<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 13, 1997
TRANSAMERICAN ENERGY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
--------
(State or other jurisdiction of incorporation)
33-85930 76-0441642
-------- ----------
(Commission File Number) (I.R.S. Employer
Identification No.)
1300 North Sam Houston Parkway East, Suite 200
Houston, Texas 77032
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(281) 986-8822
--------------
(Registrant's telephone number, including area code)
================================================================================
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
TEC NOTES OFFERING. On June 13, 1997, TransAmerican Energy
Corporation ("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 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 the intercompany loans
described below. The TEC Notes Indenture contains certain restrictive
covenants, including, among others, limitations on incurring
additional debt, asset sales, dividends and transactions with
affiliates.
The TEC Senior Secured Notes bear interest at a rate of 11 1/2% per
annum payable semi-annually in cash in arrears on June 15 and
December 15 of each year, commencing December 15, 1997. Principal on
the TEC Senior Secured Discount Notes will accrete to 100% of the
face value thereof by June 15, 1999. Commencing December 15, 1999,
cash interest on the TEC Senior Secured Discount Notes will be
payable semi-annually in arrears on June 15 and December 15 of each
year at a rate of 13% per annum. The TEC Notes will mature on June
15, 2002. The TEC Notes are not redeemable prior to June 15, 2000,
except that the Company may redeem, at its option, prior to June 15,
2000, up to 35% of the original aggregate principal amount of the TEC
Senior Secured Notes and up to 35% of the accreted value of the TEC
Senior Secured Discount Notes, at the redemption prices set forth in
the indenture governing the TEC Notes (the "TEC Notes Indenture"),
plus accrued and unpaid interest, if any, to and including the date
of redemption, with the net proceeds of any equity offering. On or
after June 15, 2000, the Notes will be redeemable at the option of
TEC, in whole or in part, at the redemption prices set forth in the
TEC Notes Indenture, plus accrued and unpaid interest, if any, to and
including the date of redemption. TEC will be obligated, subject to
certain
2
<PAGE> 3
conditions, to make an offer to purchase TEC Notes with Excess Cash
(as defined) at a price equal to 105% of the principal amount of
accreted value thereof, as applicable, if such purchase occurs on or
prior to December 31, 1997, at a price equal to 108% of the principal
amount or accreted value thereof, as applicable, if such purchase
occurs during the period from January 1, 1998 through June 14, 2000,
and thereafter at the redemption prices set forth in the TEC Notes
Indenture in each case, together with accrued and unpaid interest, if
any, to and including the date of purchase.
INTERCOMPANY LOANS TO TRANSTEXAS AND TARC. With the proceeds of the
TEC Notes Offering, TEC made intercompany loans to TransTexas Gas
Corporation ("TTXG") in the principal amount of $450 million (the
"TransTexas Intercompany Loan") and to TransAmerican Refining
Corporation ("TARC") in the original amount of $676 million (the
"TARC Intercompany Loan"). The promissory note evidencing the
TransTexas Intercompany Loan (i) bears interest at a rate of 10 7/8%
per annum, payable semi-annually in cash in arrears and (ii) is
secured initially by a security interest in substantially all of the
assets of TransTexas including the TransTexas Disbursement Account
(described below), but excluding inventory, receivables and
equipment. The promissory note evidencing the TARC Intercompany Loan
(i) accretes principal at a rate of 16% per annum, compounded
semi-annually, until June 15, 1999 to a final accreted value of $920
million, and thereafter pays interest semi-annually in cash in
arrears on the accreted value thereof, at a rate of 16% per annum and
(ii) is secured initially by a security interest in substantially all
of TARC's assets including the Disbursement Account (described below)
but excluding inventory, receivables and equipment. Each Intercompany
Loan will mature on June 1, 2002. The Intercompany Loan agreements
contain certain restrictive covenants, including, among others,
limitations on incurring additional debt, asset sales, dividends and
transactions with affiliates. TARC used approximately $103 million of
the proceeds of the TARC Intercompany Loan to repay certain
indebtedness including senior secured notes of TARC that were issued
in March 1997 and debt owed to an affiliate, and to complete the TARC
Notes Tender Offer described below. Remaining proceeds will be used
for TARC's Capital Improvement Program and for general corporate
purposes.
Upon the occurrence of a Change of Control (as defined in the TEC
Notes Indenture), TEC will be required to make an offer to purchase
all of the outstanding TEC Notes at a price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest,
if any, or, in the case of any such offer to purchase TEC Senior
Secured Discount Notes prior to June 15, 1999, at a price equal to
101% of the accreted value thereof, in each case, to and including
the date of purchase. Pursuant to the terms of the Intercompany
Loans, TEC may require TARC and TransTexas to pay a pro rata share of
the purchase price paid by TEC.
TARC WARRANTS TENDER OFFER. On June 13, 1997, TEC completed a tender
offer for the outstanding common stock purchase warrants of TARC
("TARC Warrants") at a price of $4.50 per warrant. Pursuant to the
tender offer, TEC purchased 7,335,452 TARC Warrants for an aggregate
purchase price of
3
<PAGE> 4
approximately $33 million. TARC intends to enter into a merger with
one of its affiliates pursuant to which each remaining warrant would
become exercisable (at an exercise price of $.01) to receive $4.51 of
cash instead of one share of common stock of TARC.
TARC EQUITY CONTRIBUTION. TEC intends to make a capital contribution
to TARC in the amount of $226 million from the proceeds of the
TransTexas stock repurchase program (discussed below). The amount of
this capital contribution will be retained initially in the
Disbursement Account and contributed to TARC pursuant to the terms of
the Disbursement Agreement.
DIVIDEND TO TRANSAMERICAN. TEC paid a dividend to TransAmerican in
the amount of $23 million. A portion of the dividend was used to
repay the debt of an affiliate, which had been secured by a pledge of
3.7 million shares of TransTexas common stock. In connection with the
TEC Notes Offering, TransAmerican contributed the 3.7 million shares
of TransTexas common stock to TEC.
TEC PREFERRED STOCK REDEMPTION. On June 17, 1997, TEC redeemed all of
its outstanding preferred stock for an aggregate amount of $100,000,
plus accrued and unpaid dividends.
LOBO SALE. On May 29, 1997, TransTexas entered into and consummated a
stock purchase agreement with an unaffiliated buyer (the "Lobo Sale
Agreement"), with an effective date of March 1, 1997, to effect the
sale (the "Lobo Sale") of the stock of TTC, its subsidiary that owned
substantially all of TransTexas' Lobo Trend producing properties and
related pipeline transmission system for a sales price of
approximately $1.1 billion, subject to adjustments as provided for in
the Lobo Sale Agreement. Purchase price adjustments were made for,
among other things: the value of certain NGLs and stored
hydrocarbons; the value of gas in TTC's pipeline; prepaid expenses
relating to post-effective date operations; post-closing expenses
related to pre-closing operations; the value of oil and gas produced
and sold between the effective date of the Lobo Sale Agreement and
closing (approximately $44 million); property defects; and estimated
costs associated with liabilities discovered before closing. Purchase
price adjustments made at the closing of the Lobo Sale are subject to
a review, reconciliation and resolution process, which is expected to
be completed within 105 days following the closing. With proceeds
from the Lobo Sale, TransTexas repaid certain indebtedness and other
obligations, including production payments, in an aggregate amount of
approximately $84 million. The remaining net proceeds have been or
will be used for the repurchase or redemption of the Senior Secured
Notes, and for general corporate purposes.
TRANSTEXAS SENIOR SECURED NOTES TENDER OFFER. On June 13, 1997,
TransTexas completed a tender offer for its TransTexas Senior Secured
Notes for 111 1/2% of their principal amount (plus accrued and unpaid
interest). Approximately $785.4 million principal amount of Senior
Secured Notes were tendered and accepted by
4
<PAGE> 5
TransTexas. On June 30, 1997, TransTexas redeemed the remaining
Senior Secured Notes pursuant to the terms of the Senior Secured
Notes Indenture.
TRANSTEXAS SUBORDINATED NOTES EXCHANGE OFFER. On June 19, 1997,
TransTexas completed an exchange offer, pursuant to which it
exchanged approximately $115.8 million aggregate principal amount of
its 13 3/4% Senior Subordinated Notes due 2001 (the "TransTexas
Subordinated Exchange Notes") for all of its outstanding 13 1/4%
Senior Subordinated Notes due 2003 (the "TransTexas Subordinated
Notes"). The indenture governing the TransTexas Subordinated Exchange
Notes (the "Subordinated Notes Indenture") contains certain
restrictive covenants, including, among others, limitations on
incurring additional debt, asset sales, dividends and transactions
with affiliates.
As a result of the Lobo Sale, the Tender Offer and the Exchange
Offer, TransTexas expects to record a pretax gain of approximately
$600 million and a pretax extraordinary charge of approximately $120
million during the quarter ending July 31, 1997.
TRANSTEXAS STOCK REPURCHASE PROGRAM. TransTexas has implemented a
stock repurchase program pursuant to which it plans to repurchase
common stock from its public stockholders and from its affiliates,
including TEC and TARC. It is anticipated that TransTexas will
acquire four times the number of shares from its affiliated
stockholders that it acquires from its public stockholders. Shares
may be purchased through open market purchases, negotiated
transactions or tender offers, or a combination of the above. It is
anticipated that the price paid to affiliated stockholders will equal
the weighted average price paid to purchase shares from the public
stockholders. Approximately $400 million from the proceeds of the
TransTexas Intercompany Loan was deposited in a disbursement account
to fund the stock repurchase program. Funds from the disbursement
account may also be used to pay dividends on TransTexas common stock.
As of July 31, 1997, TransTexas had purchased approximately $49.6
million in value of common stock from the public.
TARC NOTES TENDER OFFER. 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 has
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 eliminate or modify certain of the
covenants and other provisions contained in the TARC Notes Indenture.
Approximately $423 million aggregate principal amount of TARC
Mortgage Notes and TARC Discount Notes were tendered and accepted by
TARC at a cost to TARC of approximately $437 million (including
accrued interest and premiums).
TARC CAPITAL IMPROVEMENT PROGRAM. In connection with the TEC Notes
Offering, the TARC Intercompany Loan and the TARC Notes Tender Offer,
TARC has
5
<PAGE> 6
adopted a revised capital improvement program designed to increase
the capacity and complexity of the refinery ("Capital Improvement
Program"). The most significant projects include: (i) conversion of
the visbreaker unit to a delayed coking unit to process vacuum tower
bottoms into lighter petroleum products, (ii) modernization and
upgrade of 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
hydro treating, 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. TARC
estimates that Phase I will be completed at a cost of $223 million,
will be tested and operational by September 30, 1998 and will 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. TARC estimates that Phase II will be completed at a
cost of $204 million and will be tested and operational by July 31,
1999. The proceeds received or to be received by TARC from the TARC
Intercompany Loan, the TransTexas stock repurchase program and the
equity contribution from TEC will include $427 million designated for
use in the Capital Improvement Program, which TARC believes is
adequate to fund the completion of the project. 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.
