agreement, the Global Warrant may not be transferred as a whole except by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository: provided, that if:
(i) the Depository notifies the Company that the Depository is
unwilling or unable to continue as Depository for the Global Warrant and a
successor Depository for the Global Warrant is not appointed by the Company
within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant Agent
in writing that it elects to cause the issuance of Definitive Warrants
under this Warrant Agreement.
then the Company shall execute and the Warrant Agent shall countersign and
deliver, Definitive Warrants in an aggregate number equal to the number of
Warrants evidenced by the Global Warrant, in exchange for such Global Warrant.
(d) Transfer of a Beneficial Interest in Global Warrant for a Definitive
Warrant. Upon receipt by the Warrant Agent of written transfer instructions (or
such other form of instructions as is customary for the Depository) from the
Depository (or its nominee) on behalf of any person having a beneficial interest
in the Global Warrant, the Warrant Agent shall cause, in accordance with the
standing instructions and procedures existing between the Depository and the
Warrant Agent (the "Standing Instructions"), the number of Warrants and Warrant
Shares represented by the Global Warrant to be reduced and, following such
reduction, the Company shall execute and the Warrant Agent shall countersign and
deliver to the transferee, as the case may be, a Definitive Warrant. Definitive
Warrants issued in exchange for a beneficial interest in the Global Warrant
shall be registered in such names and in such authorized denominations as the
Depository shall instruct the Warrant Agent.
23
<PAGE> 27
(e) Cancellation and/or Adjustment of Global Warrant. At such time as
all beneficial interests in the Global Warrant have either been exchanged for
Definitive Warrants, exercised or cancelled, the Global Warrant shall be
returned to or retained and cancelled by the Warrant Agent. At any time prior to
such cancellation, if any beneficial interest in the Global Warrant is exchanged
for Definitive Warrants, exercised or cancelled, the number of Warrants and
Warrant Shares represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant by the Warrant Agent to reflect
such reduction.
SECTION 5.3 [INTENTIONALLY OMITTED].
SECTION 5.4 Special Transfer Provisions. The following provisions shall
apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. Subject to
Section 2.5, the following provisions shall apply with respect to the
registration of any proposed transfer of Warrants to any Institutional
Accredited Investor that is not a QIB (excluding Non-U.S. Persons):
(i) The Warrant Agent shall register the transfer of any Warrant
Certificate, if (x)(A) the requested transfer is at least two years after
the Issue Date or (B) the proposed transferee has delivered to the Warrant
Agent certificates substantially in the forms of Exhibit B hereto and (y)
if requested by the Warrant Agent or the Company, the proposed transferee
has delivered to the Warrant Agent or the Company, an opinion of counsel
acceptable to the Warrant Agent or the Company that such transfer is in
compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Global Warrant, upon receipt by the Warrant
Agent of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with DTC's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and records the
date and a decrease in the number of Warrants represented by the Global
Warrant in an amount equal to the number of Warrants represented by the
Global Warrant to be transferred, and the Company shall execute, and the
Warrant Agent shall countersign and deliver, one or more Restricted
Definitive Warrants of like tenor and amount.
(b) Transfers to QIBs. Subject to Section 2.5, the following provisions
shall apply with respect to the registration of any proposed transfer of
Warrants to a QIB:
(i) If the Warrants to be transferred are represented by (x)
Restricted Definitive Warrants, the Warrant Agent shall register the
transfer if it has received from such transferor a certificate
substantially in the form of Exhibit B hereto that the sale has
24
<PAGE> 28
been made in compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of Warrant
Certificate stating, or has otherwise advised the Company and the Warrant
Agent in writing, that it is purchasing the Warrants for its own account or
an account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A or (y) an interest in the Global
Warrant, the transfer of such interest may be effected only through the
book-entry system maintained by DTC.
(ii) If the proposed transferee is an Agent Member, and the Warrants
to be transferred are represented by Restricted Definitive Warrants, upon
receipt by the Warrant Agent of the documents referred to in clause (i)
above and instructions given in accordance with DTC's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the number of Warrants represented by
the Global Warrant in an amount equal to the number of Warrants represented
by the Restricted Definitive Warrants, and the Warrant Agent shall cancel
the Restricted Definitive Warrant.
(c) General. By its acceptance of any Warrants represented by a
Warrant Certificate bearing the legend in Section 2.2, each Holder of such
Warrants acknowledges the restrictions on transfer of such Warrants set forth in
this Agreement and in the legend and agrees that it will transfer such Warrants
only as provided in this Agreement. The Warrant Agent shall not register a
transfer of any Warrants unless such transfer complies with the requirements of
this Section 5.4. In connection with any transfer of Warrants, each Holder
agrees by its acceptance of Warrants to furnish the Warrant Agent or the Company
such certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; provided, however, that the Warrant Agent shall not be
required to determine (but may rely on a determination made by the Company with
respect to) the sufficiency of any such certifications, legal opinions or other
information. The Warrant Agent's only obligation to enforce the transfer
restrictions of this Agreement shall be to require the certifications and
opinions specifically required by this Section 5.4 as a condition to a transfer.
(d) Records. The Warrant Agent shall retain copies of all letters,
notices and other written communications received pursuant to Section 5.3 hereof
or this Section 5.4. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Warrant Agent.
SECTION 5.5 Surrender of Warrant Certificates. Any Warrant Certificate
surrendered for registration of transfer, exchange, exercise or repurchase of
the Warrants
25
<PAGE> 29
represented thereby shall, if surrendered to the Company, be delivered to the
Warrant Agent, and all Warrant Certificates surrendered or so delivered to the
Warrant Agent shall be promptly canceled by the Warrant Agent and shall not be
reissued by the Company and, except as provided in this Article V in case of an
exchange or in Article III hereof in case of the exercise or repurchase of less
than all the Warrants represented thereby or in case of a mutilated Warrant
Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof.
The Warrant Agent shall deliver to the Company from time to time or otherwise
dispose of such canceled Warrant Certificates as the Company may direct in
writing.
ARTICLE VII
Warrant Agent
SECTION 6.1 Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with provisions
of this Agreement and the Warrant Agent hereby accepts such appointment.
SECTION 6.2 Rights and Duties of Warrant Agent.
(a) Agent for the Company. In acting under this Warrant Agreement and
in connection with the Warrant Certificates, the Warrant Agent is acting solely
as agent of the Company and does not assume any obligation or relationship or
agency or trust for or with any of the holders of Warrant Certificates or
beneficial owners of Warrants.
(b) Counsel. The Warrant Agent may consult with counsel satisfactory to
it, and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the advice of such counsel.
(c) Documents. The Warrant Agent shall be protected and shall incur no
liability for or in respect of any action taken or thing suffered by it in
reliance upon any Warrant Certificate, notice, direction, consent, certificate,
affidavit, statement or other paper or document reasonably believed by it to be
genuine and to have been presented or signed by the proper parties.
(d) No Implied Obligations. The Warrant Agent shall be obligated to
perform only such duties as are herein and in the Warrant Certificates
specifically set forth and no implied duties or obligations shall be read into
this Agreement or the Warrant Certificates against the Warrant Agent. The
Warrant Agent shall not be under any obligation to take any action hereunder
which may tend to involve it in any expense or liability for which it does not
receive indemnity if such indemnity is reasonably requested. The Warrant Agent
shall not be accountable or under any duty or responsibility for the use by the
Company of any of the Warrant Certificates countersigned by the Warrant Agent
and delivered by it to the Holders or on behalf of the Holders
26
<PAGE> 30
pursuant to this Agreement or for the application by the Company of the proceeds
of the Warrants. The Warrant Agent shall have no duty or responsibility in case
of any default by the Company in the performance of its covenants or agreements
contained herein or in the Warrant Certificates or in the case of the receipt of
any written demand from a Holder with respect to such default, including any
duty or responsibility to initiate or attempt to initiate any proceedings at law
or otherwise.
(e) Not Responsible for Adjustments or Validity of Stock. The Warrant
Agent shall not at any time be under any duty or responsibility to any Holder to
determine whether any facts exist that may require an adjustment of the Warrant
Number or the Exercise Price, or with respect to the nature or extent of any
adjustment when made, or with respect to the method employed, or herein or in
any supplemental agreement provided to be employed, in making the same. The
Warrant Agent shall not be accountable with respect to the validity or value of
any shares of Common Stock or of any securities or property which may at any
time be issued or delivered upon the exercise of any Warrant or upon any
adjustment pursuant to Article IV, and it makes no representation with respect
thereto. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares of
Common Stock or stock certificates upon the surrender of any Warrant Certificate
for the purpose of exercise or upon any adjustment pursuant to Article IV, or to
comply with any of the covenants of the Company contained in Article IV.
SECTION 6.3 Individual Rights of Warrant Agent. The Warrant Agent and
any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company or its
affiliates or become pecuniarily interested in transactions in which the Company
or its affiliates may be interested, or contract with or lend money to the
Company or its affiliates or otherwise act as fully and freely as though it were
not the Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any other
legal entity.
SECTION 6.4 Warrant Agent's Disclaimer. The Warrant Agent shall not be
responsible for and makes no representation as to the validity or adequacy of
this Agreement or the Warrant Certificates and it shall not be responsible for
any statement in this Agreement or the Warrant Certificates other than its
countersignature thereon.
SECTION 6.5 Compensation and Indemnity. The Company agrees to pay the
Warrant Agent from time to time reasonable compensation for its services and to
reimburse the Warrant Agent upon request for all reasonable out-of-pocket
expenses incurred by it, including the reasonable compensation and expenses of
the Warrant Agent's agents and counsel, in connection with the services rendered
hereunder. The Company shall indemnify the Warrant Agent against any loss,
liability or expense (including reasonable agents' and attorneys' fees and
expenses) incurred by it without negligence or bad faith on its part arising out
of or in connection with the acceptance or performance of its duties under this
Agreement. The Warrant Agent shall notify the Company promptly of any claim for
which it may seek indemnity. The Company need not
27
<PAGE> 31
reimburse any expense or indemnify against any loss or liability incurred by the
Warrant Agent through willful misconduct, negligence or bad faith. The Company's
payment obligations pursuant to this Section 6.5 shall survive the termination
of this Agreement.
To secure the Company's payment obligations under this Agreement, the
Warrant Agent shall have a lien prior to the Warrant Holders on all money or
property held or collected by the Warrant Agent.
SECTION 6.6 Successor Warrant Agent.
(a) The Company To Provide Warrant Agent. The Company agrees for the
benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(b) Resignation and Removal. The Warrant Agent may at any time resign
by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 60 days after the date
on which such notice is given unless the Company otherwise agrees. The Warrant
Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed by or on behalf of the Company and specifying such
removal and the date when it shall become effective, which date shall not be
less than 60 days after such notice is given unless the Warrant Agent otherwise
agrees. Any removal under this Section 6.6 shall take effect upon the
appointment by the Company as hereinafter provided of a successor Warrant Agent
(which shall be a bank or trust company authorized under the laws of the
jurisdiction of its organization to exercise corporate trust powers) and the
acceptance of such appointment by such successor Warrant Agent.
(c) The Company To Appoint Successor. In case at any time the Warrant
Agent shall resign, or shall be removed, or shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or shall commence a voluntary case
under the Federal bankruptcy laws, as now or hereafter constituted, or under any
other applicable Federal or state bankruptcy, insolvency or similar law or shall
consent to the appointment of or taking possession by a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Warrant Agent or its property or affairs, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take corporate action in furtherance of
any such action, or a decree or order for relief by a court having jurisdiction
in the premises shall have been entered in respect of the Warrant Agent in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency or
similar law; or a decree order by a court having jurisdiction in the premises
shall have been entered for the appointment of a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant
Agent or of its property or affairs, or any public officer shall take charge or
control of the Warrant Agent or of its property or affairs for the purpose of
rehabilitation, conservation, winding up of or liquidation, a successor Warrant
Agent,
28
<PAGE> 32
qualified as aforesaid, shall be appointed by the Company by an instrument in
writing, filed with the successor Warrant Agent (or, in the absence of such
appointment within 60 days after the notice of resignation or removal, either
party hereto may petition the appointment of a successor by a court of competent
jurisdiction.) Upon the appointment as aforesaid of a successor Warrant Agent
and acceptance by the successor Warrant Agent of such appointment, the Warrant
Agent shall cease to be Warrant Agent hereunder; provided, however, that in the
event of the resignation of the Warrant Agent under this subsection (c), such
resignation shall be effective on the earlier of (i) the date specified in the
Warrant Agent's notice of resignation and (ii) the appointment and acceptance of
a successor Warrant Agent hereunder. As soon as practicable after appointment of
the successor Warrant Agent, the Company shall cause written notice of the
change in the Warrant Agent to be given to each of the registered holders of the
Warrants in the manner provided for in Section 7.7 hereof. However, failure to
give any notice provided for in this clause (c) or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be.
(d) Successor Expressly To Assume Duties. Any successor Warrant Agent
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and to the Company an instrument accepting such appointment hereunder, and
thereupon such successor Warrant Agent, without any further act, deed or
conveyance, shall become vested with all the rights and obligations of such
predecessor with like effect as if originally named as Warrant Agent hereunder,
and such predecessor, upon payment of its charges and disbursements then unpaid,
shall thereupon become obligated to transfer, deliver and pay over, and such
successor Warrant Agent shall be entitled to receive, all monies, securities and
other property on deposit with or held by such predecessor, as Warrant Agent
hereunder.
(e) Successor by Merger. Any corporation into which the Warrant Agent
hereunder may be merged or consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation to which the Warrant Agent shall sell or otherwise transfer all or
substantially all of its corporate trust business; provided that it shall be
qualified as aforesaid, shall be the successor Warrant Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
29
<PAGE> 33
ARTICLE VIII
Miscellaneous
SECTION 7.1 [INTENTIONALLY OMITTED.]
SECTION 7.2 SEC Reports and Other Information. Notwithstanding that the
Company may not be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Company shall, for all periods ending after the date of
this Warrant Agreement, file with the SEC and thereupon provide the Warrant
Agent and Holders with such annual reports and such information, documents and
other reports are as specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed at the times specified for the filing
of such information, documents and reports under such Sections, and within 5
Business Days thereafter such information, documents and other reports shall be
provided to the Warrant Agent and the Holders.
SECTION 7.3 Rule 144A. The Company hereby agrees with each Holder, for
so long as any Warrants or Warrant Shares remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to any Holder or
beneficial owner of Warrants or Warrant Shares in connection with any sale
thereof and any prospective purchaser of such Warrants or Warrant Shares from
such Holder or beneficial owner, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Warrants or Warrant
Shares pursuant to Rule 144A.
SECTION 7.4 Persons Benefitting. Nothing in this Agreement is intended
or shall be construed to confer upon any Person other than the Company, the
Warrant Agent and the Holders any right, remedy or claim under or by reason of
this agreement or any part hereof.
SECTION 7.5 Rights of Holders. Except as expressly contemplated herein,
holders of unexercised Warrants are not entitled (i) to receive dividends or
other distributions, (ii) to receive notice of or vote at any meeting of the
stockholders, (iii) to consent to any action of the stockholders, (iv) to
exercise any preemptive right or to receive notice of any other proceedings of
the Company or (v) to exercise any other rights whatsoever as stockholders of
the Company.
SECTION 7.6 Amendment. This Agreement may be amended by the parties
hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided however, that the Company determines, and
the Warrant Agent may rely on such determination, that such action shall not
affect adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has a material adverse effect on the interests of the Holders
shall require the written consent of the
30
<PAGE> 34
Holders of a majority of the then outstanding Warrants. The consent of each
Holder affected shall be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than pursuant to adjustments
provided in Article IV as of the Issue Date of the Warrants). In determining
whether the Holders of the required number of Warrants have concurred in any
direction, waiver or consent, Warrants owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Warrant
Agent shall be protected in relying on any such direction, waiver or consent,
only Warrants which the Warrant Agent knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Warrants outstanding at the
time shall be considered in any such determination.
SECTION 7.7 Notices. Any notice or communication shall be in writing
and delivered in Person or mailed by first-class mail addressed as follows:
if to the Company:
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East
Suite 320
Houston, Texas 77032-2949
Attention: Ed Donahue
Vice President
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
Dallas, Texas 75201
Attention: C. Robert Butterfield
if to the Warrant Agent:
First Union National Bank
10 State House Square CT 5845
Hartford, CT 06103-3698
Attention: Corporate Trust Administration
The Company or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.
31
<PAGE> 35
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the register in which the
Company shall provide for the registration of Warrants and Warrant Shares and of
transfers and exchanges of Warrants and Warrant Shares and shall be sufficiently
given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY, ON BEHALF OF
ITSELF, HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS
CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY,
ON BEHALF OF ITSELF, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF 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.
SECTION 7.9 Successors. All agreements of the Company in this Agreement
and the Warrant Certificates shall bind its successors. All agreements of the
Warrant Agent in this Agreement shall bind its successors.
SECTION 7.10 Multiple Originals. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.
SECTION 7.11 Table of Contents. The table of contents and headings of
the Articles and Sections of this Agreement have been inserted for convenience
of reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
SECTION 7.12 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole
32
<PAGE> 36
or in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
SECTION 7.13 Further Assurances. From time to time on and after the
date hereof, the Company shall deliver or cause to be delivered to the Warrant
Agent such further documents and instruments and shall do and cause to be done
such further acts as the Warrant Agent shall reasonably request (it being
understood that the Warrant Agent shall have no obligation to make such request)
to carry out more effectively the provisions and purposes of this Agreement, to
evidence compliance herewith or to assure itself that it is protected hereunder.
33
<PAGE> 37
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
TRANSAMERICAN REFINING CORPORATION
By:
----------------------------------------
Ed Donahue, Vice President and Secretary
FIRST UNION NATIONAL BANK, as
Warrant Agent,
By:
----------------------------------------
Diane M. Welsh, Vice President
34
<PAGE> 38
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO
YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K)
UNDER THE SECURITIES ACT AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH TRANSAMERICAN REFINING CORPORATION ("THE
COMPANY") ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D),(E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO
A-1
<PAGE> 39
EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE WARRANT AGENT.
[Unless and until it is exchanged in whole or in part for Warrants in
definitive form, this Warrant may not be transferred except as a whole by the
depository to a nominee of the depository or by a nominee of the depository to
the depository or another nominee of the depository or by the depository or any
such nominee to a successor depository or a nominee of such successor
depository. The Depository Trust Company ("DTC") (55 Water Street, New York, New
York) shall act as the depository until a successor shall be appointed by the
Company and the Warrant Agent. Unless this certificate is presented by an
authorized representative of DTC to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]*
No. [ ] Certificate for ______ Warrants
- --------
* To be included only if the Warrant is in global form.
A-2
<PAGE> 40
WARRANTS TO PURCHASE COMMON STOCK OF
TRANSAMERICAN REFINING CORPORATION
THIS CERTIFIES THAT, [ ], or its registered assigns, is the registered
holder of the number of Warrants set forth above (the "Warrants"). Each Warrant
entitles the holder thereof (the "Holder"), at its option and subject to the
provisions contained herein and in the Warrant Agreement referred to below, to
purchase from TransAmerican Refining Corporation, a Texas corporation ("the
Company"), initially 13.344257 shares of Common Stock, $0.01 par value, of the
Company (the "Common Stock") at the per share exercise price of $0.01 (the
"Exercise Price"). This Warrant Certificate shall terminate and become void as
of the close of business on June 30, 2003 (the "Expiration Date") or upon the
exercise hereof as to all the shares of Common Stock subject hereto. The number
of shares purchasable upon exercise of the Warrants and the Exercise Price per
share shall be subject to adjustment from time to time as set forth in the
Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of March 16, 1998 (the "Warrant Agreement"), between
the Company and First Union National Bank (the "Warrant Agent," which term
includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of the Company, the Warrant Agent and the Holders of the
Warrants. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Warrant Agreement. A copy of the Warrant Agreement may
be obtained for inspection by the Holder hereof upon written request to the
Warrant Agent at First Union National Bank, 10 State House Square CT 5845,
Hartford, CT 06103-3698, attention of Corporate Trust Administration.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part by presentation of this Warrant Certificate.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time or
from time to time on any Business Day only on or after December 30, 1998;
provided, however, that no Warrant shall be exercisable after June 30, 2003.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 5.2 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
A-3
<PAGE> 41
Upon any partial exercise of the Warrants, there shall be countersigned
and issued to the Holder hereof a new Warrant Certificate in respect of the
shares of Common Stock as to which the Warrants shall not have been exercised.