DISBURSEMENT AND COLLATERAL ACCOUNTS. Pursuant to a disbursement
agreement (the "Disbursement Agreement") among TARC, TEC, the TEC
Indenture Trustee, Firstar Bank of Minnesota, 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 was placed into
accounts in the name of TARC and TEC (together, the "Disbursement
Account") to be held and invested by the Disbursement Agent until
needed from time to time to fund the Capital Improvement Program and
TARC's operating expenses and working capital. Proceeds to TEC and
TARC of approximately $300 million from
6
<PAGE> 7
the TransTexas stock repurchase program will also be deposited in the
Disbursement Account.
The Disbursement Agent will make disbursements for the Capital
Improvement Program out of the 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 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 which 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 that TARC has
satisfactorily completed construction of the Delayed Coking Unit and
associated facilities, (ii) up to $19 million to pay interest on, and
to redeem, repurchase, defease or otherwise retire the remaining TARC
Notes and (iv) an initial disbursement of approximately $7 million.
In addition, interest income from the Disbursement Account may be
used for the Capital Improvement Program or disbursed to fund
administrative and other costs of TARC and TEC.
Pursuant to a disbursement agreement (the "TransTexas Disbursement
Agreement") among TransTexas, TEC, the TEC Indenture Trustee, and
Firstar Bank of Minnesota, N.A. as disbursement agent, approximately
$400 million of the proceeds of the TransTexas Intercompany Loan was
placed in an account (the "TransTexas Disbursement Account") to be
held and invested by the disbursement agent until disbursed. Funds in
the TransTexas Disbursement Account will be disbursed to TransTexas
as needed to fund the stock repurchase program. In addition,
TransTexas may at any time request disbursement of interest earned on
the funds in the TransTexas Disbursement Account.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements, pro forma financial information
and exhibits are filed as a part of this report:
(a) Financial Statements of Businesses Acquired:
Not applicable.
(b) Pro forma financial information:
7
<PAGE> 8
(1) Pro Forma Condensed Consolidated Balance Sheet dated April
30, 1997 (unaudited)
(2) Pro Forma Condensed Consolidated Statement of Operations
for the three months ended April 30, 1997 (unaudited) and
for the year ended January 31, 1997 (unaudited).
(c) Exhibits:
3.1 Certificate of Amendment dated June 5, 1997 to Certificate of
Incorporation of the Company.
3.2 Certificate of Amendment dated July 2, 1997 to Certificate of
Incorporation of the Company.
4.1 Second Supplemental Indenture dated June 13, 1997 among TARC, as
issuer, the Company, as guarantor, and First Union National
Bank, as trustee.
4.2 Indenture dated June 13, 1997 among the Company, as issuer, and
Firstar Bank of Minnesota, as trustee.
4.3 Security and Pledge Agreement dated June 13, 1997 by the Company
in favor of Firstar Bank of Minnesota, as trustee.
4.4 Registration Rights Agreement dated June 5, 1997.
4.5 Loan Agreement dated June 13, 1997 between TransTexas and the
Company.
4.6 Loan Agreement dated June 13, 1997 between TARC and the
Company.
4.7 Security and Pledge Agreement dated June 13, 1997 by TransTexas
in favor of the Company.
4.8 Security and Pledge Agreement dated June 13, 1997 by TARC in
favor of the Company.
4.9 Disbursement Agreement dated June 13, 1997 among TARC, the
Company, Firstar Bank of Minnesota, as disbursement agent and
trustee, and Baker & O'Brien, as construction supervisor.
4.10 Disbursement Agreement dated June 13, 1997 among TransTexas,
the Company and Firstar Bank of Minnesota, as disbursement agent
and trustee.
8
<PAGE> 9
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable.
9
<PAGE> 10
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
OF TRANSAMERICAN ENERGY CORPORATION
The following unaudited pro forma condensed consolidated financial
information of TransAmerican Energy Corporation (the "Company") as of and for
the three months ended April 30, 1997 and for the year ended January 31, 1997,
illustrates the effect of the sale of TransTexas Transmission Corporation
("Lobo Sale") and the transactions described in Item 5 of this Form 8-K (and
defined as the "Transactions") related to a private offering of debt securities
by the Company (the "TEC Notes Offering"). The unaudited pro forma condensed
consolidated balance sheet has been prepared assuming that the Lobo Sale, the
TEC Notes Offering and the Transactions were consummated on April 30, 1997. The
unaudited pro forma condensed consolidated statements of operations for the
three months ended April 30, 1997 and for the year ended January 31, 1997 have
been prepared assuming that the Lobo Sale, the TEC Notes Offering and the
Transactions were consummated on February 1, 1997 and 1996, respectively.
The unaudited pro forma adjustments and the resulting unaudited pro forma
condensed consolidated financial information are based on the assumptions noted
in the footnotes thereto. The unaudited pro forma condensed consolidated
financial information does not purport to represent what the Company's
financial position or results of operations would have been had the Lobo Sale,
the TEC Notes Offering and the Transactions actually occurred on the dates
indicated or the financial position or results of operations for any future
date or period.
The unaudited pro forma condensed consolidated financial information and
notes thereto should be read in conjunction with the Company's historical
financial statements and the notes thereto included in the Company's quarterly
report on Form 10-Q for the period ended April 30, 1997 and its annual report
on Form 10-K for the period ended January 31, 1997.
10
<PAGE> 11
TRANSAMERICAN ENERGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 12,997 $ 1,398,760 (a) $ 323,083
63,961 (b)
1,073,424 (c)
(2,226,059)(d)
Cash restricted for interest - TransTexas.............. 46,000 (46,000)(a) --
Debt proceeds held in collateral account - TARC........ 14,037 -- 14,037
Accounts receivable.................................... 30,327 -- 30,327
Receivable from affiliates............................. 63,961 (63,961)(b) --
Inventories............................................ 15,164 -- 15,164
Other current assets................................... 14,197 -- 14,197
---------- ------------ ----------
Total current assets........................... 196,683 200,125 396,808
Net property and equipment................................ 1,476,902 (450,592)(c) 1,026,310
Disbursement accounts..................................... -- 479,795 (d) 479,795
Other assets, net......................................... 42,102 56,500 (d) 66,404
(32,198)(e)
Deferred tax asset........................................ -- 21,987 (h) 21,987
---------- ------------ ----------
$1,715,687 $ 275,617 $1,991,304
========== ============ ==========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt................... $ 8,406 $ -- $ 8,406
Revolving credit agreement............................. 8,386 -- 8,386
Accounts payable....................................... 77,451 -- 77,451
Payable to affiliate................................... 1,972 (1,972)(d) --
Accrued liabilities.................................... 116,986 (13,879)(d) 64,511
(38,596)(d)
Notes payable.......................................... 36,000 (36,000)(d) --
---------- ------------ ----------
Total current liabilities...................... 249,201 (90,447) 158,754
Due to affiliates......................................... 14,292 (3,398)(d) 85,894
205,000 (g)
(130,000)(i)
Notes payable to affiliate................................ 60,630 (60,630)(d) --
Production payments, less current portion................. 25,362 (7,212)(d) 18,150
Long-term debt, less current maturities................... 1,297,048 475,000 (a) 1,496,785
877,760 (a)
(800,000)(d)
(364,452)(d)
11,429 (f)
Deferred revenue.......................................... 46,176 (46,176)(d) --
Deferred income taxes..................................... 35,542 (57,529)(g) --
21,987 (h)
Other liabilities......................................... 8,934 (1,309)(d) 7,625
Redeemable preferred stock, $0.01 par value, 10,000 shares
authorized; Series A - 1,000 shares issued
and outstanding........................................ 96 (96)(d) --
Stockholder's equity (deficit):
Common stock, $0.01 par value, 100,000 shares
authorized; 9,000 shares issued and outstanding...... -- -- --
Additional paid-in capital............................. 158,535 (4)(d) 254,961
(33,570)(d)
130,000 (i)
Accumulated deficit.................................... (180,129) 149,264 (j) (30,865)
---------- ------------ ----------
Total stockholder's equity (deficit)................. (21,594) 245,690 224,096
---------- ------------ ----------
$1,715,687 $ 275,617 $1,991,304
========== ============ ==========
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
11
<PAGE> 12
TRANSAMERICAN ENERGY CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) To record the proceeds from the TEC Notes Offering and release of the
restricted cash originally required by the TransTexas Senior Secured Notes
Indenture.
<TABLE>
<S> <C>
TEC Senior Secured Notes.................... $ 475,000
TEC Senior Secured Discount Notes........... 877,760
Release of restricted cash.................. 46,000
------------
$ 1,398,760
============
</TABLE>
(b) To record the collection of amounts due from affiliates.
(c) To record the Lobo Sale for a purchase price of $1,073.4 million.
<TABLE>
<S> <C>
Cash proceeds............................... $ 1,073,424
Carrying value of stock sold................ (450,592)
------------
Pretax gain on Lobo Sale................ $ 622,832 (j)
============
</TABLE>
Purchase price adjustments were made for, among other things: the value of
certain NGLs and stored hydrocarbons; the value of gas in TTC's pipeline;
prepaid expenses relating to post-effective date operations; post-closing
expenses related to pre-closing operations; the value of oil and gas
produced and sold between the effective date of the Lobo Sale and the
closing (approximately $44 million); property defects; and estimated costs
associated with liabilities incurred before closing. Purchase price
adjustments made at the closing of the Lobo Sale are subject to a review,
reconciliation and resolution process, which is expected to be completed
within 105 days following the closing.
(d) To record the application of a portion of the proceeds from (a) through
(c).
<TABLE>
<S> <C>
Repurchase of TransTexas Senior Secured Notes................ $ 800,000
Premium of 11.5% for TransTexas Senior Secured Notes......... 92,000(j)
Repurchase of 96% of TARC Notes.............................. 364,452
Premium of 12% for 96% of TARC Notes......................... 43,734(j)
Lobo Sale production repayment............................... 43,806(j)
Repayment of TransTexas volumetric production payments
(deferred revenue), dollar-denominated production
payments and other debt.................................. 68,576
Payment of TARC notes payable................................ 36,000
Payment of accrued interest.................................. 38,596
Payment of TARC notes payable to affiliates ($60,630) and
due to affiliates ($5,370)............................... 66,000
Debt issuance fees........................................... 56,500
TEC Preferred Stock Redemption............................... 100
TransTexas Stock Repurchase Program.......................... 79,930(j)
Disbursement accounts ($253,795-- TARC, $226,000-- TEC)...... 479,795
Purchase of TARC Warrants.................................... 33,570
Dividend to TransAmerican.................................... 23,000(j)
----------
$2,226,059
==========
</TABLE>
Pending completion of the TransTexas Stock Repurchase Program, up to $400
million of proceeds from the TEC Notes Offering and the Transactions will
be held by TransTexas in a restricted cash account.
12
<PAGE> 13
Such proceeds will be disbursed from such account (i) for purposes of the
TransTexas Stock Repurchase Program or (ii) upon completion of Phase II of
the Capital Improvement Program for general corporate purposes.
Approximately $16 million was used to pay accrued interest, accretion of
principal and premium on such accretion on the TARC Notes tendered in the
TARC Notes Tender Offer for the period from May 1, 1997 through June 13,
1997.
In addition to the above, proceeds of approximately $11 million was used
to pay accrued interest on the TransTexas Senior Secured Notes for the
period from May 1, 1997 through June 13, 1997.
During the months of April and May 1997, TransTexas obtained additional
financing in the aggregate amount of approximately $49.5 million, of which
approximately $29.2 million remained outstanding at June 30, 1997.
(e) To write off TransTexas and TARC unamortized debt issuance costs. See (j).
(f) To record the premium attributable to the TransTexas Subordinated Notes
Exchange Offer. See (j).
(g) To record the income tax effects of the Lobo Sale and of expenses related
to the TransTexas Senior Secured Notes Tender Offer.
<TABLE>
<S> <C>
Payable to TransAmerican pursuant to the Tax Allocation
Agreement............................................. $ 205,000
Deferred income taxes..................................... (57,529)
---------
$ 147,471 (j)
=========
</TABLE>
(h) To reclassify deferred tax assets.
(i) To record the assumption of $130 million of estimated tax liability by
TransAmerican in accordance with the Tax Allocation Agreement.
(j) To record the effects on retained earnings of pro forma adjustments (a)
through (i).
<TABLE>
<S> <C>
Pretax gain on Lobo Sale.................................... $ 622,832
Premium of 11.5% for TransTexas Senior Secured Notes........ (92,000)(1)
Lobo Sale production repayment.............................. (43,806)
Premium attributable to the TransTexas Subordinated Notes
Exchange Offer.......................................... (11,429)(1)
Unamortized debt issuance costs............................. (32,198)(1)
Federal income taxes........................................ (147,471)
Premium of 12% for the TARC Notes repurchased............... (43,734)(1)
Dividend to TransAmerican................................... (23,000)
TransTexas Stock Repurchase Program......................... (79,930)
---------
$ 149,264
=========
</TABLE>
--------------
(1) These amounts and the related income tax effects will be recorded as
an extraordinary charge to income in the period that the related debt
is extinguished.
13
<PAGE> 14
TRANSAMERICAN ENERGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
----------- ----------- ----------
<S> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids......... $ 72,649 $ (36,862)(a) $ 35,787
Transportation.................................. 9,291 (9,291)(a) --
Other........................................... 100 -- 100 (f)
----------- ----------- ----------
Total revenues............................. 82,040 (46,153) 35,887
----------- ----------- ----------
Costs and expenses:
Operating....................................... 35,437 (21,936)(a) 13,501
Depreciation, depletion and amortization........ 35,268 (14,408)(a) 20,860
General and administrative...................... 17,852 (7,688)(a) 10,789
625 (d)
Taxes other than income taxes................... 6,118 (2,450)(a) 3,668
----------- ----------- ----------
Total costs and expenses................... 94,675 (45,857) 48,818 (f)
----------- ----------- ----------
Operating loss............................. (12,635) (296) (12,931)
----------- ----------- ----------
Other income (expense):
Interest income................................. 1,821 -- 1,821
Interest expense, net........................... (28,654) (3,039)(b) (31,693)
Other, net...................................... 39 -- 39
----------- ----------- ----------
Total other income (expense)............... (26,794) (3,039) (29,833)
----------- ----------- ----------
Loss before income taxes................... (39,429) (3,335) (42,764)
Income tax expense (benefit)......................... (7,828) 3,272 (c) (4,556)
----------- ----------- ----------
Net loss before preferred stock dividend... $ (31,601) $ (6,607) $ (38,208)
=========== =========== ==========
Series A preferred stock dividend.................... $ 19 $ (19)(e) $ --
=========== =========== ==========
Net loss available for common stockholder............ $ (31,620) $ (6,588) $ (38,208)
=========== =========== ==========
Net loss per share................................... $ (3,513) $ (4,245)
=========== ==========
Weighted average number of common
shares outstanding.............................. 9,000 9,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
14
<PAGE> 15
TRANSAMERICAN ENERGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
----------- ----------- ----------
<S> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids......... $ 360,740 $ (173,761)(a) $ 186,979
Transportation.................................. 34,423 (34,423)(a) --
Product sales................................... 10,857 -- 10,857
Gains on the sale of assets..................... 7,856 -- 7,856
Other........................................... 297 -- 297 (f)
----------- ----------- ----------
Total revenues.............................. 414,173 (208,184) 205,989
----------- ----------- ----------
Costs and expenses:
Operating....................................... 154,313 (97,494)(a) 56,819
Depreciation, depletion and amortization........ 139,678 (78,932)(a) 60,746
General and administrative...................... 57,500 (2,000)(a) 58,000
2,500 (d)
Taxes other than income taxes................... 26,772 (12,818)(a) 13,954
Litigation settlements.......................... (96,000) -- (96,000)
----------- ----------- ----------
Total costs and expenses.................... 282,263 (188,744) 93,519 (f)
----------- ----------- ----------
Operating income............................ 131,910 (19,440) 112,470
----------- ----------- ----------
Other income (expense):
Interest income................................. 5,748 -- 5,748
Interest expense, net........................... (101,670) (35,123)(b) (136,793)
Other, net...................................... 42,980 -- 42,980
----------- ----------- ----------
Total other income (expense)................ (52,942) (35,123) (88,065)
----------- ----------- ----------
Income (loss) before income taxes........... 78,968 (54,563) 24,405
Income taxes......................................... 12,491 23,644 (c) 36,135
----------- ----------- ----------
Net income (loss) before preferred
stock dividend.............................. $ 66,477 $ ( 78,207) $ (11,730)
=========== =========== ==========
Series A preferred stock dividend.................... $ 19 $ (19)(e) $ --
=========== =========== ==========
Net income (loss) available for common stockholder... $ 66,458 $ (78,188) $ (11,730)
=========== =========== ==========
Net income (loss) per share.......................... $ 7,384 $ (1,303)
=========== ==========
Weighted average number of common
shares outstanding.............................. 9,000 9,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
15
<PAGE> 16
TRANSAMERICAN ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) To adjust revenues, including losses relating to risk management
activities, operating expenses, depreciation, depletion and amortization,
general and administrative and taxes other than income taxes as a result
of the Lobo Sale.
(b) To adjust interest expense as follows:
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
April 30, 1997 January 31, 1997
-------------- ----------------
<S> <C> <C>
Historical interest on TransTexas Senior Secured Notes...... $ (23,000) $ (92,000)
Historical interest on TransTexas other debt................ (634) (2,500)
Historical interest on TARC Notes repurchased............... (17,325) (62,999)
Historical interest on TransTexas Subordinated Notes........ (3,294) (1,646)
Historical interest on TARC intercompany debt............... (2,038) (2,237)
Historical interest on TARC notes payable................... (705) --
Interest on TransTexas Subordinated Exchange Notes.......... 3,981 15,925
Interest expense on TEC Senior Secured Notes................ 13,656 54,625
Interest expense on TEC Senior Secured Discount Notes (1)... 26,041 99,598
Interest expense on estimated federal income tax liability
payable to affiliate at an assumed rate of 9%............ 1,688 6,750
Amortization of historical debt issuance costs.............. (1,806) (5,461)
Amortization of estimated debt issuance costs............... 2,825 11,300
Reduction in capitalized interest........................... 3,650 13,768
---------- ----------
$ 3,039 $ 35,123
========== ==========
</TABLE>
--------------
(1) Based on actual debt outstanding at April 30, 1997 and January 31,
1997. Pro forma interest expense on the entire amount of Senior
Secured Discount Notes is approximately $28.5 million and $118.6
million at April 30, 1997 and January 31, 1997, respectively.
(c) To record income tax expense based on the combined pro forma income tax
expense of TransTexas and TARC in accordance with the Tax Allocation
Agreement.
(d) To record the fee for advisory services and other benefits to be paid
annually to TransAmerican pursuant to the Services Agreement.
(e) To eliminate the dividend on the TEC Preferred Stock which was redeemed.
(f) Does not include revenues and related expenses attributable to the
Agreement for Services between TransTexas and Conoco Inc.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRANSAMERICAN ENERGY CORPORATION
By /s/ ED DONAHUE
------------------------------------
Name: Ed Donahue
Title: Vice President and Chief
Financial Officer
Dated: August 15, 1997
17
<PAGE> 18
EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
3.1 Certificate of Amendment dated June 5, 1997 to Certificate of
Incorporation of the Company.
3.2 Certificate of Amendment dated July 2, 1997 to Certificate of
Incorporation of the Company.
4.1 Second Supplemental Indenture dated June 13, 1997 among TARC,
as issuer, the Company, as guarantor, and First Union
National Bank, as trustee.
4.2 Indenture dated June 13, 1997 among the Company, as issuer,
and Firstar Bank of Minnesota, as trustee.
4.3 Security and Pledge Agreement dated June 13, 1997 by the
Company in favor of Firstar Bank of Minnesota, as trustee.
4.4 Registration Rights Agreement dated June 5, 1997.
4.5 Loan Agreement dated June 13, 1997 between TransTexas and the
Company.
4.6 Loan Agreement dated June 13, 1997 between TARC and the
Company.
4.7 Security and Pledge Agreement dated June 13, 1997 by
TransTexas in favor of the Company.
4.8 Security and Pledge Agreement dated June 13, 1997 by TARC in
favor of the Company.
4.9 Disbursement Agreement dated June 13, 1997 among TARC, the
Company, Firstar Bank of Minnesota, as disbursement agent and
trustee, and Baker & O'Brien, as construction supervisor.