This Warrant Certificate may be exchanged at the office of the Warrant Agent by
presenting this Warrant Certificate properly endorsed with a request to exchange
this Warrant Certificate for other Warrant Certificates evidencing an equal
number of Warrants. No fractional Warrant Shares will be issued upon the
exercise of the Warrants, but the Company shall pay an amount in cash equal to
the Market Price for one Warrant Share on the trading day immediately preceding
the date the Warrant is exercised, multiplied by the fraction of a Warrant Share
that would be issuable on the exercise of any Warrant.
All shares of Common Stock issuable by the Company upon the exercise of
the Warrants shall, upon such issue, be duly and validly issued and fully paid
and nonassessable.
The Holder in whose name the Warrant Certificate is registered may be
deemed and treated by the Company and the Warrant Agent as the absolute owner of
the Warrant Certificate for all purposes whatsoever and neither the Company nor
the Warrant Agent shall be affected by notice to the contrary.
The Warrants do not entitle any holder hereof to any of the rights of a
stockholder of the Company.
A-4
<PAGE> 42
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
TRANSAMERICAN REFINING CORPORATION
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Attest:
- ----------------------------------------
Secretary
DATED:
Countersigned:
FIRST UNION NATIONAL BANK,
as Warrant Agent,
By:
-----------------------------------
Authorized Signatory
A-5
<PAGE> 43
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS*
The following exchanges of a part of this Global Warrant for definitive Warrants
have been made:
<TABLE>
<CAPTION>
Number of
Warrants in
Amount of this Global
increase/ Warrant Signature of
decrease in Number following authorized
Date of of Warrants in such increase/ officer of
Exchange this Global Warrant decrease Warrant Agent
<S> <C> <C> <C>
</TABLE>
- --------
* To be included only if the Warrant is in global form.
A-6
<PAGE> 44
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of
TransAmerican Refining Corporation (the "Company")
This Certificate relates to Warrants held in definitive form by
________ (the "Transferor").
The Transferor has requested the Warrant Agent by written order
to exchange or register the transfer of a Warrant or Warrants. In connection
with such request and in respect of each such Warrant, the Transferor does
hereby certify that the Transferor is familiar with the Warrant Agreement
relating to the above captioned Warrants and that the transfer of this Warrant
does not require registration under the Securities Act of 1933 (the "Securities
Act") because *:
[_] Such Warrant is being acquired for the Transferor's own account
without transfer.
[_] Such Warrant is being transferred to the Company.
[_] Such Warrant is being transferred pursuant to an effective
registration statement pursuant to the Securities Act.
[_] Such Warrant is being transferred in a transaction meeting the
requirements of Rule 144 under the Securities Act.
[_] Such Warrant is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act), in reliance on such
Rule 144A.
[_] Such Warrant is being transferred pursuant to another exemption
from the registration requirements of the Securities Act (explain:
________________).**
- --------
* Please check applicable box.
** If this box is checked, this certificate must be accompanied by an opinion of
counsel to the effect that such transfer is in compliance with the Securities
Act.
B-1
<PAGE> 45
The Warrant Agent and the Company are entitled to rely upon this
Certificate and are irrevocably authorized to produce this Certificate or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
,
---------------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------------
Date:
------------------------------
B-2
<PAGE> 1
EXHIBIT 4.29
TRANSAMERICAN REFINING CORPORATION
$25,000,000 16% Series C Senior Subordinated Notes due 2003
REGISTRATION RIGHTS AGREEMENT
March 16, 1998
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
TransAmerican Refining Corporation, a Texas corporation (the "Company"), is
issuing and selling to Jefferies & Company, Inc. (the "Purchaser"), upon the
terms set forth in the Purchase Agreement (as defined below), $25,000,000
aggregate principal amount of its 16% Series C Senior Subordinated Notes due
2003 (the "Notes"). As an inducement to the Purchaser to enter into the Purchase
Agreement, the Company agrees with the Purchaser, for the benefit of the holders
of the Securities (as defined below) (including, without limitation, the
Purchaser), as follows:
1. Definitions. Capitalized terms used but not defined herein have the
respective meanings given to such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"Advice" has the meaning given to such term in Section 6.
"Agreement" means this Registration Rights Agreement.
"Applicable Period" has the meaning given to such term in Section 2(f).
"Business Day" means any day other than (i) Saturday or Sunday, or (ii) a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
"Closing Date" means March 16, 1998.
"Company" has the meaning given to such term in the introductory paragraph
hereof.
"Effectiveness Date" means the later of the 135th day following the Closing
Date and the "Effectiveness Date" as defined under the Series A Registration
Rights Agreement.
"Effectiveness Period" has the meaning given to such term in Section 3(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Exchange Offer" has the meaning given to such term in Section 2(a).
<PAGE> 2
"Exchange Offer Registration Statement" has the meaning given to such term in
Section 2(a).
"Exchange Securities" means 16% Series D Senior Subordinated Notes due 2003, of
the Company, identical in all respects to the Notes, except for references to
series and restrictive legends; provided, however, that if the Company can issue
in exchange for the Notes (i) 16% Series B Senior Subordinated Notes due 2003,
pursuant to the Series A/B Indenture or (ii) such other security issued in
exchange for the Company's Series A Notes, pursuant to the Series A Registration
Rights Agreement, then Exchange Securities shall mean such Series B Notes or
such other security.
"Filing Date" means the later of the 75th day following the Closing Date and
the "Filing Date" as defined under the Series A Registration Rights Agreement.
"Holder" means each holder of Registrable Securities.
"Indemnified Party" has the meaning given to such term in Section 8(c).
"Indemnifying Party" has the meaning given to such term in Section 8(c).
"Indenture" means the Indenture dated the date hereof between the Company and
First Union National Bank, 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" has the meaning given to such term in Section
3(a).
"Losses" has the meaning given to such term in Section 8(a).
"NASD" means the National Association of Securities Dealers, Inc.
"Notes" has the meaning given to such term in the introductory paragraph
hereof.
"Participating Broker-Dealer" has the meaning given to such term in Section
2(f).
"Person" means an individual, trustee, corporation, partnership, joint stock
company, joint venture, trust, unincorporated organization or government or any
agency or political subdivision thereof, union, business association, firm or
other entity.
"Private Exchange" has the meaning given to such term in Section 2(g).
"Private Exchange Securities" has the meaning given to such term in Section
2(g).
"Prospectus" means 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 Securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
<PAGE> 3
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
"Purchaser" has the meaning given to such term in the introductory paragraph
hereof.
"Purchase Agreement" means the Purchase Agreement dated as of March 6, 1998 by
and between the Company and the Purchaser.
"Registrable Securities" means (i) Notes, (ii) Private Exchange Securities and
(iii) Exchange Securities received in the Exchange Offer that may not be sold
without restriction under federal or state securities law.
"Registration Default Date" has the meaning given to such term in Section 4(a).
"Registration Statement" means any registration statement of the Company that
covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule (other than Rule 144A) or regulation
hereafter adopted by the SEC.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
"Rule 415" means Rule 415 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes, the Private Exchange Securities and the Exchange
Securities, collectively.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
"Series A/B Indenture" means the Indenture dated as of December 30, 1997
between the Company and First Union National Bank, as trustee, providing for the
issuance of the Series A/B Notes, as such may be amended and supplemented.
"Series A/B Notes" means the Company's 16% Senior Subordinated Notes due 2003
issued pursuant to the Series A/B Indenture.
"Series A Notes" means the Company's 16% Senior Subordinated Notes due 2003,
Series A, issued pursuant to the Series A/B Indenture.
"Series A Registration Rights Agreement" means the Registration Rights
Agreement dated December 30, 1997 between the Company and the Purchaser relating
to the Series A/B Notes, as amended or supplemented from time to time.
"Shelf Notice" has the meaning given to such term in Section 2(i).
<PAGE> 4
"Shelf Registration" means the Initial Shelf Registration and any Subsequent
Shelf Registration.
"Special Counsel" means counsel chosen by the holders of a majority in
aggregate principal amount of Securities.
"Subsequent Shelf Registration" has the meaning given to such term in Section
3(b).
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trustee" means the trustee under the Indenture and, if any, the trustee under
any indenture governing the Exchange Securities or the Private Exchange
Securities.
"Underwritten Registration" or "Underwritten Offering" means a registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
"Weekly Liquidated Damages Amount" has the meaning given to such term in
Section 4(a).
2. Exchange Offer.
(a) The Company shall (i) prepare and file with the SEC promptly after the
date hereof, but in no event later than the Filing Date, a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act with respect to a proposed offer (the "Exchange Offer")
to the Holders to issue and deliver to such Holders, in exchange for the Notes,
a like aggregate principal amount of Exchange Securities, (ii) use its best
efforts to cause the Exchange Offer Registration Statement to become effective
as promptly as practicable after the filing thereof, but in no event later than
the Effectiveness Date, (iii) keep the Exchange Offer Registration Statement
effective until the consummation of the Exchange Offer pursuant to its terms,
and (iv) unless the Exchange Offer would not be permitted by a policy of the
SEC, commence the Exchange Offer and use its best efforts to issue, on or prior
to 30 Business Days after the date on which the Exchange Offer Registration
Statement is declared effective, Exchange Securities in exchange for all Notes
tendered prior thereto in the Exchange Offer. The Exchange Offer shall not be
subject to any conditions, other than (i) that the Exchange Offer does not
violate applicable law or any applicable interpretation of the staff of the SEC
and (ii) as otherwise expressed herein.
(b) The Exchange Securities shall be issued under, and entitled to the
benefits of, the Indenture, the Series A/B Indenture or a trust indenture that
is substantially identical to the Indenture or the Series A/B Indenture (other
than such changes as are necessary to (i) provide for the issuance of Exchange
Securities that are the same as the securities issued in exchange for the Series
A Notes pursuant to the Series A Registration Rights Agreement or (ii) comply
with any requirements of the SEC to effect or maintain the qualification
thereof under the TIA).
(c) In connection with the Exchange Offer, the Company shall:
<PAGE> 5
(i) mail to each Holder a copy of the Prospectus forming part of the Exchange
Offer Registration Statement, together with an appropriate letter of transmittal
that is an exhibit to the Exchange Offer Registration Statement and related
documents;
(ii) keep the Exchange Offer open for not less than 30 days after the date
notice thereof is mailed to the Holders (or longer if required by applicable
law);
(iii) utilize the services of a depository for the Exchange Offer with an
address in the Borough of Manhattan, The City of New York;
(iv) permit Holders to withdraw tendered Notes at any time prior to the close
of business, New York time, on the last Business Day on which the Exchange Offer
shall remain open; and
(v) otherwise comply with all laws applicable to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer, the Company
shall:
(i) accept for exchange all Notes validly tendered and not validly withdrawn
pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each Holder of
Notes, Exchange Securities equal in aggregate principal amount to the Notes of
such Holder so accepted for exchange.
(e) Interest on each Exchange Security and Private Exchange Security will
accrue (or principal will accrete, as applicable) from the last interest payment
date on which interest was paid on the Notes surrendered in exchange therefor
or, if no interest has been paid on the Notes, from the date of original issue
of the Notes. Each Exchange Security and Private Exchange Security shall bear
interest at the rate set forth thereon; provided, that interest with respect to
the period prior to the issuance thereof shall accrue at the rate or rates
borne by the Notes from time to time during such period.
(f) The Company shall include within the Prospectus contained in the Exchange
Offer Registration Statement a section entitled "Plan of Distribution,"
containing a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution"
section shall also allow the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including (without
limitation) all Participating Brokers-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Securities. The Company shall use its best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus to be lawfully delivered by all Persons subject to the prospectus
delivery requirement of the Securities Act for such period of time as such
Persons must comply with such requirements in order to resell the Exchange
Securities; provided that such
<PAGE> 6
period shall not exceed 180 days after consummation of the Exchange Offer (as
such period may be extended pursuant to the last paragraph of Section 6 (the
"Applicable Period").
(g) If, prior to consummation of the Exchange Offer, the Purchaser holds any
Securities acquired by it and having the status as an unsold allotment in the
initial distribution, the Company shall, upon the request of the Purchaser,
simultaneously with the delivery of the Exchange Securities in the Exchange
Offer, issue (pursuant to the same indenture as the Exchange Securities) and
deliver to the Purchaser, in exchange for the Securities held by the Purchaser
(the "Private Exchange"), a like principal amount of debt securities of the
Company that are identical to the Exchange Securities (the "Private Exchange
Securities"). The Private Exchange Securities shall bear the same CUSIP number
as the Exchange Securities.
(h) The Company may require each Holder participating in the Exchange Offer to
represent to the Company that at the time of the consummation of the Exchange
Offer (i) any Exchange Securities received by such Holder in the Exchange Offer
will be acquired in the ordinary course of its business, (ii) such Holder will
have no arrangement or understanding with any Person to participate in the
distribution of the Exchange Securities within the meaning of the Securities Act
or resale of the Exchange Securities in violation of the Securities Act, (iii)
if such Holder is not a broker-dealer, that it is not engaged in and does not
intend to engage in, the distribution of the Exchange Securities, (iv) if such
Holder is a broker-dealer that will receive Exchange Securities for its own
account in exchange for Notes that were acquired as a result of market-making or
other trading activities, that it will deliver a prospectus, as required by law,
in connection with any resale of such Ex! change Securities and (v) if such
Holder is an affiliate of the Company, that it will comply with the registration
and prospectus delivery requirements of the Securities Act applicable to it.
(i) If (i) prior to the consummation of the Exchange Offer, either the Company
or the Holders of a majority in aggregate principal amount of Registrable
Securities determines in its or their reasonable judgment that (A) the Exchange
Securities would not, upon receipt, be tradeable by the Holders thereof without
restriction under the Securities Act and the Exchange Act and without material
restrictions under applicable Blue Sky or state securities laws, or (B) the
interests of the Holders under this Agreement, taken as a whole, would be
materially adversely affected by the consummation of the Exchange Offer, (ii)
applicable interpretations of the staff of the SEC would not permit the
consummation of the Exchange Offer prior to 90 days after the Effectiveness
Date, (iii) subsequent to the consummation of the Private Exchange but within
one year of the Closing Date, the Purchaser so requests, (iv) the Exchange Offer
is not consummated within the later of 195 days of the Closing Date or such
later date as is permitted under the Series A Registration Rights Agreement to
consummate the Exchange Offer (as defined therein) for any reason or (v) in the
case of any Holder not permitted to participate in the Exchange Offer or of any
Holder participating in the Exchange Offer that receives Exchange Securities
that may not be sold without material restriction under state and federal
securities laws (other than due solely to the status of such Holder as an
affiliate of the Company within the meaning of the Securities Act) and, in
either case contemplated by this clause (v), such Holder notifies the Company
within six months of consummation of the Exchange Offer, then the Company shall
promptly deliver to the Holders (or in the case of any occurrence of the event
described in clause (v) of this Section 2(i), to any such Holder) and the
Trustee notice
<PAGE> 7
thereof (the "Shelf Notice") and shall as promptly as possible thereafter file
an Initial Shelf Registration pursuant to Section 3.
3. Shelf Registration. If a Shelf Notice is required to be delivered pursuant
to Section 2(a)(i), (ii), (iii) or (iv), then this Section 3 shall apply to all
Registrable Securities. Otherwise, upon consummation of the Exchange Offer in
accordance with Section 2, the provisions of this Section 3 shall apply solely
with respect to (i) Notes held by any Holder thereof not permitted to
participate in the Exchange Offer and (ii) Exchange Securities that are not
freely tradeable as contemplated by Section 2(i)(v).
(a) Initial Shelf Registration. The Company shall use its best efforts to
prepare and file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Securities (the "Initial Shelf Registration"). If the Company has not yet filed
an Exchange Offer Registration Statement, the Company shall use its best efforts
to file with the SEC the Initial Shelf Registration on or prior to the Filing
Date. Otherwise, the Company shall use its best efforts to file the Initial
Shelf Registration within 20 days of the delivery of the Shelf Notice or as
promptly as possible following the request of the Purchaser. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Securities for resale by such holders in the
manner or manners designated by them (including, without limitation, one or more
underwritten offerings). The Company shall (i) not permit any securities other
than the Registrable Securities to be included in any Shelf Registration, and
(ii) use its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act as promptly as practicable after the filing
thereof and to keep the Initial Shelf Registration continuously effective under
the Securities Act until the date that is 24 months from the Effectiveness Date
(subject to extension pursuant to the last paragraph of Section 6) (the
"Effectiveness Period"), or such shorter period ending when (i) all Registrable
Securities covered by the Initial Shelf Registration have been sold or (ii) a
Subsequent Shelf Registration covering all of the Registrable Securities has
been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If any Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the Registrable Securities registered thereunder),
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 30
days of such cessation of effectiveness amend the 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 the Registrable Securities (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
Subsequent Shelf Registration continuously effective for a period equal to the
number of days in the Effectiveness Period less the aggregate number of days
during which the Initial Shelf Registration, and any Subsequent Shelf
Registration, was previously effective.
<PAGE> 8
4. Liquidated Damages.
(a) The Company acknowledges and agrees that the holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if the Company fails to fulfill its
obligations hereunder. Accordingly, in the event of such failure, the Company
agrees to pay liquidated damages to each Holder under the circumstances and to
the extent set forth below:
(i) if neither the Exchange Offer Registration Statement nor the Initial Shelf
Registration has been filed with the SEC on or prior to the Filing Date; or
(ii) if neither the Exchange Offer Registration Statement nor the Initial
Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date; or
(iii) if the Company has not accepted for exchange all Notes validly tendered
in accordance with the terms of the Exchange Offer within 30 Business Days after
the date on which an Exchange Offer Registration Statement is declared effective
by the SEC; or
(iv) if a Shelf Registration is filed and declared effective by the SEC but
thereafter ceases to be effective without being succeeded within 30 days by a
Subsequent Shelf Registration filed and declared effective;
(each of the foregoing a "Registration Default," and the date on which the
Registration Default occurs being referred to herein as a "Registration Default
Date").
Upon the occurrence of any Registration Default, the Company shall be
obligated to pay, or cause to be paid, in addition to amounts otherwise due
under the Indenture and the Registrable Securities, as liquidated damages, and
not as a penalty, to each holder of a Registrable Security, an additional amount
(the "Weekly Liquidated Damages Amount") equal to (A) for each weekly period
beginning on the Registration Default Date for the first 120-day period
immediately following such Registration Default Date, $0.05 per week per $1,000
principal amount of Registrable Securities held by such holder, and (B) for each
weekly period beginning with the first full week after the 120-day period set
forth in the foregoing clause (A), $0.15 per week per $1,000 principal amount of
Registrable Securities held by such holder; provided that such liquidated
damages will, in each case, cease to accrue (subject to the occurrence of
another Registration Default) on the date on which all Registration Defaults
have been cured. A Registration Default under clause (i) above shall be cured on
the date that either the Exchange Offer Registration Statement or the Initial
Shelf Registration is filed with the SEC; a Registration Default under clause
(ii) above shall be cured on the date that either the Exchange Offer
Registration Statement or the Initial Shelf Registration is declared effective
by the SEC; a Registration Default under clause (iii) above shall be cured on
the earlier of the date (A) the Exchange Offer is consummated with respect to
all Notes validly tendered or (B) the Company delivers a Shelf Notice to the
Holders; and a Registration Default under clause (iv) above shall be cured on
the earlier of (A) the date on which the applicable Shelf Registration is no
longer subject to an order suspending the effectiveness thereof or proceedings
relating thereto or (B) a Subsequent Shelf Registration is declared effective.
(b) The Company shall notify the Trustee within five Business Days after each
Registration Default Date. The Company shall pay the liquidated damages due on
the Registrable Securities by depositing with the Trustee, in trust, for the
<PAGE> 9
benefit of the Holders thereof, by 12:00 noon, New York City time, on or before
the semi-annual interest payment date for any of the Registrable Securities,
immediately available funds in sums sufficient to pay the liquidated damages
then due. The liquidated damages amount due shall be payable on each interest
payment date to the Holder entitled to receive the interest payment to be made
on such date as set forth in the Indenture.
5. Hold-Back Agreements. The Company agrees (i) without the prior written
consent of the Holders of a majority of the aggregate principal amount of the
then outstanding Securities, not to effect any public or private sale or
distribution (including a sale pursuant to Regulation D under the Securities
Act) of any securities the same as or substantially similar to those covered by
a Registration Statement filed pursuant to Section 2 or 3, or any securities
convertible into or exchangeable or exercisable for such securities, during the
10 days prior to, and during the 90-day period beginning on, (A) the effective
date of any Registration Statement filed pursuant to Sections 2 and 3, unless
the Holders of a majority in aggregate principal amount of Registrable
Securities to be included in such Registration Statement consent or (B) the
commencement of an underwritten public distribution of Registrable Securities,
where the managing underwriter so requests; and (ii) to cause each holder of
such securities that are the same as or substantially similar to Registrable
Securities issued at any time after the date of this Agreement (other than
securities purchased in a registered public offering) to agree, unless prevented
by applicable statute or regulation, not to effect any public sale or
distribution of any such securities during such periods, including a sale
pursuant to Rule 144 or Rule 144A.
6. Registration Procedures. In connection with the registration of any
Securities pursuant to Sections 2 or 3, the Company shall effect such
registrations to permit the sale of such Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company shall:
(a) Prepare and file with the SEC, as soon as practicable after the date
hereof but in any event on or 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 as provided herein; provided, that, if (i) such filing is pursuant to
Section 3 or (ii) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the Company
shall, if requested, furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement, their Special Counsel, each
Participating Broker-Dealer, the managing underwriters, if any,! and their
counsel, a reasonable opportunity to review and make available for inspection
by such Persons copies of all such documents (including copies of any documents
to be incorporated by reference therein and all exhibits thereto) proposed to be
filed, such financial and other information and books and records of the
Company, and cause the officers, directors and employees of the Company, Company
counsel and independent certified public accountants of the Company, to respond
to such inquiries, as shall be necessary, in the opinion of respective counsel
to such holders, Participating Broker-Dealer and underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
may require each Holder to agree to keep confidential any non-public information
relating to
<PAGE> 10
the Company received by such Holder and not disclose such information (other
than to an Affiliate or prospective purchaser who agrees to respect the
confidentiality provisions of this Section 6(a)) until such in! formation has
been made generally available to the public unless the release of such
information is required by law or necessary to respond to inquiries of
regulatory authorities (including the National Association of Insurance
Commissioners, or similar organizations or their successors). The Company shall
not file any Registration Statement or Prospectus or any amendments or
supplements thereto in respect of which the Holders must be afforded an
opportunity to review prior to the filing of such document, if the Holders of a
majority in aggregate principal amount of the Registrable Securities covered by
such Registration Statement, their Special Counsel, any Participating
Broker-Dealer or the managing underwriters, if any, or their counsel shall
reasonably object.
(b) Provide an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture (or other
indenture relating to the Registrable Securities) to be qualified under the TIA
not later than the effective date of the first Registration Statement; and in
connection therewith, 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 such 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.
(c) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods required
hereby; cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto 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 distribution set forth in such Registration Statement or
Prospectus as so amended.
(d) Furnish to such selling Holders and Participating Broker-Dealers who so
request (i) upon the Company's receipt, a copy of the order of the SEC declaring
such Registration Statement and any post-effective amendment thereto effective
and (ii) such reasonable number of copies of such Registration Statement and of
each amendment and supplement thereto (in each case including any documents
incorporated therein by reference and all exhibits), (iii) such reasonable
number of copies of the Prospectus included in such Registration Statement
(including each preliminary Prospectus), and such reasonable number of copies of
the final Prospectus as filed by the Company pursuant to Rule 424(b) under the
Securities Act, in conformity with the requirements of the Securities Act, and
(iv) such other documents (including any amendments required to be filed
pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Company hereby consent to the use of the Prospectus by each of the
selling Holders of Registrable Securities or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if any, and
dealers (if any), in connection with the offering and sale of the Registrable
Securities
<PAGE> 11
or the sale by Participating Broker-Dealers of the Exchange Securities pursuant
to, such Prospectus and any amendment thereto.
(e) If (A) a Shelf Registration is filed pursuant to Section 3 or (B) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to
<PAGE> 12
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, regardless of whether the 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 with respect to filings required
to be made with the NASD and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of
counsel in connection with Blue Sky qualifications of the
Registrable Securities or Exchange Securities and
determination of the eligibility of the Registrable Securities
or Exchange Securities for investment under the laws of such
jurisdictions (x) where the Holders are located, in the case
of the Exchange Securities, or (y) as provided in Section
6(f), in the case of Registrable Securities or Exchange
Securities to be sold by a Participating Broker-Dealer during
the Applicable Period);
ii. printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities
or Exchange Securities in a form eligible for deposit with DTC
and of printing Prospectuses if the printing of Prospectuses
is requested by the managing underwriters, if any, or, in
respect of Registrable Securities or Exchange Securities to be
sold by a Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate principal
amount of the Registrable Securities included in any
Registration Statement or of such Exchange Securities, as the
case may be);
iii. messenger, telephone, duplication, word
processing and delivery expenses incurred by the Company in
the performance of its obligations hereunder;
iv. fees and disbursements of counsel for the
Company;
v. fees and disbursements of all independent
certified public accountants referred to in Section 6(n)(iii)
(including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to
such performance);
vi. fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in
an offering pursuant to Section 3 of Schedule E to the By-laws
of the NASD, but only where the need for such a "qualified
independent underwriter" arises due to a relationship with the
Company;
vii. Securities Act liability insurance, if the
Company so desires such insurance;
viii. fees and expenses of all other Persons retained
by the Company; internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting
<PAGE> 13
duties); and the expense of any annual audit; and
ix. rating agency fees and the fees and expenses
incurred in connection with the listing of the Securities to
be registered on any securities exchange.
b. The Company shall reimburse the Holders for the reasonable
fees and disbursements of not more than one counsel (in addition to
appropriate local counsel) chosen by the Holders of a majority in
aggregate principal amount of the Registrable Securities to be included
in any Registration Statement and other reasonable and necessary
out-of-pocket expenses of the Holders incurred in connection with the
registration of the Registrable Securities.
1. Indemnification.
a. Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless each Holder and each
Participating Broker-Dealer selling Exchange Securities during the
Applicable Period, each Person who controls each such Holder (within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act) and the officers, directors, partners, employees,
representatives and agents of each such Holder, Participating
Broker-Dealer and controlling person, to the fullest extent lawful,
from and against any and all losses, claims, damages, liabilities,
costs (including, without limitation, reasonable costs of preparation
and reasonable attorneys' fees) and expenses (including, without
limitation, reasonable costs and expenses incurred in connection with
investigating, preparing, pursuing or defending against any of the
foregoing) (collectively, "Losses"), as incurred, directly or
indirectly caused by, related to, based upon, arising out of or in
connection with any untrue or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or form of
prospectus, or in any amendment or supplement thereto, or in any
preliminary prospectus, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, except insofar as such Losses are
based upon information relating to such Holder or Participating
Broker-Dealer and furnished in writing to the Company by such Holder or
Participating Broker-Dealer expressly for use therein; provided,
however, that the Company shall not be liable to any Indemnified Party
to the extent that any such losses arise solely out of an untrue
statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus if (i) such Indemnified Party or
related holder of a Registrable Security failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written
confirmation of the sale by such Indemnified Party or the related
holder of a Registrable Security to the person asserting the claim from
which such Losses arise, (ii) the Prospectus would have corrected such
untrue statement or alleged untrue statement or omission or alleged
omission, and (iii) the Company has complied with its obligations under
Section 6(e). The Company shall also, jointly and severally, indemnify
underwriters, 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 Persons (within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders or the Participating
Broker-Dealer.
b. Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement, Prospectus or form of
prospectus, any amendment or supplement
<PAGE> 14
thereto, or any preliminary prospectus in which a Holder is
participating, such Holder shall furnish to the Company in writing such
information as the Company reasonably requests for use in connection
with any Registration Statement, Prospectus or form of prospectus, any
amendment or supplement thereto, or any preliminary prospectus and
shall, without limitation as to time, indemnify and hold harmless the
Company, its officers, directors, partners, employees, representatives
and agents, each Person, if any, who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20(a) of the
Exchange Act), and the officers, directors, partners, employees,
representatives and agents of such controlling persons, to the fullest
extent lawful, from and against all Losses arising out of or based upon
any untrue or alleged untrue statement of a material fact contained in
any Registration Statement, Prospectus or form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading to the extent, but only to the extent, that such untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact is contained in any information so
furnished in writing by such holder to the Company expressly for use
therein. In no event shall the liability of any selling Holder 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 Securities giving rise to such indemnification obligation.
c. Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the party or parties from which such indemnity is
sought (the "Indemnifying Parties") in writing; provided, that the
failure to so notify the Indemnifying Parties shall not relieve the
Indemnifying Parties from any obligation or liability except to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal) that the
Indemnifying Parties have been prejudiced materially by such failure.
The Indemnifying Party shall have the right,
exercisable by giving written notice to an Indemnified Party, within 20
Business Days after receipt of written notice from such Indemnified
Party of such Proceeding, to assume, at its expense, the defense of any
such Proceeding, provided, that an Indemnified Party 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 has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding or shall have failed to employ
counsel reasonably satisfactory to such Indemnified Party; or (3) the
named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party or any
of its affiliates or controlling persons, and such Indemnified Party
shall have been advised by counsel that there may be one or more
defenses available to such Indemnified Party that are in addition to,
or in conflict with, those defenses available to the Indemnifying Party
or such affiliate or controlling person (in which case, if such
Indemnified Party notifies the Indemnifying Parties in writing that it
elects to employ separate counsel at the expense of the Indemnifying
Parties, the Indemnifying Parties shall not have the right to assume
the defense thereof and the reasonable fees and expenses of such
counsel shall be at the expense of the Indemnifying Party; it being
understood, however, that, the Indemnifying Party shall not, in
connection with any one such Proceeding or separate but
<PAGE> 15
substantially similar or related Proceedings in the same jurisdiction,
arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such
Indemnified Parties).
No Indemnifying Party shall be liable for any
settlement of any such Proceeding effected without its written consent,
but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such Proceeding, each Indemnifying
Party jointly and severally agrees, subject to the exceptions and
limitations set forth above, to indemnify and hold harmless each
Indemnified Party from and against any and all Losses by reason of such
settlement or judgment. The Indemnifying Party shall not consent to the
entry of any judgment against an indemnified party or enter into any
settlement that imposes any obligation on any indemnified party that
does not include as a term thereof the giving by the claimant or
plaintiff to each Indemnified Party of a release, in form and substance
reasonably satisfactory to the Indemnified Party, from all liability in
respect of such Proceeding for which such Indemnified Party would be
entitled to indemnification hereunder (regardless of whether any
Indemnified Party is a party thereto).
d. Contribution. If the indemnification provided for in this
Section 8 is unavailable to an Indemnified Party or is insufficient to
hold such Indemnified Party harmless for any Losses in respect of which
this Section 8 would otherwise apply by its terms (other than by reason
of exceptions provided in this Section 8), 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
the Indemnifying Party, on the one hand, and such Indemnified Party, on
the other hand, in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party, on the
one hand, and 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 relates to information supplied by such
Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent any such statement or omission. The amount paid or payable by
an Indemnified Party as a result of any Losses shall be deemed to
include any legal or other fees or expenses incurred by such party in
connection with any Proceeding, to the extent such party would have
been indemnified for such fees or expenses 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), an Indemnifying Party that is a selling Holder shall not
be required to contribute, in the aggregate, any amount in excess of
such Holder's Maximum Contribution Amount. A selling Holder's "Maximum
Contribution Amount" shall equal the excess of (i) the aggregate
proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that
such Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to
<PAGE> 16
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
2. Rule 144 and Rule 144A. The Company covenants that it shall (a) file
the reports required to be filed by it (if so required) under the Securities Act
and the Exchange Act in a timely manner and, if at any time any such Person is
not required to file such reports, it will, upon the request of any Holder, make
publicly available other information necessary to permit sales pursuant to Rule
144 and Rule 144A and (b) take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act
pursuant to the exemptions provided by Rule 144 and Rule 144A. Upon the request
of any Holder, the Company shall deliver to such Holder a written statement as
to whether they have complied with such information and requirements.
3. Underwritten Registrations. If any of the Registrable Securities
covered by any Shelf Registration are to be sold in an Underwritten Offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Holders of a majority in aggregate
principal amount of such Registrable Securities included in such offering. No
Holder may participate in any Underwritten Registration hereunder unless such
Holder (a) agrees to sell such Holder's Registrable 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, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
4. Miscellaneous.
a. Remedies. In the event of a breach by the Company of any of
its obligations under this Agreement, each Holder, in addition to being
entitled to exercise all rights provided herein, in the Indenture or,
in the case of the Purchaser, in the Purchase Agreement, or granted by
law, including recovery of damages, will 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 it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action
for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
b. No Inconsistent Agreements. The Company has not entered
into, as of the date hereof, and shall not enter into, after the date
of this Agreement, any agreement with respect to any of its securities
that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof.
c. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified
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 Registrable Securities;
provided, that Sections 6(a) and 8 shall not be amended, modified or
supplemented, and waivers or consents to departures from this proviso
may not be given, unless the Company has obtained the written consent
of each Holder affected thereby. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions
<PAGE> 17
hereof with respect to a matter that relates exclusively to the rights
of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Securities being sold by
such Holders pursuant to such Registration Statement, provided that the
provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the
immediately preceding sentence.
d. 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 by
hand-delivery, certified first-class mail, return receipt requested,
next-day air courier or facsimile:
i. if to a Holder, at the most current address given
by such Holder to the Company in accordance with the
provisions of this Section 11(d), which address initially is,
with respect to each Holder, the address of such holder
maintained by the Registrar under the Indenture, with a copy
to Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand
Avenue, Los Angeles, California 90071, telecopy number (213)
687-5600, Attention: Rodrigo A. Guerra, Jr.; and
ii. if to the Company, at 1300 North Sam Houston
Parkway East, Suite 310, Houston, Texas 77032-2949, telecopy
number (281) 986-8865, Attention: President, with a copy to
Gardere & Wynne, L.L.P., 3000 Thanksgiving Tower, Dallas,
Texas 75201, telecopy number (214) 999-4667, Attention:
C. Robert Butterfield;
and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 11(d).
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 to a next-day air
courier; and when receipt is acknowledged by the addressee, if
telecopied. Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the
Trustee under the Indenture at the address specified in such Indenture.
e. 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, subsequent Holders.
f. 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.
g. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
<PAGE> 18
h. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF 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 AGREEMENT, 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 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. THE COMPANY
IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY
HOLDER 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.
i. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
j. Entire Agreement. This Agreement 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 hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein, with respect to the
registration rights granted by the Company in respect of securities
sold pursuant to the Purchase Agreement. This Agreement supersedes all
prior agreements and understandings between the parties with respect to
such subject matter.
k. Attorneys' Fees. In any Proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the
courts, shall be entitled to recover reasonable attorneys' fees in
addition to its costs and expenses and any other available remedy.
<PAGE> 19
l. Securities Held by the Company or its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities
held by the Company or its affiliates (as such term is defined in Rule
405 under the Securities Act) (other than Holders deemed to be such
affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the holders of such required percentage.
[Signature Page Follows]
<PAGE> 20
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
TRANSAMERICAN REFINING CORPORATION
By: ----------------------------------------
Ed Donahue, Vice President and Secretary
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By: ----------------------------
Joe Maly, Managing Director
<PAGE> 1
EXHIBIT 4.30
TRANSAMERICAN REFINING CORPORATION
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
March 16, 1998
JEFFERIES & COMPANY, INC.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
TransAmerican Refining Corporation (the "Company"), a Texas
corporation, pro poses to issue and sell to Jefferies & Company, Inc. (the
"Purchaser"), upon the terms set forth in a purchase agreement, dated as of
March 6, 1998 (the "Purchase Agreement"), between the Purchaser and the Company,
25,000 Units (as defined below), consisting of (i) $25,000,000 aggregate
principal amount of 16% Senior Subordinated Notes due 2003, Series C (the
"Series C Notes") and (ii) 25,000 warrants (the "Warrants") to purchase
initially 333,606 shares (the "Warrant Shares") of the Issuer's common stock,
$0.01 par value per share (together with any securities issued in exchange
therefor or in substitution thereof, the "Common Stock"), at an exercise price
of $0.01 per share. The Series C Notes will be issued pursuant to an indenture
(the "Indenture"), to be dated as of March 16, 1998, between the Issuer and
First Union National Bank, as trustee (the "Trustee"). The Warrants are to be
issued pursuant to a warrant agreement (the "Warrant Agreement"), to be dated as
of March 16, 1998, between the Issuer and the warrant agent named therein (the
"Warrant Agent"). The Series C Notes and the Warrants will be sold in Units,
each Unit consisting of (i) one Series C Note in the principal amount of $1,000
and (ii) one Warrant to purchase initially 13.344257 Warrant Shares at an
exercise price of $0.01 per share (the "Units"). Unless the context requires
otherwise, references herein to "Securities" shall be deemed to include the
Units, the Series C Notes (as defined below), Warrants, and Warrant Shares upon
initial issuance to the Purchaser as well as following separation.
As an inducement to the Purchaser to enter into the Purchase Agreement
and in satisfaction of a condition to the obligations of the Purchaser
thereunder, the Company agrees with the Purchaser, (i) for the benefit of the
Purchaser and (ii) for the benefit of the holders from time to time of the
Warrants and the Warrant Shares, as follows:
<PAGE> 2
1. Definitions. Capitalized terms used but not defined herein shall
have the respective meaning given to such terms in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"Affiliate" of any specified person, means any other person
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such specified per son. 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.
"Business Day" means any day other than (i) Saturday or Sunday
or (ii) a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to be closed.
"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 or limited partnership interest or other equity interest of such Person,
if such Person is a partnership.
"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 June 30, 2003.
"DTC" means The Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holders" means the Persons with a beneficial interest in the
Warrant Shares or other Registrable Securities.
"Initiating Holders" means one or more Holders of the
Requisite Securities.
"Officer's Certificate" means a certificate signed by any one
of the Chairman, any Vice Chairman, any Chief Executive Officer, any Senior Vice
President or the Chief Financial Officer.
2
<PAGE> 3
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Person" means an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" means 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 under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities.
"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 any Person pursuant to an effective
registration statement filed with the SEC pursuant to the Securities Act.
"Registrable Securities" means any of (i) the Warrant Shares
(whether or not the related Warrants have been exercised), and (ii) any other
securities issued or issuable with respect to any Warrant Shares, by way of
stock dividends or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a Registration Statement with respect to the
offering of such securities by the Holder thereof shall have been declared
effective under the Securities Act and such securities shall have been disposed
of by such Holder pursuant to such Registration Statement, (ii) such securities
are eligible for sale to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) promulgated under the Securities
Act, (iii) such securities shall have been otherwise transferred by such Holder
thereof and new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company or its
transfer agent and subsequent disposition of such securities shall not require
registration or qualification under the Securities Act or any similar state law
then in force or (iv) such securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to
the Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees and
expenses of compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities),
preparing, printing, filing, duplicating and distributing the Registration
Statement and the related prospectus, the cost of printing stock certificates,
the cost and charges of any transfer agent, rating agency fees, printing
expenses, messenger, telephone and delivery expenses, reasonable fees and
disbursements of counsel for the Company and all independent certified public
accountants, the fees and disbursements of
3
<PAGE> 4
underwriters customarily paid by issuers or sellers of securities (but not
including any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Securities by Selling Holders),
reasonable fees and expenses of one counsel for the Holders and other reasonable
out-of-pocket expenses of Holders.
"Registration Statement" shall mean any appropriate
registration statement of the Company filed with the SEC pursuant to the
Securities Act which covers any of the Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments in each case
including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Requisite Securities" shall mean a number of Registrable
Securities equal to not less than 25% of the Registrable Securities held in the
aggregate by all Holders.
"Rule 144" means Rule 144 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement thereto
having substantially the same effect as such Rule.
"Rule 144A" means Rule 144A promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement thereto
having substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement thereto
having substantially the same effect as such Rule.
"Rule 174" means Rule 174 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement thereto
having substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement thereto
having substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended form time to time, or any
similar rule or regulation hereafter adopted by the SEC as a replacement thereto
having substantially the same effect as such Rule.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
4
<PAGE> 5
"Selling Holder" shall mean a Holder who is selling
Registrable Securities in accordance with the provisions of this Agreement.
"Series A Registration Rights Agreement" means the
Securityholders' and Registration Rights Agreement dated December 30, 1997
between the Company and the Purchaser.
"Special Counsel" means any special counsel to the Holders,
for which Holders will be reimbursed pursuant to this Agreement.
2. Demand Registration.
(a) From time to time after 180 days following the completion
by the Company of a Public Equity Offering, one or more Initiating Holders may
request in writing that the Company effect the registration under the Securities
Act of all or part of such Initiating Holders' Registrable Securities and shall
specify the intended method of disposition thereof (the "Demand Request"). The
Company will give written notice of the Demand Request to all registered holders
of Registrable Securities within fifteen (15) days of receipt thereof. Within
120 days of receipt of the Demand Request the Company will, subject to the terms
of this Agreement, file a Registration Statement and use its best efforts to
effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such Initiating Holders for
disposition in accordance with the intended method of disposition
stated in such request;
(ii) all other Registrable Securities the holders of
which shall have made a written request to the Company for registration
thereof within 20 days after the giving of such written notice by the
Company (which request shall specify the intended method of disposition
of such Registrable Securities); and
(iii) all shares of securities which the Company may
elect to register in connection with the offering of Registrable
Securities pursuant to this Section 2,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional securities so to be registered.