4.10 Disbursement Agreement dated June 13, 1997 among TransTexas,
the Company and Firstar Bank of Minnesota, as disbursement
agent and trustee.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
TRANSAMERICAN ENERGY CORPORATION
Pursuant to the provisions of Section 242 of the General Corporation
Law of the State of Delaware, TransAmerican Energy Corporation, a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corporation, by unanimous
consent pursuant to Section 141(f) of the General Corporation Law of the State
of Delaware, adopted a resolution setting forth and declaring advisable the
following proposed amendments to the Corporation's Certificate of
Incorporation:
"Article 3 of the Corporation's Certificate of Incorporation be
amended to read in its entirety as follows:
3. The purposes of the corporation are limited to the
following:
(a) to acquire from TransAmerican Natural Gas Corporation
and from any other persons or entities and to own and
hold shares of the capital stock of TransTexas Gas
Corporation, a Delaware corporation ("TransTexas"),
and TransAmerican Refining Corporation, a Texas
corporation ("TARC"), and to sell and transfer such
shares if permitted by, and in compliance with, that
certain Indenture, dated as of February 15, 1995 (the
"Guaranteed Debt Indenture"), among TARC, the
Corporation, and First Fidelity Bank, National
Association, as Trustee (the "Trustee"), and the TEC
Pledge Agreement referred to in the Guaranteed Debt
Indenture;
(b) to execute, deliver, and perform a guarantee (the
"Guarantee") of the Guaranteed First Mortgage
Discount Notes due 2002 and the Guaranteed First
Mortgage Notes due 2002 of TARC (the "Guaranteed
Debt") issued pursuant to the Guaranteed Debt
Indenture;
(c) to execute, deliver, and perform any supplement to
the Guaranteed Debt Indenture and take any other
action contemplated pursuant to the terms of the
Guaranteed Debt Indenture, in each case provided the
same is approved by the holders of the Guaranteed
Debt pursuant to the terms of the Guaranteed Debt
Indenture to the extent, if any, that such approval
is required thereby;
<PAGE> 2
(d) to pledge shares of the capital stock of TransTexas
and TARC owned by the Corporation as security for the
Guaranteed Debt and performance of the Corporation's
obligations under the Guarantee;
(e) to acquire, own, and hold the Guaranteed Debt and 8%
Preferred Stock (as defined in the Guaranteed Debt
Indenture), subject to the limitations on such
acquisition and ownership set forth in the Guaranteed
Debt Indenture;
(f) to issue and sell debt securities, whether unsecured
or secured by any or all assets of the Corporation,
whether issued at a discount or face value, in an
aggregate principal amount which results in net
proceeds to the Corporation of up to $1.4 billion
(such securities, whether represented by one or more
promissory notes, collectively the "TEC Notes"), with
such other terms and conditions as approved by the
Corporation's Board of Directors, provided the
following conditions are satisfied:
(i) at least $500 million of the net proceeds
from the TEC Notes are concurrently advanced
to TARC, as a loan or otherwise; and
(ii) at least $300 million principal amount of the
Guaranteed Debt is concurrently purchased by
TARC pursuant to an offer by TARC to purchase
all of the Guaranteed Debt (the "TARC
Repurchase").
(g) to pledge any or all of the assets of the Corporation
as security for the TEC Notes;
(h) to loan or contribute, on such terms as shall be
approved by the Board of Directors of the
Corporation, all or any part of the net proceeds
received by the Corporation from sale of the TEC
Notes and any other funds of the Corporation to
TransTexas and/or TARC, provided TARC concurrently
completes the TARC Repurchase;
(i) to redeem the Corporation's Series A Preferred Stock
as permitted by the Corporation's Certificate of
Designation of Series A Preferred Stock, as amended
and as may be amended from time to time in accordance
with applicable law;
(j) to distribute to TransAmerican Natural Gas
Corporation, the parent corporation of the
Corporation, up to $40 million, provided TARC
concurrently completes the TARC Repurchase;
(k) to make a tender offer for up to all of the
outstanding common stock purchase warrants of TARC,
on such terms and at such price as shall be approved
by
2
<PAGE> 3
the Board of Directors of the Corporation, and,
provided TARC concurrently completes the TARC
Repurchase, to purchase such warrants pursuant to
such tender offer; and
(l) to do all other things and acts, to execute, deliver
and perform all other instruments, documents and
certificates and to pay all costs, fees and taxes as
may be necessary, proper, or advisable in order to
carry out and comply with the foregoing purposes."
"Article 11 of the Corporation's Certificate of Incorporation be
amended to read in its entirety as follows:
11. The Corporation shall not incur, become, or remain liable
for any indebtedness other than as permitted by Article 3 hereof."
"Paragraph D of the Certificate of Designation of Series A Preferred
Stock of the Corporation filed February 21, 1995 be amended to read in
its entirety as follows:
D. Redemption.
(1) Definitions. For purposes of this Paragraph D, the
following terms shall be defined as indicated:
(a) "Debt Purchase Date" means the date on which
TransAmerican Refining Corporation, a Texas corporation and a
wholly-owned subsidiary of the Corporation ("TARC"), purchases
(the "TARC Repurchase") not less than $300 million in
aggregate principal amount of its outstanding Guaranteed First
Mortgage Discount Notes due 2002 and its Guaranteed First
Mortgage Notes due 2002 pursuant to a tender offer by TARC for
all of such notes.
(b) "Mandatory Redemption date" means December 31, 2002.
(c) "Redemption Date" means the earlier of (i) the Mandatory
Redemption Date, or (ii) the date specified by the Corporation
which is any date on or after the Debt Purchase Date.
(d) "Redemption Price" means cash per share equal to $100.00
(as adjusted for any stock split, reverse stock split, stock
dividend or similar event with respect to the Series A Stock)
together with all unpaid dividends (if any) accrued to the
Redemption Date.
(2) Redemption. The Corporation may redeem or shall be
required to redeem, as applicable, the Series A Stock as follows (a
"Redemption"):
3
<PAGE> 4
(a) The Corporation, to the extent it may lawfully do so,
may, at its election, at any time on or after the Debt
Purchase Date, redeem the Series A Stock by paying the
Redemption Price. To the extent the Corporation makes such
election to redeem the Series A Stock, holders of Series A
Stock of record on the Redemption Date shall be entitled to
the Redemption Price.
(b) If any shares of Series A Preferred Stock are outstanding
on the Mandatory Redemption Date, the Corporation shall, to
the extent it may lawfully do so, redeem such shares of the
Series A Stock on the Mandatory Redemption Date by paying the
Redemption Price.
(c) Any Redemption shall be of all outstanding Series A Stock
to the extent the funds of the Corporation legally available
for redemption of shares of Series A Stock on the Redemption
Date are sufficient.
(3) Notice of Redemption. The Corporation shall notify
each holder of Series A Stock of the Redemption at least three days
prior to the Redemption Date. Such notice, which, at the
Corporation's election, may be conditioned on the TARC Repurchase
being consummated (a "Redemption Notice"), shall be sent to the
address last shown on the records of the Corporation for each holder
of Series A Stock or given by the holder to the Corporation for the
purpose of notice or, if no such address appears or is given, at the
place where the principal business office of the Corporation is
located.
(4) Redemption Procedure. On or after the Redemption
Date, each holder of Series A Stock shall surrender to the Corporation
the certificate or certificates representing such holder's shares of
Series A Stock at the principal business office of the Corporation or
such other place as the Corporation may designate in the Redemption
Notice.
(5) Partial Redemption. If the funds of the Corporation
legally available for redemption of shares of Series A Stock on the
Redemption Date are insufficient to redeem the total number of shares
of Series A Stock to be redeemed, those funds which are legally
available will be used to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed. At
any time thereafter, when additional funds of the Corporation are
legally available for the redemption of shares of Series A Stock, such
funds will immediately be used to redeem the balance of the shares
which the Corporation has become obligated to redeem on the Redemption
Date but which it has not redeemed. All shares of Series A Stock not
redeemed on the Redemption Date shall remain outstanding and entitled
to all rights, preferences, and privileges except those specifically
excluded in this Section D(5)."
SECOND: That thereafter, pursuant to resolution of the Board of
Directors, the proposed amendment was submitted to the common stockholders and
the preferred stockholders of the Corporation, and the necessary number of
shares of common stock and preferred stock as required
4
<PAGE> 5
by statute and by the Corporation's Certificate of Incorporation gave written
consent in accordance with Section 228 of the General Corporation Law of the
State of Delaware to approve and adopt the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That this Certificate of Amendment shall be effective upon
the filing hereof.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to its
Certificate of Incorporation to be executed this 4th day of June, 1997.
TRANSAMERICAN ENERGY CORPORATION
By: /s/ Ed Donahue
--------------------------------
Ed Donahue, Vice President
5
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
TRANSAMERICAN ENERGY CORPORATION
Pursuant to the provisions of Section 242 of the General Corporation
Law of the State of Delaware, TransAmerican Energy Corporation, a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corporation, by unanimous
consent pursuant to Section 141(f) of the General Corporation Law of the State
of Delaware, adopted a resolution setting forth and declaring advisable the
following proposed amendments to the Corporation's Certificate of
Incorporation:
"Article 3 of the Corporation's Certificate of Incorporation be
amended to read in its entirety as follows:
3. The purposes of the Corporation are to engage in any
lawful act or activity for which corporations may be organized under
the General Corporation Law of the State of Delaware."
"Articles 10, 11 and 12 of the Corporation's Certificate of
Incorporation be deleted in their entirety, and Articles 13 and 14 be
renumbered as Articles 10 and 11 accordingly."
"Renumbered Article 11 of the Corporation's Certificate of
Incorporation be amended to read in its entirety as follows:
11. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation in any manner now or hereafter provided herein or by
statute; and, except as provided with respect to the indemnification
or liability of directors, all rights, preferences and privileges
conferred by this Certificate of Incorporation upon stockholders,
directors, or any other person are granted subject to such right."
SECOND: That thereafter, pursuant to resolution of the Board of
Directors, the proposed amendment was submitted to the common stockholders and
the preferred stockholders of the Corporation, and the necessary number of
shares of common stock and preferred stock as required by statute and by the
Corporation's Certificate of Incorporation gave written consent in accordance
with Section 228 of the General Corporation Law of the State of Delaware to
approve and adopt the amendment.
<PAGE> 2
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That this Certificate of Amendment shall be effective upon
the filing hereof.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to its
Certificate of Incorporation to be executed this 25th day of June, 1997.