(b) Registrations under this Section (each, a "Demand
Registration") shall be on such appropriate registration form of the SEC (i) as
shall be selected by the Company and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods of
disposition specified in their request for such registration.
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(c) The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2. The
Selling Holders shall pay the underwriting discounts, commissions, and transfer
taxes, if any, in connection with each Registration Statement requested under
this Section 2, which costs shall be allocated pro rata among all Selling
Holders on whose behalf Registrable Securities of the Company are included in
such registration, on the basis of the respective amounts of the Registrable
Securities then being registered on their behalf.
(d) The Holders shall be entitled to request two (2)
registrations pursuant to this Section 2. A Registration Statement requested
pursuant to this Section 2 shall not be deemed to have been effected (i) unless
a Registration Statement with respect thereto has been declared effective by the
SEC and (ii) the Company has complied in a timely manner and in all material
respects with all of its obligations under this Agreement; provided, (i) if,
after such Registration Statement has become effective, the offering of Warrant
Shares pursuant to such Registration Statement is or becomes subject to any stop
order, injunction or other order or requirement of the SEC or other governmental
or administrative agency or court that prevents, restrains or otherwise limits
the sale of Warrant Shares under such Registration Statement for any reason,
other than by reason of some act or omission by any Holder participating in such
registration, and does not become effective within a reasonable period of time
thereafter, such period not to exceed 60 days from the date of such stop order,
injunction, or other governmental order or requirement, (ii) the Registration
Statement does not remain effective under the Securities Act until at least the
earlier of (A) an aggregate of 90 days after the effective date thereof or (B)
the consummation of the distribution by the Selling Holders of all of the
Registrable Securities covered thereby or (iii) if the Selling Holders are not
able to sell at least 80% of the Registrable Securities to be included therein,
less any Registrable Securities withdrawn or excluded from such Demand
Registration in accordance with the provisions hereof, then, in each case, such
Registration Statement shall be deemed not to have been effected. For purposes
of calculating the 90-day period referred to in the preceding sentence, any
period of time during which such Registration Statement was not in effect shall
be excluded. The Holders shall be permitted to withdraw all or any part of the
Registrable Securities from a Demand Registration at any time prior to the
effective date of such Demand Registration.
(e) If a requested registration pursuant to this Section 2
involves an underwritten offering, and the managing underwriter shall advise the
Company in writing (with a copy to each Holder requesting registration) that, in
its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) is such as to adversely affect the success of such offering,
including the price at which such securities can be sold, then the Company will
include in such registration, to the extent of the number which the Company is
so advised can be sold in such offering, (i) first, Registrable Securities
requested to be included in such registration by the Holders, pro rata among
such holders requesting such registration on the basis of the number of such
securities requested to be included by such Holders and (ii) second, securities
held by other Persons, including the Company.
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3. Piggy-Back Registration.
(a) If at any time after the Company has completed a Public
Equity Offering the Company proposes to file a Registration Statement under the
Securities Act with respect to an offering by the Company for its own account or
for the account of any of the holders of any class of its Common Stock in a
firmly underwritten Public Equity Offering (other than (i) a Registration
Statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
SEC) or (ii) a Registration Statement filed in connection with an exchange offer
or offering of securities solely to the Company's existing security holders),
then the Company shall give written notice of such proposed filing to the
Holders as soon as practicable (but in no event fewer than 20 days before the
anticipated filing date), and such notice shall offer such Holders the
opportunity to register such number of Warrant Shares as each such Holder may
request in writing within 30 days after receipt of such written notice from the
Company (which request shall specify the Warrant Shares intended to be disposed
of by such Selling Holder) (a "Piggy-Back Registration"). Upon the written
request of any such Holder made within 30 days after the receipt of any such
notice (which request shall specify the number of Registrable Securities
intended to be disposed of by such Holder and the intended method of disposition
thereof), the Company will, subject to the terms of this Agreement, effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered, by
inclusion of such Registrable Securities in the registration statement that
covers the securities which the Company proposes to register, provided that if,
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
either not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to each Holder
and, thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
any holder or holders of Registrable Securities entitled to do so to request
that such registration be effected as a registration under Section 2, and (ii)
in the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section 3
shall relieve the Company of its obligation to effect any registration upon
request under Section 2, nor shall any such registration hereunder be deemed to
have been effected pursuant to Section 2.
(b) The Company shall use its best efforts to keep such
Piggy-Back Registration continuously effective under the Securities Act until
the earlier of (A) an aggregate of 90 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of all of the Warrant
Shares covered thereby. The Company shall use its reasonable efforts to cause
the managing underwriter or underwriters of such proposed offering to permit the
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<PAGE> 8
Registrable Securities requested to be included in a Piggy-Back Registration to
be included in the same terms and conditions as any similar securities of the
Company or any other security holder included therein and to permit the sale or
other disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to these provisions by giving written notice to
the Company of its request to withdraw.
(c) The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 3 and the Selling Holders shall pay the underwriting discounts,
commissions, and transfer taxes, if any, relating to the sale of such Selling
Holders' Registrable Securities pursuant to this Section 3, such costs being
allocated pro rata among all Selling Holders on whose behalf Registrable
Securities of the Company are included in such registration, on the basis of the
respective amounts of Registrable Securities then being registered on their
behalf.
(d) Priority in Piggy-Back Registrations. If a registration
pursuant to this Section 3 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company, the
Company will, if requested by any Holder and subject to the provisions of this
Section 3, use its reasonable efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such Holder
among the securities to be distributed by such underwriters. Notwithstanding
anything to the contrary, if the managing underwriter of such underwritten
offering shall, in writing, inform the Holders requesting such registration and
the holders of any of the Company's other securities which shall have exercised
registration rights in respect of such underwritten offering of its belief that
the number of securities requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering, then, in
such event, (x) in cases initially involving the registration for sale of
securities for the Company's own account, securities shall be registered in such
offering in the following order of priority: (i) first, the securities that the
Company proposes to register, (ii) second, the securities that have been
requested to be registered pursuant to the Series A Registration Rights
Agreement, (iii) third, the securities that have been requested to be included
in such registration by Holders (pro rata on the amount of securities sought to
be registered by such Holders), and (iv) fourth, the securities that have been
requested to be included in such registration by Persons (other than Holders)
entitled to exercise "piggy-back" registration rights pursuant to contractual
commitments of the Company (pro rata on the amount of securities sought to be
registered by such Persons); and (y) in cases not initially involving the
registration for sale of securities for the Company's own account, securities
shall be registered in such offering as follows: (i) first, the securities of
any person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Company is the basis for the registration
(provided that if such person is a Holder, there shall be no priority as among
Holders and Warrant Shares sought to be included by Holders shall be included
pro rata based on the amount of securities sought to be registered by such
persons), (ii) second, the securities that have been requested to be included in
such registration pursuant to the Series A Registration Rights
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<PAGE> 9
Agreement, (iii) third, the securities that have been requested to be included
in such registration by Holders (pro rata on the amount of securities sought to
be registered by such Holders), (iv) fourth, securities of other persons
entitled to exercise "piggy-back" registration rights pursuant to contractual
commitments (pro rata based on the amount of securities sought to be registered
by such persons) and (v) fifth, the securities which the Company proposes to
register.
4. Registration Procedures. In connection with any Demand
Registration or Piggy-back Registration, the Company shall:
(a) No fewer than five Business Days prior to the initial
filing of a Registration Statement or Prospectus and no fewer than two Business
Days prior to the filing of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), if requested, furnish to the Holders, their Special Counsel and the
managing underwriters, if any, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, their
Special Counsel and such underwriters, if any, cause the officers and directors
of the Company, counsel to the Company and independent certified public
accountants to the Company to respond to such inquiries as shall be necessary,
in the opinion of respective counsel to such Holders and such underwriters, to
conduct a reasonable investigation within the meaning of the Securities Act, and
shall use reasonable efforts to reflect in each such document filed pursuant to
a Demand Registration, when so filed with the SEC, such reasonable comments as
the Holders, their Special Counsel and the managing underwriters, if any, may
propose in writing; provided, however, that the Company shall not be deemed to
have kept a Registration Statement effective during the applicable period if it
voluntarily takes or fails to take any action that results in Selling Holders
covered thereby not being able to sell such Registrable Securities pursuant to
Federal securities laws during that period; provided, further, the Company shall
not file any such Registration Statement or related Prospectus or any amendments
or supplements thereto in connection with a Demand Registration to which the
Holders of a majority of the Registrable Securities, their Special Counsel, or
the managing underwriters, if any, shall reason ably object on a timely basis;
(b) Take such action as may be necessary so that (i) any
Registration Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto (and each report or other
document incorporated herein by reference in each case) complies in all material
respects with the Securities Act and the Exchange Act and the respective rules
and regulations thereunder, (ii) any Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any Prospectus
forming part of any Registration Statement, and any amendment or supplement to
such Prospectus, does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements, in the light
of the circumstances under which they were made, not misleading.
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<PAGE> 10
(c) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable time
period; 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; and comply
with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(d) Notify the Selling Holders, their Special Counsel and the
managing underwriters, if any, promptly (and in the case of an event specified
by clause (i)(A) of this paragraph in no event fewer than two Business Days
prior to such filing), and (if requested by any such Person), confirm such
notice in writing, (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment is proposed to be filed, and, (B) with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to a Registration Statement
or related Prospectus or for additional information, (iii) of the issuance by
the SEC, any state securities commission, any other governmental agency or any
court of any stop order, order or injunction suspending or enjoining the use or
the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if at any time any of the representations and
warranties of either the Company contained in any agreement (including any
underwriting agreement) contemplated hereby cease to be true and correct in all
material respects, (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (vi) of the
happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated there in by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
not misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and (vii) of the
Company's reasonable determination that a post-effective amendment to such
Registration Statement would be appropriate;
(e) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of any order enjoining or suspending the use or
effectiveness of a Registration Statement or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment;
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<PAGE> 11
(f) If requested by the managing underwriters, if any, or the
Holders of a majority in aggregate number of the Registrable Securities being
sold in connection with such offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the managing
underwriters, if any, and such Holders reasonably agree should be included
therein, (ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment and (iii) supplement or make amendments to such
Registration Statement; provided, however, that the Company shall not be
required to take any action pursuant to this Section 4(f) that would, in the
opinion of counsel for the Company, violate applicable law;
(g) Furnish to each Selling Holder, their Special Counsel and
each managing underwriter, if any, without charge, at least one conformed copy
of each Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
each Holder (including those previously furnished or incorporated by reference)
as soon as practicable after the filing of such documents with the SEC;
(h) Deliver to each Selling Holder, their Special Counsel, and
the under writers, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons reasonably request; and the Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the Selling Holders and the underwriters, if any, in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto;
(i) Prior to any public offering of Registrable Securities,
use its reasonable efforts to register or qualify or cooperate with the Holders
of Registrable Securities to be sold or tendered for, 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 Securities for offer and sale under the securities or blue sky laws
of such jurisdictions within the United States as any Holder or underwriter
reasonably requests in writing, or, in the event of a non-underwritten offering,
as the Holders of a majority of such Registrable Securities being sold may
request; provided, however, that where Registrable Securities 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 4(i); 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 Securities covered by such Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where they are not then so
qualified or to take any action that would subject them to general service of
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<PAGE> 12
process in any such jurisdiction where they are not then so subject or subject
the Company to any tax in any such jurisdiction where it is not then so subject;
(j) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being Registrable
Securities, cooperate with the Holders and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with the DTC and
to enable such Registrable Securities to be in such denominations and registered
in such names as the managing underwriters, if any, or Holders may request at
least two Business Days prior to any sale of Registrable Securities;
(k) Use its best efforts to cause the offering of the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities within the
United States, except as may be required as a consequence of the nature of such
Selling Holder's business, in which case the Company will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of such
Registrable Securities; provided, however, that the Company shall not be
required to register the Registrable Securities in any jurisdiction that would
subject them to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any tax in any such jurisdiction
where it is not then so subject or to require the Company to qualify to do
business in any jurisdiction where it is not then so qualified;
(l) Upon the occurrence of any event contemplated by Section
4(d)(vi) or 4(d)(vii), as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. If the
Company notifies the Holders of the occurrence of any event contemplated by
paragraph 4(d)(vi) or 4(d)(vii) above, the Holders shall suspend the use of the
Prospectus until the requisite changes to the Prospectus have been made;
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Securities, as applicable, to (i) provide
the registrar for the Registrable Securities with certificates for such
securities in a form eligible for deposit with the DTC and (ii) provide a CUSIP
number for the Registrable Securities;
(n) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection therewith
(including those reasonably requested by the managing
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<PAGE> 13
underwriters, if any, or the Holders of a majority in aggregate number of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such representations and
warranties to the Holders of such Registrable Securities and the underwriters,
if any, with respect to the business of the Company (including with respect to
businesses or assets acquired or to be acquired by it), and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if
any, and Special Counsel to the Holders of the Registrable Securities being
sold), addressed to each Selling Holder and each of the underwriters, if any,
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Special
Counsel and underwriters (iii) obtain customary "comfort" letters and updates
thereof (including, if such registration includes an underwritten public
offering, a "bring down" comfort letter dated the date of the closing under the
underwriting agreement) from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any business which may hereafter be acquired by the Company for which
financial statements and financial data are required to be included in the
Registration Statement), addressed (where reasonably possible) to each Selling
Holder and each of the underwriters, if any, such letters to be in customary
form and covering matters of the type customarily covered in "comfort" letters
in connection with underwritten offerings and such other matters as reasonably
required by the managing underwriter or underwriters and as permitted by the
Statement of Auditing Standards No. 72; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the Selling Holders and the underwriters, if any, than
those set forth in Section 8 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate number of Registrable
Securities covered by such Registration Statement and the managing
underwriters); and (v) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in aggregate number of the
Registrable Securities being sold, their Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the representations
and warranties made pursuant to clause 4(n)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company;
(o) Make available for inspection by a representative of the
Selling Holders, any underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney, consultant or accountant
retained by such Selling Holders or underwriter, at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company (including with
respect to business and assets acquired or to be acquired to the extent that
such information is available to the Company, and cause the officers, directors,
agents and employees of the Company (including with respect to
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<PAGE> 14
business and assets acquired or to be acquired to the extent that such
information is available to the Company) to supply all information in each case
reasonably requested by any such representative, underwriter, attorney,
consultant or accountant in connection with such Registration, provided,
however, the Company may first require that such Persons agree to keep
confidential any non-public information relating to the Company received by such
Person and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality provisions of
this Section 4(o)) until such information has been made generally available to
the public unless the release of such information is required by law or
necessary to respond to inquiries of regulatory authorities (including the
National Association of Insurance Commissioners, or similar organizations or
their successors);
(p) Use its best efforts to cause the Warrant Shares issuable
upon exercise of the Warrants to be quoted or listed on any exchange upon which
the Company's Common Stock is then quoted or listed;
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to their security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act), 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 end
of any fiscal quarter in which Registrable Securities are sold to underwriters
in a firm commitment or reasonable efforts underwritten offering and (ii) if not
sold to underwriters in such an offering, commencing on the first day of the
first fiscal quarter after the effective date of a Registration Statement, which
statement shall cover said period, consistent with the requirements of Rule 158;
and
(r) Use its best efforts to take all other steps necessary to
effect the registration, offering and sale of the Registrable Securities
covered by the Registration Statement.
The Company may require each Selling Holder as to which any
registration is being effected to furnish to the Company such information
regarding the distribution of such Registrable Securities as is required by law
to be disclosed in the applicable Registration Statement and the Company may
exclude from such registration the Registrable Securities of any Selling Holder
who unreasonably fails to furnish such information within a reasonable time
after receiving such request.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by
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<PAGE> 15
name or otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in any
amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 4(d)(ii), 4(d)(iii), 4(d)(v) or
4(d)(vi) hereof, such Holder will forthwith discontinue disposition of such
Registrable Securities covered by such Registration Statement or Prospectus
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(l) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
90-day period referred to in Section 2(d) 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 Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 3(l) hereof or (y)
the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
5. Certain Limitations, Conditions and Qualifications to the
Company's Obligations Under Sections 2 and 3.
The obligations of the Company described in Sections 2 and 3
of this Agreement are subject to each of the following limitations, conditions
and qualifications:
(a) Subject to the next sentence of this paragraph, the
Company shall be entitled to postpone, for a reasonable period of time, the
filing or effectiveness of, or suspend the rights of any Holder to make sales
pursuant to, any Registration Statement otherwise required to be prepared, filed
and made and kept effective by it under the registration covenants described in
Sections 2 hereof; provided, however, that the duration of such postponement or
suspension may not exceed the earlier to occur of (A) 30 days after the
cessation of the circumstances described in the next sentence of this paragraph
on which such postponement or suspension is based or (B) 120 days after the date
of the determination of the Board of Directors of the Company referred to in the
next sentence, and the duration of such postponement or suspension shall be
excluded from the calculation of the 90-day period described in Section 2(d)
hereof. Such postponement or suspension may only be effected if the Board of
Directors of the Company determines in good faith that the filing or
effectiveness of, or sales pursuant to, such registration statement would
materially impede, delay or interfere with any financing, offer or sale of
securities, acquisition, corporate reorganization or other significant
transaction involving the Company or any of its affiliates (whether or not
planned, proposed or authorized prior to the exercise of demand registration
rights hereunder or any other registration rights agreement) or require
disclosure of material information which the
15
<PAGE> 16
Company has a bona fide business purpose for preserving as confidential. If the
Company shall so postpone the filing or effectiveness of, or suspend the rights
of any Holders to make sales pursuant to, a Registration Statement it shall, as
promptly as possible, notify any Selling Holders of such determination, and the
Selling Holders shall (y) have the right, in the case of a postponement of the
filing or effectiveness of a Registration Statement, upon the affirmative vote
of the Selling Holders of not less than a majority of the Registrable Securities
to be included in such Registration Statement, to withdraw the request for
registration by giving written notice to the Company within 10 days after
receipt of such notice, or (z) in the case of a suspension of the right to make
sales, receive an extension of the registration period equal to the number of
days of the suspension. Any Demand Registration as to which the withdrawal
election referred to in the preceding sentence has been effected shall not be
counted for purposes of the two Demand Registrations referred to in Section 2(d)
hereof.
(b) The Company shall not be required by this Agreement to
include securities in a Registration Statement relating to a Piggy-back
Registration above if (i) in the written opinion of counsel to the Company,
addressed to the Holders seeking registration and delivered to them, the Holders
of such securities seeking registration would be free to sell all such
securities within the current calendar quarter, without registration, under Rule
144 under the Securities Act, which opinion may be based in part upon the
representation by the Holders of such securities seeking registration, which
registration shall not be unreasonably withheld, that each such Holder is not an
affiliate of the Company within the meaning of the Securities Act, and (ii) all
requirements under the Securities Act for effecting such sales are satisfied at
such time.
(c) The Company's obligations shall be subject to the
obligations of the Selling Holders to furnish all information and materials and
not to take any and all actions as may be required under Federal and state
securities laws and regulations to permit the Company to comply with all
applicable requirements of the SEC and to obtain any acceleration of the
effective date of such Registration Statement.
(d) The Company shall not be obligated to cause any special
audit to be undertaken in connection with any registration pursuant to this
Agreement unless such audit is requested by the underwriters with respect to
such registration.
6. Indemnification
(a) The Company agrees to indemnify and hold harmless each of
(i) the Purchaser, (ii) each Holder (iii) each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
any of the foregoing (any of the persons referred to in this clause (i) being
hereinafter referred to as a "controlling person"), and (iv) the respective
officers, directors, partners, employees, representatives and agents of the
Purchaser, each Holder, each broker-dealer participating in an offering subject
to this Agreement or any controlling person (any person referred to in clause
(i), (ii), (iii) or (iv) may hereinafter be referred to as an "Indemnified
Person"), to the fullest extent lawful, from and against any and all losses,
claims, damages,
16
<PAGE> 17
liabilities, judgments, actions and expenses (including, without limitation, and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Person) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with, any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of Prospectus or in
any amendment or supplement thereto or in any preliminary Prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in writing to the
Company by or on behalf of such Indemnified Person expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary Prospectus
shall not inure to the benefit of any Indemnified Person from whom the person
asserting such losses, claims, damages, liabilities and judgments purchased
securities if such untrue statement or omission or alleged untrue statement or
omission made in such preliminary Prospectus is eliminated or remedied in the
Prospectus and a copy of the Prospectus shall not have been furnished to such
person in a timely manner due to the wrongful action or wrongful inaction of
such Indemnified Person.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any such Prospectus
or any amendment or supplement thereto and with respect to which indemnity may
be sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses; provided, however, that the failure to so
notify the Company shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material rights or defenses by
the Company and the Company was not otherwise aware of such action or claim).