TRANSAMERICAN ENERGY CORPORATION
By: /s/ Ed Donahue
--------------------------
Ed Donahue, Vice President
2
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
TRANSAMERICAN REFINING CORPORATION,
Issuer
and
TRANSAMERICAN ENERGY CORPORATION,
Guarantor
and
FIRST UNION NATIONAL BANK, f/k/a FIRST FIDELITY BANK, NATIONAL ASSOCIATION,
Trustee
-------------------------
SECOND SUPPLEMENTAL INDENTURE
dated as of June 13, 1997
-------------------------
$340,000,000 Guaranteed First Mortgage Discount Notes due 2002
and
$100,000,000 Guaranteed First Mortgage Notes due 2002
- --------------------------------------------------------------------------------
<PAGE> 2
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of June 13, 1997 (the
"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 (the "Original Indenture"), as supplemented by the First
Supplemental Indenture dated as of February 24, 1997 among the Company, TEC and
the Trustee (the Original Indenture, as so supplemented, is referred to herein
as 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 9.2 of the Current Indenture provides, among other
things, that with the consent of the Holders of not less than a majority in
aggregate principal amount of then outstanding Securities or, with respect to
certain matters, 66-2/3% of the aggregate principal amount of Notes then
outstanding, the Obligors, when authorized by Board Resolutions, and the
Trustee may amend or supplement the Current Indenture or the Securities or
enter into an indenture supplemental thereto for the purposes of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Current Indenture or the Securities or of modifying in any manner the
rights of the Holders under the Current Indenture or the Securities; and
WHEREAS, the Company has offered to purchase for cash, upon the terms
and subject to the conditions set forth in an Offer to Purchase and Consent
Solicitation dated May 15, 1997, as supplemented and amended by that certain
Supplement to Offer to Purchase and Consent Solicitation dated May 30, 1997 and
that certain Second Supplement to Offer to Purchase and Consent Solicitation
dated June 6, 1997 (collectively, the "Offer to Purchase and Consent
Solicitation"), and in a Letter of Transmittal and Consent (the "Letter of
Transmittal and Consent" and, together with the Offer to Purchase and Consent
Solicitation, the "Offer") all of its Guaranteed First Mortgage Notes due 2002
and Guaranteed First Mortgage Discount Notes (collectively, the "Securities");
and
1
<PAGE> 3
WHEREAS, the Offer to Purchase and Consent Solicitation and Letter of
Transmittal and Consent also constitute a solicitation of consents from the
Holders of the Securities to certain amendments to the Current Indenture to
eliminate or modify certain of the covenants and other provisions contained in
the Current Indenture, as more particularly described in this Supplemental
Indenture (the "Proposed Amendments"); and
WHEREAS, the Holders of at least 66-2/3% of the aggregate principal
amount of Securities have consented to the Proposed Amendments pursuant to the
Offer; and
WHEREAS, the Boards of Directors of the Obligors have adopted
resolutions authorizing and approving the Proposed Amendments and the Company
and the Trustee are executing and delivering this Supplemental Indenture in
order to provide for such amendments;
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. New Definitions. The Current Indenture is hereby
amended, effective as of the Acceptance Date (as defined below), to add the
following definitions to Section 1.1 to read as follows:
"1997 Intercreditor Agreement" means an agreement between the Trustee
and the trustee under an indenture relating to indebtedness of TEC to
whom TEC collaterally assigns the New Note or any interest therein,
with such changes thereto, including without limitation changes to
reflect the circumstances of the transaction giving rise to the New
Note or such indebtedness of TEC, as do not have a material adverse
effect on the Notes.
"New Note" means a promissory note of the Company evidencing a loan
from TEC to the Company, the proceeds of which are used to finance the
purchase of the Notes pursuant to its Offer to Purchase and Consent
2
<PAGE> 4
Solicitation dated May 15, 1997, as amended or supplemented from time
to time, or for other purposes.
"Offer" means the offer to purchase the Notes made by the Company
pursuant to that certain Offer to Purchase and Consent Solicitation
dated May 15, 1997, as amended or supplemented from time to time, and
the accompanying Letter of Transmittal and Consent.
Section 1.02. Section 4.4 of the Current Indenture. Section 4.4 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.4 Construction.
[intentionally omitted]
Section 1.03. Section 4.5 of the Current Indenture. Section 4.5 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.5 Limitation on Restricted Payments.
[intentionally omitted]
Section 1.04. Section 4.7 of the Current Indenture. Section 4.7 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.7 Payment of Taxes and Other Claims.
Each Obligor shall, and shall cause each of its Subsidiaries
to, pay or discharge or cause to be paid or discharged, within 60 days
after the same shall become delinquent, (a) all taxes, assessments and
governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon such Obligor
or any of its Subsidiaries or any of their respective properties and
assets and (b) all lawful claims, whether for labor, materials,
supplies, services or anything else, which have become due and payable
and which by law have or may become a Lien upon the property and
assets of such Obligor or any of its Subsidiaries;
3
<PAGE> 5
provided, however, that an Obligor shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which
disputed amounts adequate reserves have been established in accordance
with GAAP.
Section 1.05. Section 4.9 of the Current Indenture. Section 4.9 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
4
<PAGE> 6
SECTION 4.9. Compliance Certificate; Notice of Default.
The Company and each Guarantor shall deliver to the Trustee
within 60 days after the end of its fiscal quarter 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 or such Guarantor, as the case may be, has kept, observed,
performed and fulfilled its obligations under this Indenture and
further stating, as to each such Officer signing such certificate,
whether or not such Officer knows of any failure by the Company, any
Guarantor or any Subsidiary of the Company or a Guarantor to comply
with any conditions or covenants in this Indenture and, if such
Officer does know of such a failure to comply, the certificate shall
describe such failure with particularity. The Officers' Certificate
shall also notify the Trustee should the relevant fiscal year end on
any date other than the current fiscal year end date and shall notify
the Trustee of any changes in the composition of the Board of
Directors of the Company, any Guarantor or any of their Subsidiaries
or of any amendment to the charter or bylaws of the Company, a
Guarantor or any of their Subsidiaries.
The Company and each Guarantor 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, any Guarantor or any Subsidiary of
the Company or a Guarantor was not in compliance with the provisions
set forth in Section 4.3, 4.16, 4.18 or 4.21 of this Indenture.
The Company and each Guarantor 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
5
<PAGE> 7
action the Company or such Guarantor 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 an Officers' Certificate specifying the Default or
Event of Default giving rise thereto from the Company or a Guarantor
or written notice specifying the occurrence of a Default or an Event
of Default from any of the Holders.
Section 1.06. Section 4.12 of the Current Indenture. Section 4.12 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.12. Limitation on Transactions with Related Persons.
[intentionally omitted]
Section 1.07. Section 4.13 of the Current Indenture. Section 4.13 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.13. Limitation on Incurrences of Additional Debt and
Issuances of Disqualified Capital Stock.
[intentionally omitted]
Section 1.08. Section 4.14 of the Current Indenture. Section 4.14 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.14. Limitations on Restricting Subsidiary Dividends.
[intentionally omitted]
Section 1.09. Section 4.15 of the Current Indenture. Section 4.15 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.15. Limitation on Liens.
[intentionally omitted]
6
<PAGE> 8
Section 1.10. Section 4.19 of the Current Indenture. Section 4.19 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.19. Restriction on Sale and Issuance of Subsidiary Stock.
[intentionally omitted]
Section 1.11. Section 4.20 of the Current Indenture. Section 4.20 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.20. Limitations on Line of Business.
[intentionally omitted]
Section 1.12. Section 4.26 of the Current Indenture. Paragraph (a)
of Section 4.26 of the Current Indenture is hereby amended, effective as of the
Acceptance Date, to read in its entirety as follows:
SECTION 4.26. Additional Equity Investments.
(a) TEC shall make an Equity Exchange Offer unless, after the
Issue Date and prior to December 31, 1997, (i) the Company has
received cash equity Investments aggregating at least $100,000,000 and
an equivalent amount has thereafter and prior to December 31, 1997
been expended by the Company on the expansion and modification of the
Company's refinery and the Company has delivered to the Trustee an
Officers' Certificate to that effect, or (ii) TEC has sold for cash at
least 10,000,000 shares of TransTexas common stock (subject to
adjustment upon the occurrence of certain events, including
subdivisions, combinations and certain reclassifications, affecting
TransTexas common stock) and, as soon as practicable thereafter, used
the Net Proceeds of such sale or sales to purchase 8% Preferred Stock
of the Company, and the Company has, immediately upon receipt thereof,
deposited such Net Proceeds in the Collateral Account.
Section 1.13. Section 4.27 of the Current Indenture. Section
7
<PAGE> 9
4.27 of the Current Indenture is hereby amended, effective as of the
Acceptance Date, to read in its entirety as follows:
SECTION 4.27. Revolving Credit Facility.
[intentionally omitted]
Section 1.14. Section 4.28 of the Current Indenture. Section 4.28 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.28. Registration of Pledged Shares.
[intentionally omitted]
Section 1.15. Section 4.29 of the Current Indenture. Section 4.29 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 4.29. Limitation on Sale/Leaseback Transactions.
[intentionally omitted]
Section 1.16. Section 5.1 of the Current Indenture. Section 5.1 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
SECTION 5.1 When Company May Merge, Etc.
(a) Neither the Company nor any Guarantor shall, in a single
transaction or through a series of related transactions, consolidate
with or merge with or into any other Person or, directly or
indirectly, sell, lease, assign, transfer or convey all or
substantially all of its assets (computed on a consolidated basis), to
another Person or group of Affiliated Persons, unless:
(1) either (a) the Company or such 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
8
<PAGE> 10
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,
and any supplements to any Security Documents as the Trustee
in its sole discretion may require, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company or such Guarantor, as the case may
be, under the Securities, any Guarantee, the Security
Documents and this Indenture; and
(2) [intentionally omitted]
(3) [intentionally omitted]
(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, that
such consolidation, merger, assignment or transfer will not
have any adverse effect on the validity, legality or
enforceability of the Notes and that all conditions precedent
herein provided relating to such transaction have been
satisfied.
(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 or a Guarantor, which properties and assets, if held by the
Company or a Guarantor instead of such Subsidiaries, would constitute
all or substantially all of the properties and assets of
9
<PAGE> 11
the Company or such Guarantor, as the case may be, on a consolidated
basis, shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company or such Guarantor, as the
case may be.
Section 1.17. Section 6.1 of the Current Indenture. Section 6.1 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:
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 Change of Control Purchase Price in
accordance with Article XI, the Offer Price in accordance with
Section 4.16, the Deficiency Purchase Price in accordance with
Section 4.21 or the Excess Cash Offer Price in accordance with
Section 4.24;
(c) default in the observance or performance of, or
breach of, any covenant, agreement or warranty of the Company
or a Guarantor contained in the Security Documents, the Notes
or this Indenture (other than a default in the performance of
any covenant, agreement or warranty which is specifically
dealt with elsewhere in this Section 6.1), and continuance of
such default or breach for a period of 30 days after there has
been given, by registered or certified mail, to the Company
and the Guarantors by the Trustee, or to the Company,
10
<PAGE> 12
the Guarantors and the Trustee by Holders of at least 25% in
aggregate principal amount of the outstanding Notes, a written
notice specifying such default or breach, requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder;
(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, a Guarantor or any of
their Subsidiaries with an aggregate principal amount in
excess of $50,000,000, or failure to pay such Debt at its
stated maturity, it being understood that a waiver by the
lenders of such debt of such default shall constitute a waiver
hereunder for the same period;
(e) a decree, judgment, or order by a court of
competent jurisdiction shall have been entered adjudging the
Company, a Guarantor or any of their Significant Subsidiaries
as bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization of the Company, a Guarantor or
any of their Significant 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, a Guarantor any of
their Significant 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, a Guarantor or any of their
Significant Subsidiaries shall institute proceedings to be
adjudicated a voluntary bankrupt,
11
<PAGE> 13
or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent
seeking reorganization 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, fails generally to pay
their debts as they become due, or takes any corporate action
in furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing;
(g) [intentionally omitted]
(h) [intentionally omitted]
(i) [intentionally omitted]
(j) [intentionally omitted]
(k) [intentionally omitted]
(l) [intentionally omitted]
Any Defaults under Sections 4.21, 4.24, 4.26 or 5.1 of this
Indenture shall be Events of Default without the notice specified in
clause (c) above and upon the passage of 10 days.