Any Indemnified Person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person, unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the Company, (ii) the Company shall have failed to assume the defense and employ
counsel or (iii) the named parties to any such action (including any impleaded
parties) include both such Indemnified Person and the Company and such
Indemnified Person shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Company (in which case the Company shall not have the
right to assume the defense of such action on behalf of such Indemnified Person,
it being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local
17
<PAGE> 18
counsel) for all such Indemnified Persons, which firm shall be designated in
writing by such Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred). The Company shall not be liable for any
settlement of any such action effected without its written consent but if
settled with the written consent of the Company, the Company agrees to indemnify
and hold harmless any Indemnified Person from and against any loss or liability
by reason of such settlement. The Company shall not, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the subject matter
of such proceeding.
(c) In connection with any Registration Statement in which a
Holder is participating, such Holder agrees, severally and not jointly, to
indemnify and hold harmless each of the Company, its directors, its officers and
any person controlling the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to each Indemnified Person but only with reference to
information relating to such Indemnified Person furnished in writing by or on
behalf of such Indemnified Person expressly for use in such Registration
Statement or any Prospectus (or any amendment or supplement thereto) or any
preliminary Prospectus. In case any action shall be brought against the Company,
any of their directors, any such officer or any person controlling the Company
based on such Registration Statement and in respect of which indemnity may be
sought against any Indemnified Person, the Indemnified Person shall have the
rights and duties given to the Company (except that if the Company shall have
assumed the defense thereof, such Indemnified Person shall not be required to do
so, but may employ separate counsel therein and participate in defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Person), and the Company, its directors, any such officers and any
person controlling the Company shall have the rights and duties given to the
Indemnified Person, by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an Indemnified Person in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then the Company, in lieu of
indemnifying such Indemnified Person, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and each
Indemnified Person on the other hand from the offering of the Warrant Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and each such Indemnified Person in connection with the statements
or omissions (or alleged statements or omissions) which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company and each such
Indemnified Person shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or the alleged omission to state a material fact
18
<PAGE> 19
relates to information supplied by the Company or such Indemnified Person and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 6(d) were determined by pro rata allocation (even if the Indemnified
Person were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an the
Company as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified Person in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6, no Indemnified Person shall be required to contribute any amount in
excess of the amount by which the total net profit received by it in connection
with the sale of the Warrant Shares pursuant to this Agreement exceeds the
amount of any damages which such Indemnified Person has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 6 will be in addition to any liability which the Company may otherwise
have to the Indemnified Persons referred to above. The Indemnified Persons'
obligations to contribute pursuant to this Section 6(d) are several in
proportion to the respective amount of Warrant Shares included in any such
Registration Statement by each Indemnified Person and not joint.
7. Rules 144 and 144A
The Company shall use its best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time it is not required to file such reports but in
the past had been required to or did file such reports, it will, upon the
request of any Holder, make available other information as required by, and so
long as necessary to permit, sales of its Registrable Securities pursuant to
Rule 144A. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
8. Underwritten Registrations
If any of the Registrable Securities covered by any
Registration Statement pursuant to a Demand Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate number of such Registrable Securities included in such
offering, subject to the consent of the Company (which will not be unreasonably
withheld or delayed).
19
<PAGE> 20
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Registrable
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
9. Miscellaneous
(a) Remedies. In the event of a breach by the Company, or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Without the written consent of
the Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any person the right to request it to register any of
its equity securities under the Securities Act unless the rights so granted are
subject in all respects to the prior rights of the Holders set forth herein, and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) [intentionally omitted].
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the written consent of the Holders of a majority of the
then outstanding Registrable Securities is obtained; provided, however, that,
for the purposes of this Agreement, Registrable Securities that are owned,
directly or indirectly, by the Company or an Affiliate of the Company are not
deemed outstanding. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of a majority in aggregate number of the
Registrable Securities 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 provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, or facsimile:
20
<PAGE> 21
(i) if to the Company:
TransAmerican Refining Corporation
1300 North Sam Houston
Parkway, Suite 320
Houston, Texas 77032-2949
Fax: (281) 986-8865
Attention: Ed Donahue
with a copy to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
Dallas, Texas 75201
Fax: (214) 999-4667
Attention: C. Robert Butterfield
(ii) if to the Purchaser:
Jefferies & Company, Inc.
111 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Fax: (310) 575-5299
Attention: Jerry M. Gluck
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
34th Floor
Los Angeles, California 90071
Fax: (213) 687-5600
Attention: Rod A. Guerra
(iii) if to any other person who is then a
registered Holder, to the address of such
Holder as it appears in the share register
of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one business day after being timely delivered to a
next-day air courier; five business days after being deposited
21
<PAGE> 22
in the mail, postage prepaid, if mailed; and when receipt is acknowledged by the
recipient's telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Notwithstanding the foregoing, no transferee shall have any of the
rights granted under this Agreement until such transferee shall acknowledge its
rights and obligations hereunder by a signed written statement of such
transferee's acceptance of such rights and obligations.
(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) Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.
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. 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 AGREEMENT, AND IRREVOCABLY ACCEPT
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS.
(i) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts to find
and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this
22
<PAGE> 23
Agreement to "Section" and "paragraph" refer to such Section or paragraph of
this Agreement, unless expressly stated otherwise.
(k) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof or
thereof is validly asserted as a defense, the prevailing party, as determined by
the court, shall be entitled to recover reasonable attorneys' fees in addition
to any other available remedy.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement, the Warrant Agreement, and the 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 hereto in respect of the subject matter contained herein and therein.
This Agreement, the Purchase Agreement, the Warrant Agreement, and the Indenture
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
23
<PAGE> 24
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
TRANSAMERICAN REFINING CORPORATION
By:
----------------------------------------
Ed Donahue, Vice President and Secretary
The foregoing Securityholders' and Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
JEFFERIES & COMPANY, INC.
By:
---------------------------
Joe Maly, Managing Director
<PAGE> 1
EXHIBIT 4.31
[EXECUTION COPY]
================================================================================
NOTE PURCHASE AGREEMENT
between
TRANSAMERICAN REFINING CORPORATION
and
MERRILL LYNCH CORPORATE BOND FUND, INC. - HIGH INCOME PORTFOLIO
$36,000,000 Senior Secured Notes Due 2002
Dated as of December 10, 1997
================================================================================
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS
<S> <C>
................................................................................................................ 1
Section 1.01. Defined Terms........................................................................... 1
Section 1.02. Certain Terms........................................................................... 12
Section 1.03. Rules of Construction................................................................... 12
ARTICLE II
SALE AND PURCHASE OF NOTES
................................................................................................................ 12
Section 2.01. Authorization of Notes.................................................................. 12
Section 2.02. Sale and Purchase of Notes.............................................................. 13
Section 2.03. Closing; Funding........................................................................ 13
Section 2.04. Payments................................................................................ 13
Section 2.05. Fees.................................................................................... 13
Section 2.06. Interest Rate Limitation................................................................ 14
ARTICLE III
PAYMENT AND REDEMPTION OF NOTES
................................................................................................................ 14
Section 3.01. Maturity Date........................................................................... 14
Section 3.02. Redemption.............................................................................. 14
....................................................................................................... 17
Section 3.03. Repurchase of Notes Upon Change of Control.............................................. 17
Section 3.04. Pro Rata Redemptions/Repurchases........................................................ 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
................................................................................................................ 19
Section 4.01. Representations and Warranties.......................................................... 19
Section 4.02. Certificates............................................................................ 22
ARTICLE V
CONDITIONS TO CLOSING
................................................................................................................ 22
Section 5.01. Conditions Precedent.................................................................... 22
ARTICLE VI
INFORMATION
................................................................................................................ 25
Section 6.01. Information............................................................................. 25
</TABLE>
<PAGE> 3
<TABLE>
ARTICLE VII
<S> <C>
INTENTIONALLY OMITTED.................................................................................. 25
ARTICLE VIII
COVENANTS.............................................................................................. 26
Section 8.01. Use of Proceeds......................................................................... 26
Section 8.02. Filing of Security Documents............................................................ 26
Section 8.03. Further Assurances...................................................................... 26
Section 8.04. Incorporation by Reference.............................................................. 26
ARTICLE IX
EVENTS OF DEFAULT...................................................................................... 27
Section 9.01. Events of Default; Remedies............................................................. 27
Section 9.02. Remedies................................................................................ 29
Section 9.03. Remedies Cumulative..................................................................... 30
Section 9.04. Remedies Not Waived..................................................................... 30
ARTICLE X
THE NOTES.............................................................................................. 30
Section 10.01. Registration, Exchange, and Transfer of Notes.......................................... 30
Section 10.02. Lost, Stolen, Damaged and Destroyed Notes.............................................. 30
ARTICLE XI
MISCELLANEOUS.......................................................................................... 31
Section 11.01. Amendment and Waiver................................................................... 31
Section 11.02. Expenses and Taxes..................................................................... 31
Section 11.03. Survival of Representations and Warranties............................................. 32
Section 11.04. Successors and Assigns................................................................. 33
Section 11.05. Notices................................................................................ 33
Section 11.06. Indemnification........................................................................ 34
Section 11.07. Public Announcements................................................................... 35
Section 11.08. No Fiduciary Relationship.............................................................. 35
Section 11.09. Integration and Severability........................................................... 35
Section 11.10. Counterparts........................................................................... 35
Section 11.11. Governing Law.......................................................................... 36
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
SECTION 11.12. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE
AND VENUE..................................................................................... 36
SECTION 11.13. MUTUAL WAIVER OF RIGHT TO TRIAL BY JURY................................................ 37
SECTION 11.14. Release of Collateral; Subordination................................................... 37
</TABLE>
Appendix A - Principal Amounts and Payment Instructions
Exhibit A - Form of Senior Secured Note
Exhibit B - Form of Security Agreement
Exhibit C - Form of Cash Collateral and Disbursement Agreement
Exhibit D - Form of Mortgage
Exhibit E - Form of Environmental Indemnity Agreement
3
<PAGE> 5
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, dated as of December 10, 1997 (the
"Agreement"), by and between TRANSAMERICAN REFINING CORPORATION, a Texas
corporation (together with its successors and assigns, the "Company") and
Merrill Lynch Corporate Bond Fund, Inc. - High Income Portfolio (together with
its successors and assigns, the "Purchaser").
W I T N E S S E T H:
WHEREAS, prior to the date hereof, and pursuant to an Asset Purchase
Agreement, dated as of September 19, 1997, between GATX Terminals Corporation, a
Delaware corporation (together with its successors and assigns, "GATX"), and the
Company (as it may be from time to time amended, modified or supplemented, the
"Asset Purchase Agreement"), the Company has purchased from GATX the Acquired
Assets (as such term is defined in the Asset Purchase Agreement, and herein
referred to as the "Acquired Assets");
WHEREAS, the Company desires to issue and sell to Purchaser its Senior
Secured Notes Due 2002 in an aggregate principal amount of Thirty Six Million
Dollars ($36,000,000); and
WHEREAS, subject to the terms and conditions hereinafter set forth,
Purchaser is willing to purchase such Senior Secured Notes.
NOW, THEREFORE, in consideration of the foregoing and for such other
good and valuable consideration, the sufficiency and receipt of which each party
hereto hereby acknowledges, the Company and Purchaser agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
"Acquired Assets" shall have the meaning set forth in the
recitals hereto.
"Affiliate" means, with respect to any specified Person, (a)
any other Person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such specified Person or (b) any
officer, director or controlling shareholder of such other Person. For purposes
of this definition, the term "control" means (i) the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership
<PAGE> 6
of voting securities, by contract, or otherwise, or (ii) without limiting the
foregoing, the beneficial ownership of 5% or more of the voting power of the
voting common equity of such Person (on a fully diluted basis) or of warrants or
other rights to acquire such equity (whether or not presently exercisable).
"Asset Purchase Agreement" shall have the meaning set forth in
the recitals hereto.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors, as amended from time to
time.
"Board of Directors" means, with respect to any Person, the
Board of Directors of such Person or any committee of the Board of Directors of
such Person 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 Saturday or Sunday or
a day on which banks are required or otherwise authorized to close in either New
York, New York or Houston, Texas.
"Capital Stock" means, with respect to any Person, any capital
stock of such Person and shares, interests, participation 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 of such Person if such Person is a
partnership provided, however, that with respect to the Company, "Capital Stock"
shall not include warrants to purchase common stock of the Company either (i)
currently outstanding or (ii) issued in connection with the issuance of
Subordinated Debt of the Company.
"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 TEC
Indenture Trustee, that invest solely in United States dollars and
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<PAGE> 7
securities of the types described in clauses (a) through (e), (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) above
or with an Eligible Institution, 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, including deposits denominated
in foreign currency, with any Eligible Institution; provided that all such
deposits do not exceed $10,000,000 in the aggregate at any one time, and (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% 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 clause (ii), the Notes have an Investment
Grade Rating; provided, however, that if at any time within 120 days after such
occurrence, the Notes cease having an Investment Grade Rating, such event shall
be a "Change of Control."
"Change of Control Offer" shall have the meaning specified in
Section 3.03.
"Change of Control Payment Date" shall have the meaning
specified in Section 3.03.
"Change of Control Purchase Price" shall have the meaning
specified in Section 3.03.
"Closing Date" means the date of this Agreement.
"Collateral" means all of the Property of the Company subject
to the Lien of the Holders pursuant to the Security Documents.
"Collateral Account" shall have the meaning provided in the
Disbursement Agreement.
"Common Stock" means the common stock, par value $.01 per
share, of the Company, now or hereafter issued.
"Company" has the meaning set forth in the preamble hereto.
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<PAGE> 8
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt" shall have the meaning ascribed thereto in the TEC
Indenture, and any defined term used therein not otherwise defined herein shall
have the meaning ascribed thereto in the TEC Indenture.
"Default" means an event or condition, the occurrence of which
is, or with the lapse of time would be, or giving of notice, or both, would be
an Event of Default.
"Disbursement Agent" means State Street Bank and Trust
Company, Inc., in its capacity as Disbursement Agent under the Disbursement
Agreement, and any successor thereto.
"Disbursement Agreement" means the Cash Collateral and
Disbursement Agreement, among the Company, Purchaser and the Disbursement Agent
substantially in the form of Exhibit C, as amended from time to time in
accordance with the terms hereof.
"Docks" means the three docks designated as "Ship Docks #s 1,
2 and 3" (formerly designated as "Ship Docks #2, 3 and 4") and all appurtenances
thereto, situated on and in the Mississippi River adjacent to the portion of the
Real Estate fronting on the Mississippi River, all as shown on the Survey (as
"Ship Docks #s 2, 3 and 4").
"Dollars" 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.
"Eligible Institution" means a domestic commercial banking
institution that has combined capital and surplus of not less than $500,000,000,
whose debt is rated "A" (or higher) according to S&P or Moody's at the time as
of which any investment or rollover therein is made.
"Environmental Indemnity Agreement" means the Environmental
Indemnity Agreement between the Parent and Purchaser, substantially in the form
attached as Exhibit E, as amended from time to time in accordance with the terms
thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"Event of Default" shall have the meaning specified in Section
9.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
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<PAGE> 9
"Final Change of Control Put Date" shall have the meaning
specified in Section 3.03.
"GAAP" means generally accepted accounting principles as in
effect in the United States on the Closing Date applied on a basis consistent
with that used in the preparation of the audited financial statements of the
Company included in the offering circular related to the TEC Indenture.
"GATX" shall have the meaning set forth in the recitals
hereto.
"Government Securities" means direct obligations of, or other
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"Holder" means the Person in whose name a Note is registered
on the Company's books.
"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 "-" other modifiers) by any
rating agency or if any such rating agency has ceased using letter rating
categories or if 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).
"Lien" means any mortgage, lien, pledge, charge, security
interest, or other encumbrance of any kind, whether or not 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).
"Marketable Securities" means (a) Government Securities, (b)
any certificate of deposit maturing not more than 270 days after the date of
acquisition issued by, or time deposit of, an Eligible Institution, (c)
commercial paper maturing not more than 270 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Company) with a rating,
at the time as of which any investment therein is made, of "A-l" (or higher)
according to S&P or "P-1" (or higher) according to Moody's, issued or offered by
an Eligible Institution, (d) any bankers' acceptances or money market deposit
accounts issued or offered by an Eligible Institution, and (e) any fund
investing exclusively in investments of the types described in clauses (a)
through (d) above.
"Material Adverse Effect" means, with respect to any
occurrence, failure, act or omission of any nature, individually or in the
aggregate, a change or an effect which would
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<PAGE> 10
reasonably be expected to impair materially (i) the ability of the Company and
its Subsidiaries, taken as a whole, to conduct its business substantially as now
conducted; (ii) the business, operations, prospects or financial condition of
the Company and its Subsidiaries taken as a whole; (iii) the ability of the
Company to perform any of its obligations hereunder, under the Notes or under
any Security Document to which it is a party; (iv) the validity or
enforceability of this Agreement, the Notes or any Security Document; (v) the
priority or enforceability of any security interest created hereby or by any
Security Document and intended to be perfected hereunder or thereunder; or (vi)
the ability of the Holders to exercise any of their rights or remedies
hereunder, under the Notes or under any Security Document.
"Maturity Date", when used with respect to the Notes, means
the date on which the principal of such Notes becomes due and payable as therein
or herein provided, whether at the Stated Maturity or Change of Control Payment
Date or by declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage(s)" has the meaning specified in Section 5.01(a)(v).
"NASD" means the National Association of Securities Dealers,
Inc.
"Note(s)" means the Company's Senior Secured Notes Due 2002,
substantially in the form of Exhibit A, and any Note delivered in substitution
or exchange for any thereof, as supplemented from time to time in accordance
with the terms hereof.
"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 or, with respect to any certificates required at Closing, any Assistant
Secretary of the Company.
"Parent" means TransAmerican Natural Gas Corporation, a Texas
corporation.
"Permits" means authorizations, approvals, orders, licenses,
certificates and permits of and from any regulatory or governmental officials,
bodies and tribunals.
"Permitted Liens" or "Permitted TARC 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 any of the TARC Entities in accordance with GAAP; (b) statutory Liens
of landlords, carriers, warehousemen, mechanics, materialmen, repairment,
mineral interest owners,
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<PAGE> 11
or other like Liens arising by operation of law in the ordinary course of
business provided that (i) the underlying obligations are not overdue for a
period of more than 60 days, or (ii) such Liens are being contested in god faith
and by appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of any of the TARC Entities in accordance with GAAP; (c)
deposits of cash or Cash Equivalents to secure (i) the performance of bids,
trade contracts (other than borrowed money), leases, statutory obligations,
surety 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 issued to secure such performance or other obligations) in an
aggregate amount outstanding at any one time not in excess of $5,000,000 or (ii)
appeal or supersedeas bonds (or to secure reimbursement obligations or letters
of credit in support of such bonds); (d) easements, servitudes, 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 any of the
TARC Entities) or materially interfere with the ordinary conduct of the business
of any of the TARC Entities including, without limitation, any easement or
servitude granted in connection with the Port Authority Financing; (e) Liens
arising by operation of law in connection with judgements, only to the extent,
for an amount and for a period not resulting in an Event of Default with respect
thereto; (f) Liens securing debt or other obligations not in excess of
$3,000,000; (g) pledges or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance, other types of
social security legislation, property insurance and liability insurance; (h)
Liens on Equipment, Receivables and Inventory (as each such term is defined in
the TEC Indenture); (i) Liens on the assets of any entity existing at the time
such assets are acquired by any of the TARC Entities, 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
any of the TARC Entities and (ii) do not extend to any other assets of any of
the TARC Entities; (j) Liens (including extensions and renewals thereof) on real
or personal property, acquired after the Closing Date ("New TARC 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 improvement or
construction) of the item of New TARC Property, (ii) the principal amount of the
Debt secured by such Lien does not exceed 100% of such cost plus reasonable
financing fees and other associated reasonable out-of-pocket expenses (iii) any
such Lien shall not extend to or cover any property or assets other than such
item of New TARC Property and any improvements on such New TARC Property and
(iv) such Lien does not extend the assets or property which are part of the
fixed refinery assets which are part of the Capital Improvement Program; (k)
leases or subleases granted to others that do not materially interfere with the
ordinary course of business of any of the TARC Entities, taken as a whole; (l)
Liens on the assets of one of the TARC Entities in favor of another TARC Entity;
(m) Liens securing reimbursement obligations with respect to letters of credit
that encumber documents relating to such letters of credit and the products and
proceeds thereof; provided, that, such reimbursement obligations are not matured
for a period of over 60 days; (n) Liens in favor of customs and revenue
authorities arising as a matter
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<PAGE> 12
of law to secure payment of customs duties in connection with the importation of
goods; (o) Liens encumbering customary initial deposits and margin deposits
securing Swap Obligations or Permitted Hedging Transactions (as such terms are
defined in the TEC Indenture); (p) Liens on cash deposits to secure
reimbursement obligations with respect to letters of credit after the Delayed
Coking Unit (as such terms are defined in the TEC Indenture) is completed; (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
Lien (exclusive of the stock of the applicable Unrestricted Subsidiary) shall
not exceed the amount of allowed Unrestricted Non-Recourse Debt of TARC; (r)
Liens on the proceeds of any property subject to a Permitted TARC Lien or on
deposit accounts containing any such proceeds; (s) Liens on the proceeds of any
property that is not Collateral; (t) Liens imposed in connection with the Port
Authority Financing; provided, that such Liens, if not Permitted Liens, do not
extend to property other than the Port Facility Assets; (u) any extension,
renewal or replacement of the Liens created pursuant to any of clauses (a)
through (g), (i) through (t) or (w) provided that such Liens would have
otherwise been permitted under such clauses, and provided further that the Liens
permitted by this clause (u) do not secure any additional Debt or encumber any
additional property; (v) Liens of the trustee under indenture and related
collateral documents governing the terms of the Senior TARC Mortgage Notes and
the Senior TARC Discount Notes; (w) Liens in favor of TEC or its assignee under
the Security Documents (as defined in the TEC Indenture) and (x) Liens on tank
storage facilities in the vicinity of the TARC refinery acquired after the date
hereof.
"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.
"Port Authority Financing" means a financing transaction
involving the following elements: (a) the transfer of TARC's interest in all or
some of the following assets (together with the granting, at TARC's discretion,
of any easements or servitudes reasonably necessary to the ownership and
operation of such assets by the transferee) which are constructed or under
construction in or near TARC's refinery: (i) the Prospect Road tank farm and
other tanks; (ii) certain dock improvements; (iii) the dock vapor recovery
system; (iv) the coke handling system; (v) the refinery waste water treatment
facility and (vi) tankage for liquefied petroleum gas (the "Port Facility
Assets") to the Port of South Louisiana Commission or its affiliate (the
"Tax-Exempt Issuer") and a leaseback of the Port Facility Assets to TARC or one
of its Subsidiaries; (b) the issuance of tax-exempt bonds by the Tax-Exempt
Issuer; and (c) the loan proceeds from such bonds to TARC or one of its
Subsidiaries for the purpose of financing the completion of the Port Facility
Assets.
"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.
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"Public Equity Offering" means a public offering by the
Company of Capital Stock (or debt securities convertible into Capital Stock of
the Company) of the Company underwritten by a nationally recognized member of
the National Association of Securities Dealers pursuant to an effective
registration statement filed with the Securities and Exchange Commission
pursuant to the Securities Act.
"Purchaser" has the meaning specified in the preamble hereof.
"Real Estate" means the property in Norco, St. Charles Parish,
Louisiana, purchased by the Company from GATX pursuant to the Asset Purchase
Agreement consisting of the Terminal Acreage and the Wetlands Acreage.
"Record Date" means a Record Date specified in the Notes
whether or not such Record Date is a Business Day.
"Redemption Date" means, when used with respect to any Note to
be redeemed, the date fixed for such redemption pursuant to this Agreement.
"Redemption Price" when used with respect to any Note to be
redeemed, means the redemption price for such redemption pursuant to this
Agreement, which shall include, without duplication, in each case, accrued and
unpaid interest to the Redemption Date.
"S&P" means Standard & Poor's Ratings Service, a division of
McGraw-Hill, Inc., and its successors.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means all reports, schedules, forms,
statements and other documents filed by the Company and/or by TEC with the SEC
since January 1, 1996.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Security Agreement" means the Security Agreement between the
Company and Purchaser, substantially in the form attached as Exhibit B, as
amended from time to time in accordance with the terms hereof.
"Security Documents" means (i) the Security Agreement, (ii)
the Disbursement Agreement, (iii) the Mortgages, and (iv) each other agreement
relating to the pledge of assets to secure the Notes that may be entered into
after the Closing Date pursuant to the terms of this
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<PAGE> 14
Agreement.
"Solvent" means, with respect to any Person, that (i) the
aggregate present fair saleable value of such Person's assets is in excess of
the total amount of its probable liability on its existing debts as they become
absolute and matured, (ii) such Person has not incurred debts beyond its
foreseeable ability to pay such debts as they mature, and (iii) such Person has
capital adequate to conduct the business it is presently engaged in or is about
to engage in.
"Stated Maturity", when used with respect to the Notes, means
December 15, 2002.
"Subordinated Debt" shall have the meaning ascribed thereto in
the TEC Indenture and capitalized terms used therein not otherwise defined
herein shall have the meaning ascribed thereto in the TEC Indenture.
"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 (i) for the
purposes of Section 4.16 of the TEC Indenture, a joint venture an investment in
which would constitute a Permitted Investment under clause (ix) of the
definition thereof in the TEC Indenture or (ii) any Unrestricted Subsidiary of
such Person.
"Survey" means the survey of the Real Estate and also
depicting the Docks and the Tanks, prepared by BFM Corporation, dated July 30,
1997, September 12, 1997, September 14, 1997, September 16, 1997 and September
17, 1997, received by the Company in accordance with the Asset Purchase
Agreement.
"TARC" means the Company.
"TARC Entities" means the Company and its Subsidiaries.
"Tanks" means approximately 84 above ground storage tanks with
a shell capacity of approximately 5.5 million barrels located on the Real
Estate.
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"TEC" means TransAmerican Energy Corporation, a Delaware
corporation.
"TEC Indenture" means the Indenture dated as of June 13, 1997
between TEC and the TEC Indenture Trustee, pursuant to which TEC's 11.5% Senior
Secured Notes due 2002 and 13% Senior Secured Discount Notes due 2002 were
issued.
"TEC Indenture Trustee" means Firstar Bank of Minnesota, N.A.,
as Trustee under the TEC Indenture, and its successors and assigns in such
capacity.
"TEC Note" means that certain promissory note dated July 31,
1997 evidencing loans from TEC to the Company.
"Terminal Acreage" means approximately 240.8 acres within the
fence line of the GATX terminal facility between the Mississippi River and U.S.
Highway #61 and approximately 1.149 acres subject to a 50' L.C. Railroad right
of way.
"TNGC" means TransAmerican Natural Gas Corporation, a Texas
corporation, together with its successors and assigns.
"TransTexas" means TransTexas Gas Corporation, a Delaware
corporation.
"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 (as such term is defined in the
TEC Indenture); (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 of
the TEC Indenture 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. 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 described in Section 4.11 of the TEC Indenture
(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
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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 Agreement.
"Voting Stock" means, with respect to any corporation, Capital
Stock of such corporation having generally the right to vote in the election of
directors of such corporation.
"Wetlands Acreage" means approximately 463 acres of wetlands,
the majority of which wetlands are on the north side of U.S. Highway #61.
Section 1.02. Certain Terms. All accounting terms used in this
Agreement shall be applied on a consolidated basis, unless otherwise
specifically indicated herein. Any accounting terms not specifically defined
herein shall have the meanings customarily given them in accordance with GAAP.
Terms used herein that are defined in the Uniform Commercial Code as in effect
in the State of New York, unless defined herein, shall have the respective
meanings specified in that statute.
Section 1.03. Rules of Construction. Unless the context otherwise
requires: (a) a term has the meaning assigned to it and a capitalized term not
otherwise defined herein has the meaning given to such term in the TEC Indenture
unless the context requires otherwise; (b) an accounting term not otherwise
defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not
exclusive; (d) words in the singular include the plural, and words in the plural
include the singular; (e) provisions apply to successive events and
transactions; (f) "herein", "hereof" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision; and (g) references to Sections or Articles means reference to such
Section or Article in this Agreement, unless stated otherwise.
ARTICLE II
SALE AND PURCHASE OF NOTES
Section 2.01. Authorization of Notes.
(a) The Company has duly authorized the issue, sale and
delivery of the Notes in an aggregate principal amount of Thirty Six Million
Dollars ($36,000,000), to be dated the Closing Date, to bear interest from such
date on the unpaid principal amount thereof at a rate of thirteen percent (13%)
per annum, calculated on the basis of actual days elapsed in a 360 day year
assuming a 12-month year of 30-day months.
(b) The Company shall pay interest on December 15 and June 15
of each year, in arrears, commencing June 15, 1998 and on the Maturity Date, in
each case subject to Section 2.06.
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(c) If all or a portion of the principal amount of any Note,
interest payable thereon or any fees payable hereunder shall not be paid when
due whether at the stated maturity, by acceleration or otherwise, such overdue
amount shall bear interest at a rate per annum equal to the then applicable rate
on principal plus Two Percent (2%), in each case from the date of such
nonpayment until such amount is paid in full (as well as before judgment).
Section 2.02. Sale and Purchase of Notes. Subject to the applicable
terms and conditions set forth in this Agreement, on the Closing Date, the
Company shall issue and sell to Purchaser, and Purchaser shall purchase from the
Company, a Note in the principal amount of Thirty Six Million Dollars
($36,000,000) at a purchase price equal to One Hundred Percent (100%) of the
principal amount thereof.
Section 2.03. Closing; Funding.
(a) Subject to the satisfaction or waiver of the conditions to
closing set forth in Article V, the execution and delivery of this Agreement and
the Security Documents shall take place at the offices of Brown & Wood LLP, 56th
Floor, One World Trade Center, New York, New York 10048, on December 10, 1997,
or such other time and place as the parties shall agree (herein called the
"Closing Date").
(b) Subject to and in accordance with Section 2.02, and
subject to the satisfaction or waiver of the conditions to funding set forth in
Article V, on the Closing Date the Company shall deliver to Purchaser a Note or
Notes registered in the name of Purchaser or its nominee, duly executed and
dated the Closing Date, in the aggregate principal amount of the Notes purchased
by Purchaser hereunder, in such denomination as Purchaser may specify (not to
exceed the aggregate principal amount) by timely notice to the Company, but in
no event later than one Business Day prior to the Closing Date (or, in the
absence of such notice, one Note registered in its name in such aggregate
principal amount), against Purchaser's delivery to the Company of immediately
available funds to an account specified to Purchaser by the Company not later
than the Closing Date in the amount of the aggregate purchase price of the Notes
to be sold to Purchaser on the Closing Date.
Section 2.04. Payments. All payments by the Company hereunder of the
principal amount of the Notes, interest thereon, fees, expenses and other
amounts due hereunder shall be made in Dollars by wire transfer or other
immediately available funds, without deduction, set off or counterclaim, to each
Holder in accordance with the payment instructions on Appendix A attached hereto
(or in accordance with alternate payment instructions delivered by such Holder
to the Company at least ten Business Days but no more than twenty Business Days
prior to the relevant payment date), not later than 1:00 p.m. (New York City
time) on the date on which such payment shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day). Deposit by the Company into the Disbursement
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Account of any amount required to be paid hereunder shall constitute payment of
such amount hereunder.
Section 2.05. Fees. In addition to all other fees and other amounts
payable or paid by the Company pursuant to this Agreement, the Security
Documents or otherwise, but subject to the Interest Rate Limitation, on the
Closing Date, the Company shall pay to Purchaser, as a funding fee, an aggregate
amount equal to Three Hundred Sixty Thousand Dollars ($360,000).
Section 2.06. Interest Rate Limitation. Notwithstanding any provision
of this Agreement, the Notes or the Security Documents to the contrary, it is
the parties' intent that in no event shall the aggregate amount of all interest,
fees under Section 2.05, compounded interest, and default interest actually paid
by the Company exceed the amount of interest on principal computed (as set forth
below) at the highest rate of interest permitted by law which a court of
competent jurisdiction shall deem applicable hereto. If, under any circumstances
whatsoever, in fulfilling the provisions of this Agreement, the Notes or the
Security Documents, the Company actually pays an amount of interest, chargeable
on the total aggregate principal obligations of the Company under all Notes (as
said rate is calculated over a period of time that is the longer of (i) the time
from the date of this Agreement through the Maturity Date or (ii) the entire
period of time that any principal is outstanding on any of said Notes), which
amount of interest exceeds interest calculated at the maximum lawful interest
rate on said principal chargeable over said period of time, then such excess
interest actually paid by the Company shall be applied, first, to the pro rata
payment of principal outstanding on the Notes; second, after all principal is
repaid, to the payment of the Holders' out-of-pocket costs, expenses, and
professional fees which are owed by the Company to the Holders under this
Agreement or the Security Documents; and, third, after all principal, costs,
expenses, and professional fees owed by the Company to the Holders are repaid,
the excess (if any) shall be refunded to the Company.
ARTICLE III
PAYMENT AND REDEMPTION OF NOTES
Section 3.01. Maturity Date. The unpaid principal balance of each of
the Notes shall mature and shall be paid in full on the Maturity Date, together
with all interest accrued thereon to such date and all unpaid fees, expenses and
other amounts due and owing under the provisions of this Agreement, the Notes
and the Security Documents. All payments of the Notes shall be allocated pro
rata to each Holder and applied first to the amount of any unpaid fees, second
to any accrued and unpaid interest, and third to the outstanding principal
amount of the Notes until paid in full.
Section 3.02. Redemption.
(a) The Company may at its election, with the net proceeds of
any Public Equity
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Offering, at any time on or after the date the Notes are issued and before
December 15, 2000, redeem up to 35% of the aggregate principal amount of the
Notes in cash at a redemption price of 113% of the principal amount so redeemed,
together with accrued and unpaid interest, if any on such principal amount to
the Redemption Date.
(b) The Notes may be redeemed at the election of the Company,
as a whole or from time to time in part, at any time on and after December 15,
2000, to and including December 15, 2001 at 105% of the principal amount and
from and after December 15, 2001 to Maturity at 100% of the principal amount, in
each case together with accrued but unpaid interest on the principal amount
being redeemed to the date of such redemption, and unpaid fees and other amounts
owing pursuant to the Agreement, the Notes and the Security Documents, but
without penalty.
(c) The Company may, at its election, with the proceeds of any
Port Authority Financing, redeem all of the then outstanding Notes at a
redemption price of 108% of the principal amount so redeemed, together with
accrued but unpaid interest thereon to the date of such redemption and (ii) the
Company shall, at any time prior to 20 Business Days after the consummation of
any Port Authority Financing, if the Company has not elected to redeem all of
the outstanding Notes pursuant to clause (i) above, make an offer to purchase
$4,000,000 in principal amount of the Notes at a redemption price equal to 101%
of the principal amount, together with accrued but unpaid interest thereon to
the date of such redemption; provided, however, that the Company shall be
required to make such an offer to purchase only if the Company is requesting
therewith, pursuant to Section 11.14(c), a release or subordination of the Lien
created by the Mortgage and Security Documents on Dock No. 1 (designated as Dock
No. 2 in the Survey); provided, further, that the Company may make such offer to
purchase prior to, and may make such offer to purchase contingent upon, the
consummation of any Port Authority Financing.
(d) At least 10 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 each Holder whose Notes are to be redeemed. 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 conditions determined by the Company in its sole
discretion. Each notice for redemption shall identify the Notes to be redeemed
and shall state the following:
(i) the Redemption Date;
(ii) the Redemption Price, including the amount of accrued
and unpaid interest to be paid upon such redemption;
(iii) that Notes called for redemption (or, with respect to
an offer to purchase pursuant to Section 3.02(c)(ii),
Notes tendered in connection with such offer
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<PAGE> 20
to purchase) must be surrendered to the Company at the
address specified in such notice to collect the
Redemption Price;
(iv) that interest on Notes called for redemption (or, with
respect to an offer to purchase under Section
3.02(c)(ii), Notes tendered in connection with such
offer to purchase) ceases to accrue on and after the
Redemption Date and the only remaining right of the
Holders of such Notes is to receive payment of the
Redemption Price, including accrued and unpaid
interest, upon surrender to the Paying Agent of the
Notes called for redemption and to be redeemed (or,
with respect to an offer to purchase under Section
3.02(c)(ii), Notes tendered in connection with such
offer to purchase);
(v) if any Note is being redeemed in part, the portion of
the principal amount, equal to $1,000 or any integral
multiple thereof, of such Note that will not be
redeemed and that, after the Redemption Date, and
upon surrender of such Note, a new Note or Notes in
aggregate principal amount equal to the unredeemed
portion thereof will be issued;
(vi) if less than all the Notes are to be redeemed, the
identification of the particular Notes (or portion
thereof) to be redeemed, as well as the aggregate
principal amount of such Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding
after such partial redemption;
(vii) that the notice is being sent pursuant to this
Section 3.02(d) and pursuant to the redemption
provisions of Paragraph 5 of the Notes.
(e) Once notice of redemption is mailed in accordance
with Section 3.02(d) 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, Notes called for redemption (or, with respect to an offer
to purchase under Section 3.02(c)(ii), Notes tendered in connection with such
offer to purchase) become due and payable on the Redemption Date and at the
Redemption Price, including accrued and unpaid interest. Upon surrender to the
Company, such Notes called for redemption (or, with respect to an offer to
purchase under Section 3.02(c)(ii), Notes tendered in connection with such offer
to purchase) 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 through the date of redemption shall be payable to the Holder
of the redeemed Notes 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.
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(f) Upon compliance by the Company with the provisions of
this Section 3.02 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 Notes called for redemption (or, with
respect to an offer to purchase under Section 3.02(c)(ii), Notes tendered in
connection with such offer to purchase) will cease to accrue. On and after the
Redemption Date, regardless of whether such Notes are presented for payment.
Notwithstanding anything herein to the contrary, if any Note surrendered for
redemption in the manner provided in the Notes 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 2.01 and the Note.
(g) Upon surrender of a Note that is to be redeemed in part,
the Company shall execute and deliver to the Holder, without service charge, a
new Note or Notes equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.03. Repurchase of Notes Upon Change of Control.
(a) In the event that a Change of Control occurs, each
Holder of Notes shall have the right, at such Holder's option, to require the
Company to repurchase all or any part of such Holder's Notes (provided that the
principal amount of such Notes at maturity must be $1,000 or an integral
multiple thereof) on the date that is no later than 60 Business Days after the
occurrence of a Change of Control (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, to and including
the Change of Control Payment Date.
(b) Within ten (10) Business Days after each date upon which
the Company knows of the occurrence of a Change of Control, the Company shall so
notify each Holder, and within twenty (20) Business Days after the Company knows
of such occurrence, the Company shall make an irrevocable unconditional offer (a
"Change of Control Offer") to all Holders to purchase for cash all of the Notes
pursuant to Section 3.03(c) at the Change of Control Purchase Price.
(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. 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 Notes pursuant to the
Change of Control Offer. The notice, which shall govern the terms of the offer,
shall state:
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(i) that the Change of Control Offer is being made
pursuant to this Section 3.03 and that all Notes or portions thereof
tendered will be accepted for payment;
(ii) the Change of Control Purchase Price (including
the amount of accrued and unpaid interest), the Change of Control
Payment Date and the Final Change of Control Put Date (as defined
below);
(iii) that any Note, or portion thereof, not tendered
or accepted for payment will continue to accrue interest;
(iv) that 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;
(v) that Holders electing to have a Note or
portion thereof purchased pursuant to a Change of Control Offer will be
required to surrender the Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Note completed, to 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");
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Company 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 Notes the Holder is withdrawing and
a statement that such Holder is withdrawing his election to have such
principal amount of Notes purchased; and
(vii) a brief description of the events resulting in
such Change of Control.
(d) Any such Change of Control Offer shall comply with
all applicable provisions of Federal and state laws, including those regulating
tender offers, if applicable, and any provisions of this Agreement which
conflict with such laws shall be deemed to be superseded by the provisions of
such laws. On or before the Change of Control Payment Date, the Company shall
accept for payment Notes 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. The Company shall on the Change of Control Payment Date mail
to the Holders of Notes so accepted payment in an amount equal to the Change of
Control Purchase Price (together with accrued and unpaid interest). The Company
shall promptly cancel all Notes accepted thereby pursuant to the Change of
Control Offer and delivered to it, and authenticate and mail or deliver to the
Holders of Notes so accepted a new Note
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<PAGE> 23
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.