Section 1.18. Section 12.6 of the Current Indenture. Paragraph (b)
of Section 12.6 of the Current Indenture is hereby amended, effective as of the
Acceptance Date, to read in its entirety as follows:
SECTION 12.6 Release of Collateral.
(b) Shares of TransTexas common stock may be
12
<PAGE> 14
released from the security interest created by the Pledge Agreements
as follows:
(1) Up to 15,000,000 shares of pledged TransTexas
common stock (subject to adjustment upon the occurrence of
certain events, including subdivision, combinations and
reclassifications, affecting TransTexas common stock) owned by
the Company may be released from the security interest created
by the Company Pledge Agreement if (A) such shares are sold
for cash and the Net Proceeds are immediately deposited in the
Collateral Account or (B) if the Company issues and sells
Preferred Stock that is exchangeable for TransTexas common
stock and the Net Proceeds of such sale are deposited
concurrently in the Collateral Account, provided such Net
Proceeds are at least equal to the Market Value, as of the
date of such release, of the shares of TransTexas common stock
that are released. Any such shares sold by the Company shall
be sold at prices no less favorable to the Company than those
that could be obtained in arm's-length transactions with
unrelated persons.
(2) Up to 10,000,000 shares of pledged TransTexas
common stock (subject to adjustment upon the occurrence of
certain events, including subdivisions, combinations and
reclassifications, affecting TransTexas common stock) owned by
TEC may be released from the security interest created by the
TEC Pledge Agreement if (A) such shares are sold after the
Phase I Completion Date and the Phase I Completion Date
occurred by the Required Phase I Completion Date, (B) the 15
million shares of TransTexas common stock referred to in
paragraph (b)(1) above have been sold in accordance with the
Indenture or reserved for issuance upon exchange of the
Preferred Stock referred to in paragraph (b)(1)(B) above, (C)
such shares are sold on or before December 31, 1997, (D) such
shares are sold for cash, (E) the Net Proceeds from such sale
are used to make a concurrent purchase of 8% Preferred Stock
of the Company, (F) the Company immediately
13
<PAGE> 15
deposits such Net Proceeds in the Collateral Account and (G)
the Net Proceeds from such sale, together with all other
amounts in the Collateral Account are sufficient to fund the
completion of Phase II. Any determination of sufficient funds
shall be evidenced by a resolution of the Board of Directors
of the Company, an Officers' Certificate and a certification
by the Construction Supervisor, each evidencing the parties'
respective determination of the sufficiency of funds, copies
of which shall be delivered to the Trustee prior to any
release of shares of TransTexas common stock. Any such shares
sold by TEC shall be sold at prices no less favorable to TEC
than those that could be obtained in arm's-length transactions
with unrelated persons.
(3) Pledged shares of TransTexas common stock owned
by TEC may be released from the security interest created by
the TEC Pledge Agreement if (A) TEC sells such shares at a
price of at least $12 per share, (B) the Net Proceeds of such
sale are immediately deposited in a segregated cash collateral
account established for such purpose and in which the Trustee
for the benefit of the Holders has a perfected first priority
security interest, (C) such account does not have a balance in
excess of $30 million for a period in excess of 30 consecutive
days, (D) funds in the account are released only to permit TEC
to purchase 8% Preferred Stock of the Company and (E)
simultaneously with TEC's purchase of such shares of 8%
Preferred Stock, the Company uses all such Net Proceeds to
fund a Note Redemption or a Note Repurchase. Until the Phase
II Completion Date has occurred, no shares of TransTexas
common stock may be released pursuant to this clause (3) if,
as a result of such release, less than 10 million shares of
TransTexas common stock (subject to adjustment upon the
occurrence of certain events, including subdivisions,
combinations and certain reclassifications, affecting
TransTexas common stock) would be pledged by TEC pursuant to
the TEC Pledge Agreement.
14
<PAGE> 16
(4) Pledged shares of TransTexas common stock owned
by TEC may be released from the security interest created by
the TEC Pledge Agreement after a Public Equity Offering, if
(A) the outstanding Common Stock of the Company has a Public
Market Value of at least $750,000,000, (B) after such shares
are released, the Collateral Ratio is at least 3:1, and (C) at
any time thereafter that the Collateral Ratio is less than
3:1, within 5 Business Days, TEC pledges, as security for the
Notes and the Guarantee, additional shares of TransTexas
common stock sufficient to make the Collateral Ratio exceed
3:1.
(5) Pledged shares of TransTexas common stock owned
by TEC may be released from the security interest created by
the TEC Pledge Agreement if (A) TEC sells such shares and the
Net Proceeds of such sale are immediately deposited in a
segregated cash collateral account established for such
purpose and in which the Trustee for the benefit of the
Holders has a perfected first priority security interest, the
funds in the account are released only to permit TEC to
purchase 8% Preferred Stock of the Company and simultaneously
with TEC's purchase of such shares of 8% Preferred Stock, the
Company immediately uses all such Net Proceeds to fund a Note
Redemption or a Note Repurchase, or (B) the Company or TEC has
completed a Note Redemption or a Note Repurchase prior to such
release, and, in the case of both (A) and (B), (i) the number
of shares released does not exceed the product of (x) the
number of shares so pledged immediately prior to such release,
and (y) a fraction, the numerator of which is equal to the
Value of Notes subject to such Note Redemption or Note
Repurchase, and the denominator of which is equal to the Value
of Notes outstanding immediately prior to such Note Redemption
or Note Repurchase, (ii) the Market Value of the shares of
TransTexas common stock pledged to secure the Notes and the
Guarantee
15
<PAGE> 17
(excluding the shares to be released) is at least equal to the
outstanding principal amount of the Notes, plus all accrued
and unpaid interest thereon (after giving effect to such Note
Redemption or Note Repurchase) and (iii) the Phase II
Completion Date has occurred, except that if the Phase II
Completion Date has not occurred but the Phase I Completion
Date has, up to 10 million shares of TransTexas stock (subject
to adjustment) may be sold. Until the Phase II Completion
Date has occurred, no shares of TransTexas common stock may be
released pursuant to this clause (5) if, as a result of such
release, less than 10 million shares of TransTexas common
stock (subject to adjustment upon the occurrence of certain
events, including subdivisions, combinations and certain
reclassifications, affecting TransTexas common stock) would be
pledged by TEC pursuant to the TEC Pledge Agreement. The Net
Proceeds of any such sale of TransTexas common stock shall be
deposited in the Collateral Account and released from the
Collateral Account only in accordance with a Trustee's
Certificate given to the Disbursement Agent pursuant to
Section 6.1 of the Disbursement Agreement and shall be used by
the Trustee to make payments to Holders of Notes being
redeemed or purchased by the Company.
(6) Pledged shares of TransTexas common stock owned
by TEC may be released from the security interest created by
the TEC Pledge Agreement if (A) the Phase II Completion Date
has occurred, (B) the Company has received, subsequent to the
Issue Date, cash equity investments aggregating at least
$100,000,000 that have been deposited in the Collateral
Account prior to December 31, 1997 and, (C) after giving
effect to such release, at least 35,000,000 shares of
TransTexas common stock (subject to adjustment for stock
splits, stock dividends and other similar transactions) remain
subject to the pledge.
(7) All of the pledged shares of TransTexas
16
<PAGE> 18
common stock and pledged shares of capital stock of the
Company may be released from the security interest created by
the Pledge Agreements if the Notes have an Investment Grade
Rating and the rating agencies have indicated in writing that
the Notes will continue to have an Investment Grade Rating
after the release of the shares of TransTexas common stock and
the shares of the Company's capital stock.
(8) All of the pledged shares of TransTexas common
stock and pledged shares of capital stock of the Company shall
be released from the security interest created by the Pledge
Agreements upon the occurrence of a Change of Control (A) on
the day after the Change of Control Payment Date if a Change
of Control Offer has been consummated in accordance with the
Indenture or (B) at any time after a Change of Control has
occurred if the shares released from the security interest are
sold by TEC and (i) the Net Proceeds of such sale are,
together with other funds of the Company available therefor,
at least equal to the Change of Control Purchase Price
(including accrued and unpaid interest) of all outstanding
Notes, (ii) such Net Proceeds are immediately deposited in a
segregated cash collateral account established for such
purpose and in which the Trustee has a perfected first
priority security interest, (iii) funds in such account are
released only to permit TEC to purchase 8% Preferred Stock of
the Company, and (iv) simultaneously with TEC's purchase of
such shares of 8% Preferred Stock, the Company uses all of
such Net Proceeds to make payments to Holders of Notes in
connection with a Change of Control Offer.
(9) Up to all shares of pledged TransTexas common
stock owned by the Company may be released from the security
interest created by the Company Pledge Agreement at any time
upon the request of the Company; provided, that there shall
remain pledged to secure the Notes an aggregate number of
shares of TransTexas common stock at least equal to
17
<PAGE> 19
the number obtained by multiplying 50,450,000 by a fraction,
the numerator of which is the aggregate principal amount of
the Notes which remain outstanding immediately following
consummation of the Offer and the denominator of which is
$440,000,000.
(10) Up to all shares of pledged TransTexas common
stock owned by TEC may be released from the security interest
created by the TEC Pledge Agreement at any time upon the
request of TEC; provided, that there shall remain pledged to
secure the Notes an aggregate number of shares of TransTexas
common stock at least equal to the number obtained by
multiplying 50,450,000 by a fraction, the numerator of which
is the aggregate principal amount of the Notes which remain
outstanding immediately following consummation of the Offer
and the denominator of which is $440,000,000.
and Paragraph (h) of Section 12.6 of the Current Indenture is hereby amended,
effective as of the Acceptance Date, to read in its entirety as follows:
(h) Notwithstanding the foregoing, no Collateral may be
released from the security interest created by the Security Documents
if at the time of such proposed release, a Default or Event of Default
has occurred and is continuing or would occur as a result of such
release. Any shares of TransTexas common stock that is released
pursuant to this Section 12.6 (other than subsections (b)(9) or
(b)(10) hereof) in connection with a sale of such stock shall be sold
for cash at prices no less favorable to the seller than those that
could be obtained in arms-length transactions with unrelated persons.
Section 1.19. Section 12.7. There shall be added to the Current
Indenture a new Section 12.7, effective as of the Acceptance Date, to read in
its entirety as follows:
18
<PAGE> 20
SECTION 12.7 Trustee's Execution of Intercreditor Agreements.