Section 3.04. Pro Rata Redemptions/Repurchases. If pursuant to this
Article III on account of any redemption or offer to repurchase, less than all
the Notes then outstanding are to be redeemed or repurchased, as the case may
be, the Notes shall be redeemed or repurchased, as the case may be, pro rata or
by lot amongst the Holders in such manner as complies with any applicable legal
requirements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties. The Company represents
and warrants to Purchaser as follows:
(a) The Company is a corporation duly incorporated, and
validly existing and in good standing under the laws of the State of Texas, with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the SEC Documents, and is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature or location of its properties (owned or
leased) or the conduct of its business requires such registration or
qualification, except where the failure to be so registered or qualified would
reasonably be expected to have a Material Adverse Effect.
(b) Each of the Company and its Subsidiaries have all
necessary material Permits to own or lease its properties and to conduct its
business as described in the SEC Documents, except as otherwise described
therein, and none of the Company or its subsidiaries has received any notice or
threat of proceedings relating to the revocation or modification of any such
Permits; each of the Company and its subsidiaries has fulfilled and performed in
all material respects all of its current obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse of
time, or both, would allow revocation or termination thereof or results in any
other material impairment of the rights of the holder of any such Permit,
subject, in each case, to such qualification as may be set forth in an SEC
Document; and each of the Company and its subsidiaries is in compliance with all
applicable laws, rules, regulations, orders and consents, except where the
failure to comply would reasonably be expected to have a Material Adverse
Effect.
(c) The Company has all requisite power and authority to enter
into this Agreement, the Notes and the Security Documents, to carry out the
provisions and conditions hereof and thereof, and to issue and deliver the Notes
to Purchaser as provided herein.
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(d) The execution and delivery and performance by the Company
of this Agreement, the Notes and the Security Documents, and the performance of
its obligations thereunder, have been duly authorized by the Company and, upon
execution and delivery by the Company (assuming the due authorization, execution
and delivery thereof by the other parties thereto), each of this Agreement, the
Notes and the Security Documents will constitute a valid and binding agreement
of the Company enforceable against the Company in accordance with its terms,
subject to (A) any applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws relating to or affecting creditors' rights and remedies
generally and (B) general principles of equity regardless of whether enforcement
is sought in a proceeding in equity or at law, and the Notes are entitled to the
benefits of the Agreement.
(e) The authorized Capital Stock of the Company consists of
100,000,000 shares of Common Stock, $.01 par value, of which 30,000,000 shares
are issued and outstanding as of the close of business on Closing Date, and all
of the issued and outstanding shares of Capital Stock of the Company are validly
issued, fully paid and nonassessable and are owned of record and beneficially by
TEC. The Parent owns 100% of the outstanding capital stock of TEC. As of the
Closing Date there are no securities of the Company outstanding that are
convertible into or exchangeable for any shares of Capital Stock of the Company,
nor are there outstanding any rights to subscribe for or purchase from the
Company, or any options for the purchase from the Company of, or any agreements
(contingent or otherwise) providing for the issuance by the Company of, any
shares of Capital Stock of the Company or any securities convertible into or
exchangeable for any such shares, in each case other than the outstanding
warrants to purchase common stock of the Company.
(f) The Company is not (i) an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and is not subject to
registration under such act, (ii) a "public utility holding" company under the
Public Utility Holding Company Act of 1935 and is not subject to regulation as a
public utility holding company under such act, (iii) subject to regulation under
the Federal Power Act or (iv) subject to regulation under any other federal or
state statute, rule or regulation restricting its ability to incur indebtedness
for borrowed money.
(g) The Company is not in violation of its charter or bylaws
or similar organizational documents or of any law, ordinance, administrative or
governmental rule or regulation applicable to it, or of any franchise, license,
permit, judgment or any decree of any court or governmental agency or body
having jurisdiction over it, or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease, bond, debenture, bank loan,
credit agreement or other agreement instrument or evidence of indebtedness to
which it is a party or by which it is or may be bound, or to which any of its
property or assets is subject, which violation or default would reasonably be
expected to have a Material Adverse Effect.
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<PAGE> 25
(h) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company, or to which
any of its property is subject, except as disclosed in the SEC Documents, or as
otherwise disclosed to Purchaser, that, if adversely determined, would
reasonably be expected to have a Material Adverse Effect.
(i) Since January 31, 1997, there has not been any change or
development with respect to the condition (financial or otherwise) or business,
properties, net worth, results of operations or prospects of the Company whether
or not arising in the ordinary course of business that would reasonably be
likely to have a Material Adverse Effect.
(j) Except as disclosed in any SEC Document or as otherwise
disclosed to Purchaser, there has not been any material change in the capital
stock or other equity, or material increase in the short-term debt or long-term
debt, of the Company or any development involving or which may reasonably be
expected to have a Material Adverse Effect.
(k) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transactions contemplated hereby, except such as will have been obtained at or
before Closing.
(l) Except as disclosed in any SEC Document, or as otherwise
disclosed to Purchaser, the Company nor any of its subsidiaries is involved in
any material labor dispute nor, to its knowledge, is any such dispute
threatened.
(m) The Company has filed all federal, state and local tax
returns that are or were required to be filed or has obtained extensions thereof
and has paid all taxes shown on such returns and all assessments received by it,
to the extent that the same have become due, except for such assessments which
the Company disputes in good faith and has adequately reserved for.
(n) The issuance and sale of the Notes, the execution and
delivery of this Agreement and the Security Documents and the consummation of
any other of the transactions herein or therein contemplated, and the
fulfillment of the terms hereof or thereof, will not conflict with, result in a
breach of, or constitute a default under, the terms of any material indenture or
other agreement or instrument to which the Company is a party or bound or any
law, order, statute, regulation, consent or memorandum of understanding
applicable to the Company of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company (which
default would have a Material Adverse Effect), or the charter or bylaws of the
Company.
(o) No part of the proceeds from the sale of the Notes will be
used, directly or indirectly, for the purpose of buying or carrying any margin
stock within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System of the United States (12 CFR 207), or
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<PAGE> 26
for the purpose of buying or carrying on trading in any securities under such
circumstances as to involve any of the Parent, the Company or of their
Subsidiaries in a violation of Regulation X of said Board (12 CFR 224) or to
involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). None of the Parent, the Company, any of their Subsidiaries or any
agent acting on behalf of the Parent, the Company or any of their Subsidiaries
has taken or will take any action which might cause this Agreement or the Notes
to violate Regulation G, Regulation X, Regulation T or any other regulation of
the Board of Governors of the Federal Reserve System or to violate the Exchange
Act, in each case as in effect now or as the same may hereafter be in effect. As
used in this Section, the term "purpose of buying or carrying" has the meaning
assigned thereto in the aforesaid Regulation G.
(p) As supplemented or modified as set forth on Schedule
4.01(p) hereto the representations and warranties of the Company set forth in
Section 4.18 of the Mortgage are true and correct in all respects.
(q) Each of Parent and the Company is, and immediately after
giving effect to the sale of the Notes, the Acquisition and the other
transactions and agreements contemplated by this Agreement, will be, Solvent.
(r) At the Closing Date, the chief executive office of the
Company is at the address set forth on the signature page hereof. At least 30
days prior to the relocation of such chief executive office, the Company shall
provide written notice to the Holders setting forth the new address of such
chief executive office.
(s) On and after the Closing Date, each of the Security
Documents creates, as security for the Notes, a valid and enforceable perfected
security interest in and Lien on all of the Collateral subject thereto, superior
to and prior to the rights of all third Persons and subject to no other Liens
other than Permitted Liens. No filings or recordings are required in order to
perfect the security interests created under any Security Document which shall
not have been made, or for which satisfactory arrangements have not been made,
upon or prior to the execution and delivery thereof.
(t) Assuming the accuracy of Purchaser's representations
contained in Section 11.04(b), the offer and sale of the Notes will be exempt
from the registration requirements of the Securities Act.
Section 4.02. Certificates. Any certificate signed by any officer of
the Company and delivered to the Holders or to counsel for the Holders pursuant
to the terms of this Agreement shall be deemed a representation and warranty by
the Company to each Holder as to the matters covered thereby.
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ARTICLE V
CONDITIONS TO CLOSING
Section 5.01. Conditions Precedent. Purchaser's obligation to execute
and deliver this Agreement and the Security Documents described below and to
purchase the Notes on the Closing Date shall be subject to the satisfaction, on
or before the Closing Date, of the following conditions:
(a) Transaction Documents. Purchaser shall have received,
except for the Note to be issued thereto, a counterpart of each of the
following, each of which shall be satisfactory to Purchaser in form and
substance in all respects:
(i) this Agreement, duly executed and delivered by
the Company;
(ii) each Note to be purchased by Purchaser, duly
executed by the Company;
(iii) the Security Agreement, duly executed by the
Company;
(iv) duly executed financing statements in proper
form for filing under the Uniform Commercial Code in all such
jurisdictions as Purchaser may deem necessary or desirable in order to
perfect and protect the Liens created by the Security Agreement
covering the Collateral described in the Security Agreement;
(v) one or more mortgages in the form of Exhibit D
attached hereto (as amended from time to time in accordance with their
terms, the "Mortgages"), duly executed by the Company and dated the
Closing Date, all in proper form for filing in the appropriate offices
within the State of Louisiana as Purchaser may deem necessary or
desirable in order to perfect and protect the Liens created by the
Mortgages, together with duly executed financing statements in proper
form for filing under the Uniform Commercial Code as in effect in the
State of Louisiana;
(vi) such consents, approvals and authorizations of,
and declarations, registrations and filings with, any governmental
entities, and such consents, waivers, amendments, estoppel letters,
subordination and nondisturbance agreements, and other agreements and
confirmations of bailees, lessors of real and personal Property owned
or used by the Company and other nongovernmental third parties, as
Purchaser may deem necessary or desirable in connection with the use,
occupancy or operation of the real Properties leased by the Company or
otherwise in order to protect the rights and interests of Purchaser in
the Collateral;
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(vii) the Disbursement Agreement, duly executed by
the Company and the Disbursement Agent; and
(viii) the Environmental Indemnity Agreement, duly
executed and delivered by Parent.
(b) Corporate Documents. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to Purchaser, and Purchaser shall have received all such
counterpart originals or certified or other copies of such documents as it may
request, including:
(i) certificates dated as of a recent date as to
the good standing and payment of franchise and similar taxes of the
Parent and the Company in each jurisdiction where any of such Persons
is incorporated or formed or is authorized to do business as a foreign
corporation (except when failure to maintain such authorization to do
business would not result in a Material Adverse Effect);
(ii) certified copies of the certificate or articles
of incorporation of the Parent and the Company, with all amendments
thereto;
(iii) certified copies of the by-laws of the Parent
and the Company, with all amendments thereto;
(iv) certified copies of Board Resolutions of the
Parent and the Company authorizing the execution, delivery and
performance of this Agreement, the Notes, the Environmental Indemnity
Agreement and the Security Documents to which Parent and/or the Company
is a party; and
(v) certificates as to the incumbency and
signatures of each of the officers of Parent and the Company who shall
execute this Agreement or any Note or Security Document on behalf of
such respective party.
(c) TEC Indenture. The Company shall have delivered to
Purchaser a certificate of an Officer thereof certifying that (i) attached
thereto is a complete, correct and accurate copy of the TEC Indenture, together
with all attachments, exhibits, annexes and schedules thereto; (ii) the TEC
Indenture in the form of such copy is in full force and effect as of the Closing
Date and no Default or Event of Default thereunder shall have occurred and then
be continuing; and (iii) there are no outstanding waivers, amendments,
modifications or supplements to the TEC Indenture that are not attached to, or
otherwise described in, such certificate.
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(d) Opinion of Counsel. Purchaser shall have received from
each of (i) Gardere & Wynne, L.L.P., and (ii) Campbell, McCranie, Sistrunk,
Angelino & Hardy, favorable legal opinions, dated the Closing Date and addressed
to Purchaser, in form and substance satisfactory to Purchaser.
(e) Solvency. On the Closing Date, Purchaser shall have
received from the chief financial officer or other qualified officer of each of
Parent and the Company respectively, that the Parent or the Company, as
applicable, and immediately after giving effect to the sale of the Note and the
other transactions contemplated by this Agreement, will be, Solvent.
(f) Appraisal. An appraisal reasonably acceptable to Purchaser
setting forth the value of the Collateral.
(g) Representations and Warranties True. The representations
and warranties contained in Article IV and elsewhere in this Agreement and the
representations and warranties contained in the Security Documents shall be true
on and as of the Closing Date with the same effect as if such representations
and warranties had been made on and as of the Closing Date. The Company shall
have performed all agreements on its part required to be performed under this
Agreement prior to the Closing Date; there shall exist on the Closing Date no
Default or Event of Default.
(h) Absence of Litigation, Orders. There shall not be pending
or threatened any action, suit, proceeding, governmental investigation or
arbitration against or affecting the Company or its Properties which seeks to
enjoin or restrain any of the transactions contemplated herein or hereby.
(i) Fees and Expenses. Purchaser shall have received all fees
due and payable in accordance with Section 2.05 hereof. The reasonable fees and
disbursements incurred by counsel for Purchaser, and the environmental
consultant of Purchaser in connection with the preparation of this Agreement and
the Security Documents and the transactions contemplated hereby and thereby
shall be paid in full by the Company or the Parent on the Closing Date.
ARTICLE VI
INFORMATION
Section 6.01. Information. The Company will furnish to the Holders, so
long as any of the Notes shall remain unpaid, in duplicate:
The Company shall deliver to the Holders, within 15 days after it files
the same with the
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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.
If the Company is no longer subject to the filing and reporting
requirements of the SEC, the Company shall deliver 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 such reporting requirements.
ARTICLE VII
INSPECTION OF PROPERTIES AND BOOKS
THIS SECTION INTENTIONALLY LEFT BLANK
ARTICLE VIII
COVENANTS
Section 8.01. Use of Proceeds. The Company shall use the net proceeds
derived from the sale of the Notes solely for repaying a portion of its
obligations under the TEC Note.
Section 8.02. Filing of Security Documents. The Company shall cause to
be filed with the proper government authorities all Security Documents as
contemplated by such documents promptly, and in no event later than three (3)
Business Days from the Closing Date.
Section 8.03. Further Assurances. The Company will from time to time
execute any and all further documents, financing statements, agreements,
mortgages, deeds of trust, and instruments, and take all further actions
(including filing Uniform Commercial Code financing statements), which may be
required under applicable law, or which the Holders may reasonably request, in
order to effectuate the transactions contemplated by this Agreement and in order
to grant, preserve, protect and perfect the validity and priority of the Liens
and security interests created by the Security Documents.
Section 8.04. Incorporation by Reference.
(a) Until all of the obligations of the Company with respect
to the Notes are paid in full, the Company shall perform, and shall cause each
of its Subsidiaries to perform, to the extent applicable thereto, each covenant
set forth at (i) Sections 4.3 through and including 4.6, 4.9 through
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and including 4.15 and 4.18 through and including 4.20 of the TEC Indenture and
(ii) Article V of the TEC Indenture as if fully set forth herein, and each such
covenant, together with each capitalized term used therein, is hereby
incorporated herein by reference thereto (such covenants and capitalized terms
are herein collectively referred to as the "TEC Indenture Covenants") provided,
however, that if any capitalized term used in the TEC Indenture Covenants is
defined herein, the definition herein shall control unless the context otherwise
requires.
(b) Upon the effective date of any waiver, amendment,
modification or supplement of any of the TEC Indenture Covenants effected
pursuant the terms and conditions of the TEC Indenture, each and every such
waiver, amendment, modification or supplement shall be effective to the TEC
Indenture Covenant applicable thereto without further action by the Company or
any Holder.
(c) In the event that for whatever reason the TEC Indenture
shall be terminated or is no longer in full force and effect, then each of the
TEC Indenture Covenants shall continue to be applicable hereto as incorporated
herein in the form and substance of each such TEC Indenture Covenant on the
Business Day immediately prior to the date of such termination or cessation, and
shall remain in full force and effect with respect hereto until waived, amended,
modified or supplemented in accordance with the terms hereof.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01. Events of Default; Remedies. If any of the following
events (herein called "Events of Default") shall have occurred and be continuing
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or by operation of law or otherwise):
(a) the Company shall default in the due and punctual payment
or prepayment of all or any part of the principal of any Note when and as the
same shall become due and payable, whether at stated maturity, by acceleration,
by notice of prepayment or otherwise;
(b) the Company shall default in the due and punctual payment
or prepayment of (i) any interest on any Note or (ii) any other amounts payable
hereunder or under any Security Document (other than those amounts referred to
in Section 9.01(a)), when and as such interest or other amounts shall become due
and payable, and such default shall continue for a period of five Business Days,
which period shall commence to run after written notice to the Company from the
Holders having at least 25% of the outstanding principal amount of all Notes
with respect to amounts covered in clause (ii);
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(c) the Company shall default in the performance or observance
of any of the covenants, agreements or conditions set forth in any of Sections
4.3, 4.11, 4.14, or 5.1 of the TEC Indenture, each as incorporated herein by
reference (such reference to incorporate any grace period applicable thereto
under the TEC Indenture) thereto pursuant to Section 8.04, and otherwise subject
to the provisions thereof;
(d) the Company shall default in the performance or observance
of any of the covenants, agreements or conditions contained in this Agreement or
otherwise incorporated herein by reference thereto, or any of the Security
Documents (other than those covenants referred to or described in Section
9.01(a), 9.01(b) and 9.01(c)), and such default shall continue for a period of
thirty (30) days, after written notice thereof to the Company from the Holders
having at least 25% of the outstanding principal amount of all Notes.
(e) the Company shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its Property, (ii) be
generally unable to pay its indebtedness as such indebtedness becomes due, (iii)
make a general assignment for the benefit of its creditors, (iv) commence a
voluntary case under the Bankruptcy Code, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vi) fail to
controvert in a timely or appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Bankruptcy Code,
(vii) admit in writing its inability to pay its debts generally as such debts
become due, (viii) take any action under the laws of its jurisdiction of
organization analogous to any of the foregoing, or (ix) take any requisite
action for the purpose of effecting any of the foregoing;
(f) a proceeding or case shall be commenced, without the
application or consent of the Company in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, dissolution, winding up of the
Company or composition or readjustment of the indebtedness of any of them, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the like of the
Company, or of all or any substantial part of the assets of any of them, or
(iii) similar relief in respect of the Company under any law providing for the
relief of debtors, and such proceeding or case shall continue undismissed, or
unstayed and in effect, for a period of 60 days; or an order for relief shall be
entered in an involuntary case under the Bankruptcy Code, against the Company,
or action under the laws of the jurisdiction of organization of any of the
Company analogous to any of the foregoing shall be taken with respect to any of
the Company and shall continue undismissed, or unstayed and in effect, for a
period of 60 days;
(g) final judgment for the payment of money shall be rendered
by a court of competent jurisdiction against the Company, and the Company shall
not discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, within twenty days from the date
of entry thereof and within said period of twenty days, or such longer
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period during which execution of such judgment shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal, and
such judgment together with all other such judgments shall exceed in the
aggregate One Hundred Thousand Dollars ($100,000) (excluding all or any portion
of such judgment or judgments covered by insurance maintained with one or more
financially sound insurers that are obligated to pay such portion; provided,
however, that the Company shall have provided an officer's certificate to the
Holders not later than three Business Days after the date the related judgment
is rendered certifying that the Company has filed, or expects to file promptly,
a claim or claims with such insurer or insurers and has no reason to believe
that such insurer or insurers will not pay the claims in respect thereof in
full);
(h) (i) any representation or warranty made by or on behalf of
the Company in this Agreement or the Security Documents, or in any financial
statement, certificate or other instrument or document now or hereafter
delivered pursuant to or in connection with any provision of this Agreement or
the Security Documents that repeats such representations or warranties, shall
prove to be breached in any material respect or false or incorrect in any
material respect on the date as of which made (provided, however, that with
respect to the representations made in Section 4.18 of the Mortgage, such
representation shall be deemed to include a qualification for information
previously provided in writing to the Purchaser) or (ii) any representation,
warranty or statement made by or on behalf of the Company in any financial
statement, certificate or other instrument or document now or hereafter
delivered pursuant to or in connection with any provision of this Agreement or
the Security Documents, shall prove to be false or incorrect in any material
respect or breached in any material respect on the date as of which made;
(i) any provision of any of this Agreement, the Notes or the
Security Documents shall, for any reason, not be or shall cease to be in full
force and effect, or not be, or be asserted in writing by the Company not to be,
valid, binding and enforceable against any Person purported to be bound by it,
if the failure of such provision to be in full force and effect or to be valid,
binding and enforceable could be reasonably likely to have a Material Adverse
Effect;
(j) any of the Security Documents shall for any reason cease
to be in full force and effect, or shall cease to give the Holders for their
ratable benefit the Liens, rights, powers and privileges purported to be created
thereby including but not limited to, a perfected security interest in, and Lien
on, all of the Collateral in accordance with the terms thereof, if such
cessation would reasonably be expected to have a Material Adverse Effect;
(k) any Event of Default shall have occurred and be continuing
under the TEC Indenture which has not been waived by the necessary parties
thereto;
then (i) upon the occurrence of any Event of Default described in subsection (e)
or (f), the unpaid principal amount of all Notes, together with the interest
accrued thereon and all unpaid fees,
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expenses and other amounts owing under the provisions of this Agreement, the
Notes and the Security Documents, shall automatically become immediately due and
payable, all without presentment, demand, notice, declaration, protest or other
requirements of any kind, all of which are hereby expressly waived, or (ii) upon
the occurrence and during the continuance of any other Event of Default, the
Holders of more than twenty-five percent (25%) in outstanding principal amount
of the Notes may, by written notice to the Company, declare the unpaid principal
amount of all Notes to be, and the same shall forthwith become, immediately due
and payable, together with the interest accrued thereon and all unpaid fees,
expenses and other amounts owing under the provisions of this Agreement, the
Notes and the Security Documents, all without presentment, demand, notice,
protest or other requirements of any kind, all of which are hereby expressly
waived.
Section 9.02. Remedies. If any Event of Default shall have occurred and
be continuing, the Holders having at least 25% of the outstanding principal
amount of all Notes may proceed to protect and enforce their rights, either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the exercise of any power granted in this Agreement, or in the Security
Documents, or in any out of court work out or restructuring, or in any
reorganization or liquidation case or proceeding that relates to or affects the
Company, the Parent or any Collateral, and such Holders may proceed to enforce
the performance of all obligations and payment of all sums due upon such Notes,
or under this Agreement or any Security Document, and such further amounts as
shall be sufficient to cover the reasonable costs and expenses of collection
(including all reasonable fees and disbursements of counsel, accountants,
appraisers, investment bankers, and all other professionals, experts, and
advisors of the Holders), or to enforce any other legal or equitable right of
the Holders.
Section 9.03. Remedies Cumulative. No remedy conferred herein or in the
Security Documents upon the Holders is intended to be exclusive of any other
remedy and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or otherwise.
Section 9.04. Remedies Not Waived. No course of dealing between Parent
or the Company and the Holders, and no delay or failure in exercising any rights
hereunder or under the Notes or the Security Documents in respect thereof, shall
operate as a waiver of any of the rights of the Holders.
ARTICLE X
THE NOTES
Section 10.01. Registration, Exchange, and Transfer of Notes. The
Company will keep at its principal executive office a register, in which,
subject to such reasonable regulations as it may prescribe, but at its expense
(other than transfer taxes, if any), the Company will provide for the
registration and transfer of Notes. Whenever any Note or Notes shall be
surrendered either at the
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principal executive office of the Company, or at the place of payment named in
the Note, for transfer or exchange, accompanied (if so required by the Company)
by a written instrument of transfer in form reasonably satisfactory to the
Company duly executed by the Holder thereof or by such Holder's attorney duly
authorized in writing, the Company will execute and deliver in exchange therefor
a new Note or Notes in such denominations as may be requested by such Holder, of
like tenor and in the same aggregate unpaid principal amount as the aggregate
unpaid principal amount of the Note or Notes so surrendered. Any Note issued in
exchange for any other Note or upon transfer thereof shall carry the rights to
unpaid interest, unpaid fees and other amounts owing pursuant to this Agreement,
the Notes and the Security Documents, and interest to accrue which were carried
by the Note so exchanged or transferred, and neither gain nor loss of interest
shall result from any such transfer or exchange. Any transfer tax or
governmental charge relating to such transaction shall be paid by the Holder
requesting the exchange. The Company and any of its agents may treat the Person
in whose name any Note is registered as the owner of such Note for the purpose
of receiving payment of the principal of, prepayment charge (if any) and
interest and other amounts on such Note and for all other purposes whatsoever,
whether or not such Note be overdue.
Section 10.02. Lost, Stolen, Damaged and Destroyed Notes. At the
request of any Holder, the Company will issue and deliver at its expense, in
replacement of any Note or Notes lost, stolen, damaged or destroyed, upon
surrender thereof, if mutilated, a new Note or Notes in the same aggregate
unpaid principal amount, and otherwise of the same tenor, as the Note or Notes
so lost, stolen, damaged or destroyed, duly executed by the Company. The Company
may condition the replacement of a Note or Notes reported by the Holder thereof
as lost, stolen, damaged or destroyed, upon the receipt from such Holder of an
indemnity or security reasonably satisfactory to the Company.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Amendment and Waiver. No amendment or waiver of any
provision of this Agreement or the Notes or any Security Document or any consent
to any departure by the Company therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Holders representing more
than fifty percent (50%) of the aggregate principal amount of the Notes then
outstanding. Without the specific prior written consent of the Holders
representing more that sixty-six Percent (66%) of the aggregate principal amount
of the Notes then outstanding, no such amendment, waiver or consent shall
release or subordinate any of the Liens created by the Security Documents. No
such amendment, waiver or consent which purports to (i) reduce the principal of,
or the rate of interest on, any Note, (ii) extend the time for payment of all or
any portion of the principal of or interest on any Note or (iii) amend, modify
or waive any provision of this Section 11.01 shall be effective with respect to
any Note unless the Holder of such Note has given its specific
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prior written consent thereto. Any such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. Neither any
failure nor any delay on the part of the Holders in exercising any right, power
or privilege hereunder or under the Notes or any of the Security Documents shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. Except as otherwise provided herein or in the Notes
or any Security Document, no notice to or demand on the Company in any case
shall entitle the Company to any other or further notice or demand in the same,
similar or other circumstances.
Section 11.02. Expenses and Taxes. The Company agrees, whether or not
the transactions hereby contemplated shall be consummated, to pay, indemnify and
save the Holders harmless against any and all liabilities for the payment of (i)
all reasonable out-of-pocket expenses arising in connection with the
preparation, negotiation, execution and delivery of this Agreement, the Notes,
the Security Documents and the other instruments and documents hereby and
thereby contemplated and the closing of the transactions contemplated hereby,
(ii) all such expenses incurred with respect to the enforcement of any provision
of any such agreement or instrument, (iii) all reasonable expenses reasonably
incurred in connection with the reproduction of such agreements and instruments
and all stamp and other similar taxes (together in each case with interest and
penalties, if any) which may be payable in respect of the execution and delivery
of such agreement or instruments; provided, however, that the Company shall not
be responsible for taxes arising out of any assignment or transfer of the Notes,
(iv) all reasonable fees, taxes and other charges incurred in connection with
the filing or recording of any Security Documents (at or subsequent to the
Closing Date) and in connection with any Lien, tax and judgment searches
(including searches undertaken subsequent to the Closing Date), including
appraisal, survey and other title costs, (v) the reasonable fees and
disbursements of any special or local counsel in connection with the preparation
of such agreements and instruments and the transactions hereby and thereby
contemplated, (vi) all reasonable expenses incurred by the Holders (including
all fees and disbursements of counsel, accountants, appraisers, investment
bankers, and all other professionals, experts, and advisors of the Holders) in
connection with any amendment or requested amendment of, or waiver or consent or
requested waiver or consent under or with respect to, this Agreement, the Notes
or any of the Security Documents, whether or not the same shall become effective
(including counsel fees and disbursements), (vii) all reasonable expenses
incurred by the Holders (including all fees and disbursements of counsel,
accountants, appraisers, investment bankers, and all other professionals,
experts, and advisors of the Holders) following the occurrence and during the
continuance of any Default or Event of Default or incident to the negotiation of
any workout, restructuring or similar arrangement relating to the Company or any
Collateral, including any reorganization or liquidation case or proceeding,
whether or not suit is commenced, and (viii) all other reasonable obligations,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of, or
in any other way arising out of or relating to, this Agreement, the Notes or the
Security Documents or any other documents
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contemplated by or referred to herein or therein or any action taken or omitted
to be taken by the Holders with respect to any of the foregoing; provided,
however, that the Holders shall not be entitled to the payment and
indemnification set forth in clause (viii) in connection with any action taken
or omitted to be taken by the Holders that is judicially determined by a court
of competent jurisdiction in a final judgment not subject to appeal to have
resulted from the bad faith, willful misconduct or gross negligence of the
Holders; provided, further, that the Company shall not be required to pay the
fees and expenses for more than one law firm with respect to expenses incurred
by the Holders having at least 25% of the outstanding principal amount of all
Notes as described in clauses (vi), (vii) or (viii) above. The obligations of
the Company under this Section 11.02 shall survive the payment or prepayment in
full or transfer of any Note, the enforcement of any provision hereof or
thereof, any such amendments, waivers or consents, any such Default or Event of
Default, and any such workout, restructuring or similar arrangement.
Section 11.03. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement or in any document, certificate or
statement delivered hereto or otherwise in connection herewith, shall (i)
survive the execution and delivery of this Agreement and the delivery of the
Notes to Purchaser and shall continue in effect as long as any one of the Notes
is outstanding and thereafter shall survive as provided in Sections 11.02 and
11.06, and (ii) be deemed to have been relied upon by the Holders, regardless of
any investigation made by the Holders or on its behalf.
Section 11.04. Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company, the Holders and their respective successors and assigns;
provided, however, that the Company shall not have the right to assign its
rights hereunder or any interest herein or to delegate any of its duties
hereunder without the prior written consent of the Holders.
(b) Purchaser represents that (i) it is either (x) an
"accredited investor" as such term in defined in Rule 501 (a) of Regulation D
promulgated under the Securities Act, or (y) not a U.S. Person as defined in
Rule 902 of Regulation S promulgated under the Securities Act, and (ii) it is
purchasing the Notes for its own account for investment and not with a view to a
public distribution thereof (within the meaning of the Securities Act and rules
and regulations promulgated thereunder). Each Note shall bear a restrictive
legend in substantially the following form:
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT.
(c) Subject to compliance with applicable Federal securities
laws and regulations and state "blue sky" laws and regulations, Purchaser may at
any time sell or assign to any Person all or any part of its rights in the Notes
and in the obligations of the Company and the obligations of Purchaser under
this Agreement, the Notes and the Security Documents (including the obligations
of Purchaser to purchase Notes), and each such assignee shall assume the rights
and obligations of Purchaser hereunder and thereunder, to the extent of such
assignment, pursuant to an instrument in writing executed by such assignee and
Purchaser. Execution and delivery of such an instrument shall be deemed to be a
representation by such assignee that the factual statements contained in Section
11.04(b) are true with respect to such assignee. Upon execution and delivery of
such an instrument, such assignee shall be a party to this Agreement and shall
have the rights and obligations of Purchaser (including it rights under this
Section 11.04(c)), to the extent of such assignment, and the assignor shall be
released from its obligations hereunder to a corresponding extent. Upon the
consummation of any assignment pursuant to this Section 11.04(c), the assignor
and the Company shall make appropriate arrangements so that, if required, new
Notes shall be issued to Purchaser and the assignee. Purchaser shall give the
Company prior written notice of the date that any such assignment shall become
effective, which date shall be no less than 10 days after the date such notice
is given.
Section 11.05. Notices. Except as otherwise provided herein, all
notices and service of process required, contemplated, or permitted hereunder or
with respect to the subject matter hereof shall be in writing, and shall
conclusively be deemed to have been validly served, given or delivered upon: (a)
completed transmission by facsimile or hand delivery during normal business
hours or; (b) the first Business Day after (i) deposit with an overnight courier
service or overnight mail delivery service (ii) completed transmission by
facsimile or hand delivery after normal business hours; or (c) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
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in the case of the Company, to:
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Telecopy No.: (281) 986-8820
in the case of Purchaser, to:
c/o Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: Vincent Lathsbury
Telecopy No.: (609) 282-2940
or at such other address or telecopy number or to the attention of such other
Person as any of such Persons shall have advised the other by notice to any
Holder at its registered address in the manner herein specified.
Section 11.06. Indemnification. In consideration of the execution and
delivery of this Agreement by Purchaser the Company hereby agrees to defend,
indemnify, exonerate and hold harmless the Holders and each of their officers,
directors, stockholders, affiliates, trustees, employees and agents, and each
other Person, if any, controlling the Holders or any of their Affiliates (herein
collectively called the "Indemnitees") from and against any and all actions,
causes of action, suits, losses, liabilities and damages, and reasonable
expenses in connection therewith, including reasonable counsel fees and
disbursements incurred in the investigation and defense of claims and actions
(herein collectively called the "Indemnified Liabilities"), incurred by the
Indemnitees or any of them as a result of, or arising out of or relating to:
(a) this Agreement, the Notes, the Security Documents, the
purchase of the Notes or the other transactions contemplated hereby or thereby,
or any action or failure to act by the Company with respect thereto (including
statements or omissions made, or information provided by the Company or its
Subsidiaries, officers, employees or agents); or
(b) any Environmental Matter, any Environmental Law or the
actual or alleged existence or release of any Material of Environmental Concern;
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except for any such Indemnified Liabilities that are finally judicially
determined to have resulted from the Indemnitee's gross negligence or wilful
misconduct. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The obligations of the
Company under this Section 11.06 shall be in addition to any liability that the
Company may otherwise have and shall survive the payment or prepayment in full
or transfer of any Note and the enforcement of any provision hereof or thereof.
Nothing in this Section 11.06 shall limit, negate or release, or in any way
obligate the Company to indemnify the Holders for any breach of any of the
Holders' obligations under this Agreement or any of the Security Documents.
Section 11.07. Public Announcements. The Company and the Holders agree
that they will not issue any press release or make any other public
announcement, statement or filing with regard to this Agreement, the Notes or
the other Security Documents or the transactions hereby or thereby contemplated
without the prior approval, in each case, of the other parties to this
Agreement, which approval shall not be withheld in any case where such press
release, public announcement, statement or filing is required by applicable law
(including applicable rules and regulations of the SEC).
Section 11.08. No Fiduciary Relationship. The relationship between the
Holders, on the one hand, and the Company, on the other hand, is solely that of
debtor and creditor, and the Holders shall not be deemed to have any fiduciary
or other special relationship with the Company or any of its Subsidiaries. No
provision of this Agreement, the Notes or any of the Security Documents shall be
construed to create a fiduciary duty on the part of the Holders in favor of the
Company, any of its Subsidiaries or Affiliates, or their respective directors,
officers, employees, agents, stockholders or creditors.
Section 11.09. Integration and Severability. This Agreement, the Notes
and the Security Documents embody the entire agreement and understanding between
the Holders and the Company, and supersedes all prior agreements and
understandings relating to the subject matter hereof. In case any one or more of
the provisions contained in this Agreement or in any instrument contemplated
hereby for such date, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein, and any other application
thereof, shall not in any way be affected or impaired thereby.
Section 11.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same instrument.
Section 11.11. Governing Law. The laws of the State of New York
(without regard to principles of conflict of laws that would cause the
application of the laws of any other jurisdiction)
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shall govern the construction, interpretation, and enforceability of this
Agreement and any dispute, case or controversy arising in or under or related to
or connected with this Agreement or the relationship between or among the
parties hereto, whether sounding in tort, contract, or other legal or equitable
relief.
SECTION 11.12. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND
VENUE.
(a) THE COMPANY CONSENTS AND AGREES TO THE JURISDICTION AND
VENUE OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK, AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH
RESPECT TO ANY ACTION OR PROCEEDING ARISING IN OR UNDER OR RELATED TO THIS
AGREEMENT INSTITUTED THEREIN, AND AGREES THAT ANY DISPUTE CONCERNING THE
RELATIONSHIP AMONG THE HOLDERS, ON THE ONE HAND, AND THE COMPANY, ON THE OTHER
HAND, OR THE CONDUCT OF ANY PARTY IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE
SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE EXCEPT AS OTHERWISE PROVIDED
IN SECTION 11.12(c).
(b) THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
HAND DELIVERY TO IT AT ITS ADDRESS SET FORTH ABOVE IN SECTION 11.05, OR, AT THE
OPTION OF THE HOLDERS, BY SERVICE UPON CT CORPORATION SYSTEM, 1633 BROADWAY, NEW
YORK, NY 10019, WHICH THE COMPANY IRREVOCABLY APPOINTS AS SUCH PERSON'S AGENT
FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF NEW YORK. IN
ADDITION, THE HOLDERS AGREE TO PROMPTLY FORWARD, BY FIRST CLASS MAIL, HAND
DELIVERY OR FACSIMILE ANY PROCESS SO SERVED UPON SAID AGENT TO THE COMPANY, AS
APPLICABLE, AT ITS ADDRESS SET FORTH ABOVE IN SECTION 11.05. THE COMPANY HEREBY
CONSENTS TO SERVICE OF PROCESS AS AFORESAID.
(c) NOTHING IN THIS SECTION 11.12 SHALL AFFECT THE RIGHT OF
THE HOLDERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE HOLDERS TO BRING ANY ACTION OR PROCEEDING AGAINST THE
COMPANY OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 11.13. MUTUAL WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF
THE COMPANY AND THE HOLDERS ACKNOWLEDGES THAT IT MAY HAVE A
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CONSTITUTIONAL RIGHT TO TRIAL BY JURY OF CERTAIN DISPUTES. HOWEVER, BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. EACH OF THE COMPANY AND THE HOLDERS HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF (I) ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH; OR (II) CLAIMS IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO, AND (III) ANY CLAIMS FOR DAMAGES, BREACH OF CONTRACT, SPECIFIC
PERFORMANCE, OR ANY EQUITABLE OR LEGAL RELIEF OF ANY KIND HEREUNDER OR
THEREUNDER, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH OF THE COMPANY AND THE HOLDERS
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
SECTION 11.14. RELEASE OF COLLATERAL; SUBORDINATION.
(a) Holders shall release all Liens created by the Mortgages
or Security Documents upon indefeasible payment in full of the Notes on any
Maturity Date or Redemption Date.
(b) Holders shall release or subordinate any Liens created by
the Mortgages or Security Documents to the extent such Liens are identified for
release or subordination in a consent obtained in accordance with Section 11.01.
(c) Holders shall release or subordinate the Lien created by
the Mortgages or Security Documents on Dock No. 1 (designated Dock No. 2 in the
Survey) upon the consummation of an offer to purchase (regardless of the
principal amount of Notes tendered in connection with such offer to purchase)
pursuant to clause (ii) of Section 3.02(c).
38
<PAGE> 43
(d) Holders shall, upon request by the Company, subordinate
the Lien created by the Mortgages or Security Documents to any Lien described in
and meeting the requirements of clauses (d), (k) or (t) of the definition of
"Permitted Liens" provided, however, that Holders shall not be required to
subordinate the Lien created by the Mortgages or Security Documents on Dock No.
1 (designated Dock No. 2 in the Survey), except pursuant to Section 11.14(c).
(e) Holders shall from time to time execute and deliver (at
the expense of the Company) any and all further documents and instruments and
take such further actions as the Company may reasonably request to effectuate
the transactions contemplated by this Section 11.14.
39
<PAGE> 44
IN WITNESS WHEREOF, the Company and Purchaser have executed this
Agreement by their duly authorized officers as of the date first written above.
TRANSAMERICAN REFINING CORPORATION
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
MERRILL LYNCH CORPORATE BOND FUND,
INC. - HIGH INCOME PORTFOLIO
By:
---------------------------------------
Title: Authorized Representative
<PAGE> 45
EXHIBIT A
[FORM OF SENIOR SECURED NOTE]
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 190,921
<SECURITIES> 17,705
<RECEIVABLES> 870
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 125,737
<PP&E> 939,780
<DEPRECIATION> 25,257
<TOTAL-ASSETS> 1,195,449
<CURRENT-LIABILITIES> 55,236
<BONDS> 970,932
0
0
<COMMON> 300
<OTHER-SE> 160,108
<TOTAL-LIABILITY-AND-EQUITY> 1,195,449
<SALES> 0
<TOTAL-REVENUES> 2,828
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 49,226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113,400
<INCOME-PRETAX> (17,097)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,097)
<DISCONTINUED> 0
<EXTRAORDINARY> (94,911)
<CHANGES> 0
<NET-INCOME> (112,008)
<EPS-PRIMARY> (3.73)
<EPS-DILUTED> (3.73)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 613
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,289
<PP&E> 555,816
<DEPRECIATION> 16,930
<TOTAL-ASSETS> 564,241
<CURRENT-LIABILITIES> 42,103
<BONDS> 412,319
0
0
<COMMON> 300
<OTHER-SE> 81,063
<TOTAL-LIABILITY-AND-EQUITY> 564,241
<SALES> 10,857
<TOTAL-REVENUES> 10,857
<CGS> 11,544
<TOTAL-COSTS> 11,544
<OTHER-EXPENSES> 65,852
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,503
<INCOME-PRETAX> 9,406
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,406
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,406
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.25
</TABLE>