Upon receipt of an Officers' Certificate requesting the
Trustee's execution and delivery of the 1997 Intercreditor Agreement,
the Trustee, at the Company's expense, will execute and deliver the
1997 Intercreditor Agreement and the Company, TEC and any other
Guarantors will execute, deliver, file and record, all instruments and
do all acts and other things as may be reasonably necessary to
provide, pursuant to the 1997 Intercreditor Agreement, (i) that (A)
the New Note will be subordinated in right of payment to the full and
final payment of the Notes, (B) the liens and security interests
securing the New Note encumbering collateral that secures both the
Notes and the New Note (the "Shared Collateral") will be subordinate
and inferior to the liens and security interests in the Shared
Collateral that secure the Notes, and (C) the rights of the holder of
the New Note to proceed against the Shared Collateral will be
restricted to the extent necessary to effect the intent of the 1997
Intercreditor Agreement, (ii) that the Company will be permitted to
pay, and the holder of the New Note will be permitted to receive,
regularly scheduled payments of interest and principal under the New
Note so long as at the time of such payment, or after giving effect
thereto, no Default or Event of Default shall have occurred and then
be continuing or would occur thereunder after giving effect to such
payment, (iii) that the holder of the New Note will be required to pay
or deliver to the Trustee cash or other assets received with respect
to the New Note, except payments permitted under the preceding clause
(ii), (iv) that (A) in the event of any case or proceeding involving
or seeking the liquidation or reorganization of the Company (each, a
"Proceeding"), any and all cash or other assets, including proceeds
received from realization on the Shared Collateral, paid or
distributed on account of the New Note, will be applied, after payment
of reasonable costs and expenses relating to obtaining such proceeds,
to the payment of the Notes, and only after the Notes have been paid
in full, to the payment of the New Note, and (B) in any other event,
any and all proceeds of the Shared Collateral received by or
19
<PAGE> 21
for the account of the Holder of the New Note and/or the holders of
the Notes for application to the New Note and/or the Notes will be
applied so as not to impair or affect the right of the holders of the
Notes to receive payments as and when due (but nothing contained in
the 1997 Intercreditor Agreement shall be construed to prohibit, limit
or otherwise affect the rights of the Company to transfer, dispose of
or otherwise deal with its properties and assets included within the
Shared Collateral, and the proceeds thereof, in any manner permitted
under the Indenture), (v) that the rights of the holder of the New
Note to vote or to take action in connection with any Proceeding so as
to contest (A) the validity of any obligation of the Company or TEC
under or with respect to the Indenture or any collateral therefor or
guaranties thereof, (B) the relative rights of holders of the Notes
with respect to any of such collateral or guaranties or (C) the
obligations and agreements of the holder of the New Note as set forth
in the Intercreditor Agreement will be appropriately limited and
restricted so as to effect the intent of the Intercreditor Agreement,
and (vi) that determinations regarding the exercise of remedies
against the Shared Collateral will be made by a majority of the
outstanding principal amount of the Notes and the New Note, except
that, and the Intercreditor Agreement will so provide, that nothing
contained in the Intercreditor Agreement will impair or affect the
right of the holder of any Note to institute suit for the enforcement
of any payment thereof as and when due.
ARTICLE II
GENERAL PROVISIONS
Section 2.01. Effectiveness of Amendments. The Supplemental
Indenture is effective as of the date first above written. The Current
Indenture will remain operative in the form in which it existed prior to the
date hereof until the date (the "Acceptance Date") on which the Company accepts
for purchase and payment all Securities that have been properly tendered and
not withdrawn pursuant to the Offer. On and after the Acceptance Date, the
Proposed Amendments will be effective.
20
<PAGE> 22
Section 2.02. 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 2.03. 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 attached hereto.
Section 2.04. 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 2.05. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
Section 2.06. 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.
[THE NEXT-FOLLOWING PAGE IS THE SIGNATURE PAGE]
21
<PAGE> 23
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, on this 13th day of June,
1997, but all to be effective as of day and year first above written.
TRANSAMERICAN REFINING CORPORATION
Attest:
-------------------------------------------------------------------------
By:
-------------------------------------
Tim Moore Ed Donahue
Assistant Secretary Vice President
TRANSAMERICAN ENERGY CORPORATION
Attest:
-------------------------------------------------------------------------
By:
-------------------------------------
Tim Moore Ed Donahue
Assistant Secretary Vice President
FIRST UNION NATIONAL BANK, f/k/a
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION, Trustee
By:
-------------------------------------
W. Jeffrey Kramer,
Vice President
22
<PAGE> 24
EXHIBIT A
TRANSAMERICAN REFINING CORPORATION
OFFICERS' CERTIFICATE
The undersigned, Ed Donahue, Vice President, and Tim Moore, Assistant
Secretary, of TransAmerican Refining Corporation, a Texas corporation (the
"Company"), do hereby certify pursuant to Section 2.03 of that certain Second
Supplemental Indenture, dated as of June 13, 1997, among the Company,
TransAmerican Energy Corporation, a Delaware corporation ("TEC") and First
Union National Bank, f/k/a First Fidelity Bank, National Association, as
Trustee (the "Trustee"), and Section 14.4 of that certain Indenture, dated as
of February 15, 1995, among the Company, TransTexas Transmission Corporation
and the Trustee, as amended and supplemented (the "Indenture"), as follows:
1. The undersigned have read Section 9.2 of the Indenture.
2. The undersigned have participated in the solicitation of
consents (the "Consents") to the Proposed Amendments (as defined in the
Supplemental Indenture), and the Company has recieved consents from the Holders
(as defined in the Indenture) of at least 66 2/3% of the aggregate principal
amount of the Notes to the Proposed Amendments.
3. In our opinion, we have made such examination and
investigation as is necessary to enable us to express an informed opinion as to
whether or not the conditions precedent in the Indenture requiring compliance
by the Company and TEC to or concurrently with the execution and delivery by
the Company and TEC of the Second Supplemental Indenture have been complied
with.
4. In our opinion, each of the conditions precedent in the
Indenture requiring compliance by the Company and TEC prior to or concurrently
with the execution and delivery by the Company and TEC of the Second
Supplemental Indenture have been complied with, and the Trustee is authorized
or permitted, pursuant to Section 9.2 of the Indenture, to execute the Second
Supplemental Indenture.
IN WITNESS WHEREOF, we have executed this Certificate as of June 13, 1997.
----------------------------------------
Ed Donahue, Vice President
----------------------------------------
Tim Moore, Assistant Secretary
<PAGE> 25
EXHIBIT B
Matters to be Covered by Gardere & Wynne, L.L.P. Opinion
1. The Second Supplemental Indenture has been duly
authorized, executed and delivered by the Company and TEC.
2. Each of the conditions precedent in the Current
Indenture requiring compliance by the Company and TEC prior to or
concurrently with the execution and delivery by the Company and TEC of
the Second Supplemental Indenture has been complied with by the
Company and TEC, and Section 9.2 of the Current Indenture authorizes
or permits the Trustee to execute the Second Supplemental Indenture.
<PAGE> 26
TRANSAMERICAN REFINING CORPORATION
OFFICERS' CERTIFICATE
The undersigned, Ed Donahue, Vice President, and Tim Moore, Assistant
Secretary, of TransAmerican Refining Corporation, a Texas corporation (the
"Company"), do hereby certify pursuant to Section 2.03 of that certain Second
Supplemental Indenture, dated as of June 13, 1997, among the Company,
TransAmerican Energy Corporation, a Delaware corporation ("TEC") and First
Union National Bank, f/k/a First Fidelity Bank, National Association, as
Trustee (the "Trustee"), and Section 14.4 of that certain Indenture, dated as
of February 15, 1995, among the Company, TEC and the Trustee, as amended and
supplemented (the "Indenture"), as follows:
1. The undersigned have read Section 9.2 of the Indenture.
2. The undersigned have participated in the solicitation of
consents (the "Consents") to the Proposed Amendments (as defined in the
Supplemental Indenture), and the Company has recieved consents from the Holders
(as defined in the Indenture) of at least 66 2/3% of the aggregate principal
amount of the Notes to the Proposed Amendments.
3. In our opinion, we have made such examination and
investigation as is necessary to enable us to express an informed opinion as to
whether or not the conditions precedent in the Indenture requiring compliance
by the Company and TEC to or concurrently with the execution and delivery by
the Company and TEC of the Second Supplemental Indenture have been complied
with.
4. In our opinion, each of the conditions precedent in the
Indenture requiring compliance by the Company and TEC prior to or concurrently
with the execution and delivery by the Company and TEC of the Second
Supplemental Indenture have been complied with, and the Trustee is authorized
or permitted, pursuant to Section 9.2 of the Indenture, to execute the Second
Supplemental Indenture.
IN WITNESS WHEREOF, we have executed this Certificate as of June 13,
1997.
----------------------------------------
Ed Donahue, Vice President
----------------------------------------
Tim Moore, Assistant Secretary
<PAGE> 1
EXHIBIT 4.2
================================================================================
$475,000,000 11 1/2% Senior Secured Notes due 2002
and
$1,130,000,000 13% Senior Secured Discount Notes due 2002
INDENTURE
among
TRANSAMERICAN ENERGY CORPORATION,
as Issuer
and
Firstar Bank of Minnesota, N.A.,
as Trustee
Dated as of June 13, 1997
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
SECTION SECTION
------- ---------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 1.3 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE II THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.2 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.3 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.4 Paying Agent to Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 2.5 Noteholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 2.6 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 2.7 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 2.8 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 2.9 Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 2.13 Computation of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 2.14 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE III REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.1 Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.2 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 3.3 Selection of Notes to Be Redeemed 49
Section 3.4 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 3.5 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 3.6 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 3.7 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.1 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.3 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.4 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.5 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.6 Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.7 Compliance Certificate; Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.8 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 4.9 Limitation on Status as Investment Company or Public Utility Company . . . . . . . . . . . 55
Section 4.10 Limitation on Transactions with Related Persons . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
Section 4.11 Limitation on Incurrences of Additional Debt and Issuances of Disqualified Capital
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 4.12 Limitations on Restricting Subsidiary Dividends . . . . . . . . . . . . . . . . . . . . . 66
Section 4.13 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 4.14 Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 4.15 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 4.16 Guarantee by Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 4.17 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 4.18 Limitations on Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 4.19 Separate Existence and Formalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 4.20 Accounts Receivable Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 4.21 Excess Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 4.22 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 4.23 Limitation on Assets Held by Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 4.24 Additional Interest Excess Cash Offer . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE V SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 5.1 When the Company May Merge, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 5.2 Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 6.2 Acceleration of Maturity Date; Rescission and Annulment . . . . . . . . . . . . . . . . . 80
Section 6.3 Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . 81
Section 6.4 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 6.5 Trustee May Enforce Claims Without Possession of Notes . . . . . . . . . . . . . . . . . . 82
Section 6.6 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 6.7 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 6.8 Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . 83
Section 6.9 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 6.10 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 6.11 Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 6.12 Waiver of Past Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 6.13 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 6.14 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE VII TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 7.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 7.2 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 7.3 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 7.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 7.6 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
Section 7.7 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 7.9 Successor Trustee by Merger, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 7.11 Preferential Collection of Claims against Company . . . . . . . . . . . . . . . . . . . . 89
Section 7.12 No Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 7.13 Condition to Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 7.14 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE VIII SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 8.1 Satisfaction, Discharge of the Indenture and Defeasance of the Notes . . . . . . . . . . . 90
Section 8.2 Termination of Obligations Upon Cancellation of the Notes . . . . . . . . . . . . . . . . 91
Section 8.3 Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 8.4 Acknowledgment of Discharge by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 8.5 Application of Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 8.6 Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 8.7 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 9.1 Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . 93
Section 9.2 Amendments, Supplemental Indentures and Waivers with Consent of Holders . . . . . . . . . 92
Section 9.3 Compliance with TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 9.4 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 9.5 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 9.6 Trustee to Sign Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE X MEETINGS OF NOTEHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.1 Purposes for Which Meetings May Be Called . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.2 Manner of Calling Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.3 Call of Meetings by Company or Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.4 Who May Attend and Vote at Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 10.5 Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights;
Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 10.6 Voting at the Meeting and Record to Be Kept . . . . . . . . . . . . . . . . . . . . . . . 97
Section 10.7 Exercise of Rights of Trustee or Noteholders May Not Be Hindered or Delayed by
Call of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
ARTICLE XI RIGHT TO REQUIRE REPURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 11.1 Repurchase of Notes at Option of the Holder Upon Change of Control . . . . . . . . . . . . 98
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C>
ARTICLE XII SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 12.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 12.2 Trustee's Execution of Intercreditor Agreements and Subordination Agreements . . . . . . 100
Section 12.3 Recording; Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 12.4 Disposition of Certain Collateral Without Requesting Release . . . . . . . . . . . . . . . 102
Section 12.5 Requesting Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 12.6 Substitute Collateral Other Than Cash Collateral . . . . . . . . . . . . . . . . . . . . . 105
Section 12.7 Substitution of Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 12.8 Release Upon Defeasance or Satisfaction and Discharge of this Indenture . . . . . . . . . 106
Section 12.9 Reliance on Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 12.10 Purchaser May Rely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 12.11 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 12.12 Trustee's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 12.13 Authorization of Actions to be Taken by the Trustee Under the Security Documents . . . . . 107
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 13.1 TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 13.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 13.3 Communications by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . 109
Section 13.4 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . 109
Section 13.5 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . 109
Section 13.6 Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . . . . . . . . . . . . . 110
Section 13.7 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section 13.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section 13.9 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . 110
Section 13.10 No Recourse against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section 13.11 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Section 13.12 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Section 13.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Section 13.14 Table of Contents, Headings, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
EXHIBITS
Exhibit A - Form of Senior Secured Note
Exhibit B - Form of Senior Secured Discount Note
Exhibit C - Certificate of Transferor-Senior Secured Note
Exhibit D - Certificate of Transferor-Senior Secured Discount Note
Exhibit E - Form of TEC Security and Pledge Agreement
Exhibit F - Form of TEC Collateral Assignment Agreement
Exhibit G - Form of TARC Mortgage
Exhibit H - Form of TARC Security and Pledge Agreement
Exhibit I - Form of TARC Intercompany Loan
Exhibit J - Form of TransTexas Mortgage
Exhibit K - Form of TransTexas Security and Pledge Agreement
Exhibit L - Form of TransTexas Intercompany Loan
Exhibit M - Form of TARC Intercreditor Agreement
Exhibit N - Form of TransTexas Intercreditor Agreement
Exhibit O - Form of TransTexas Disbursement Agreement
Exhibit P - Form of TARC/TEC Disbursement Agreement
</TABLE>
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 June 13, 1997, among TRANSAMERICAN ENERGY
CORPORATION, a Delaware corporation (the "Company"), and Firstar Bank of
Minnesota, N.A., 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 11
1/2% Senior Secured Notes due 2002 and 13% Senior Secured Discount Notes due
2002:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1 Definitions.
"Accounts Receivable Subsidiary" means a subsidiary of the Company
designated as an Accounts Receivable Subsidiary for the purpose of financing
the accounts receivable of TARC.
"Accounts Receivable Subsidiary Notes" means the notes to be issued by
the Accounts Receivable Subsidiary for the purchase of accounts receivable.
"Accreted Value" of a Senior Secured Discount Note, with respect to
each $1,000 principal amount of Senior Secured Discount Notes, is defined as of
any Semi-Annual Accretion Date set forth below as the Accreted Value thereof
set forth below and as of any other date as the Accreted Value set forth below
for the immediately preceding Semi-Annual Accretion Date plus the Proportionate
Amount to such date:
<TABLE>
<CAPTION>
ACCRETED VALUE (PER $1,000
SEMI-ANNUAL ACCRETION DATE PRINCIPAL AMOUNT)
- -------------------------- --------------------------
<S> <C>
December 15, 1997 . . . . . . . . . . . . . . . $ 827.849
June 15, 1998 . . . . . . . . . . . . . . . . . 881.659
December 15, 1998 . . . . . . . . . . . . . . . 938.967
June 15, 1999 and thereafter . . . . . . . . . 1,000.000
</TABLE>
The Accreted Value prior to the first Semi-Annual Accretion Date will
be the sum of $776.779 and the Proportionate Amount. "Proportionate Amount,"
with respect to a Senior Secured Discount Note
<PAGE> 8
as of any date, is defined as an amount equal to the product of (i) the
Accreted Value for the immediately following Semi-Annual Accretion Date less
the Accreted Value for the immediately preceding Semi-Annual Accretion Date
(or, with respect to the period before the first Semi-Annual Accretion Date,
less $776.779) multiplied by (ii) a fraction, the numerator of which is the
actual number of days elapsed from the immediately preceding Semi-Annual
Accretion Date (or, with respect to the period before the first Semi-Annual
Accretion Date, the Issue Date) to the date for which the Proportionate Amount
is being determined and the denominator of which is the actual number of days
from the date of the immediately preceding Semi-Annual Accretion Date to and
including the immediately following Semi-Annual Accretion Date or the actual
number of days from the Issue Date to the first Semi-Annual Accretion Date, as
the case may be.
"Additional Interest Accumulated Amount" shall have the meaning
specified in Section 4.24.
"Additional Interest Excess Cash" means the cash received by the
Company from (i) the TARC Interest Increase and (ii) the TransTexas Interest
Increase.
"Additional Interest Excess Cash Acceptance Amount" shall have the
meaning specified in Section 4.24.
"Additional Interest Excess Cash Offer" shall have the meaning
specified in Section 4.24.
"Additional Interest Excess Cash Offer Amount" shall have the meaning
specified in Section 4.24.
"Additional Interest Excess Cash Offer Price" shall have the meaning
specified in Section 4.24.
"Additional Interest Excess Cash Purchase Date" shall have the meaning
specified in Section 4.24.
"Additional Interest Final Put Date" shall have the meaning specified
in Section 4.24.
"Adjusted Consolidated Net Income" of any Person for any period means
the net income (loss) of such Person and its consolidated Subsidiaries for such
period, determined in accordance with GAAP, excluding (without duplication) (i)
all extraordinary gains, (ii) the net income, if positive, of any other Person,
other than a consolidated Subsidiary, in which such Person or any of its
consolidated Subsidiaries has an interest, except to the extent of the amount
of any dividends or distributions actually paid in cash to such Person or a
consolidated Subsidiary of such Person during such period, (iii) the net
income, if positive, of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (iv) the
net income, if positive, of any Subsidiary of such Person to the extent that
the declaration or payment of dividends or similar distributions is not at the
time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule, or governmental regulation
applicable to such Subsidiary.
"Adjusted Consolidated Tangible Assets" means (without duplication),
as of the date of determination, (A) the sum of (i) discounted future net cash
flows from proved oil and gas reserves of the TransTexas Entities, calculated
in accordance with SEC guidelines (before any state or federal income tax), as
estimated in a Reserve Report as of a date no earlier than TransTexas' most
recent fiscal year end (or, if such reserve report is unavailable, or if the
date of determination is after the end of the first fiscal quarter of the then
current fiscal year of TransTexas, as estimated by TransTexas engineers on the
same basis as of a date no earlier than the end of the most recent fiscal
quarter, which estimates shall be confirmed in
2
<PAGE> 9
writing by a report by nationally recognized independent petroleum engineers in
accordance with SEC guidelines in the event of a Material Change), (ii) the Net
Working Capital of TransTexas on a date no earlier than the date of TransTexas'
latest consolidated annual or quarterly financial statements and (iii) with
respect to all other tangible assets (which are deemed to include mineral
lease-hold interests) of the TransTexas Entities, the greater of (a) the net
book value of such other tangible assets on a date no earlier than the date of
TransTexas' latest consolidated annual or quarterly financial statements, and
(b) the Appraised Value, as estimated by an Appraiser of such other tangible
assets, as of a date no earlier than the date that is three years prior to the
date of determination (or such later date on which TransTexas shall have a
reasonable basis to believe that there has occurred a material decrease in
value since the determination of such appraised value), minus (B) minority
interests and, to the extent not otherwise taken into account in determining
Adjusted Consolidated Tangible Assets, any gas balancing liabilities of the
TransTexas Entities. In addition to, but without duplication of, the foregoing,
for purposes of this definition, "Adjusted Consolidated Tangible Assets" shall
be calculated after giving effect, on a pro forma basis, to (1) any Permitted
Investment, to and including the date of the transaction giving rise to the
need to calculate Adjusted Consolidated Tangible Assets (the "Assets
Transaction Date"), in any other Person that, as a result of such investment,
becomes a Subsidiary of TransTexas, (2) the acquisition, to and including the
Assets Transaction Date (by merger, consolidation, or purchase of stock or
assets), of any business or assets, including, without limitation, Permitted
Investments, (3) any sales or other dispositions of assets (other than sales of
Hydrocarbons or other mineral products in the ordinary course of business)
occurring on or prior to the Assets Transaction Date and (4) the TTXD Spin-off
if the TTXD Spin-off has occurred. For purposes of calculating the ratio of
TransTexas' Adjusted Consolidated Tangible Assets to total consolidated Debt of
the TransTexas Entities, Debt of a Subsidiary that is not a wholly owned
Subsidiary of TransTexas (which Debt is non-recourse to TransTexas or any of
its other Subsidiaries or any of their assets) shall be included only to the
extent of TransTexas' pro rata ownership interest in 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 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.
3
<PAGE> 10
"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 property that is not Collateral, (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 (other than the creation of a Permitted Lien in
connection with a Dollar-Denominated Production Payment that TransTexas or any
of its Subsidiaries does not elect to treat as Debt or in connection with a
Volumetric Production Payment, which in either case shall be treated as an
Asset Sale hereunder; provided, however, that a contribution of a Dollar
Denominated Production Payment to a Hedging Subsidiary shall not constitute an
Asset Sale) or (iii) conveyances, sales, transfers or other dispositions in
connection with a Drilling Program.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP
or, in the event that such rate of interest is not reasonably determinable,
discounted at the rate of interest borne by the Senior Secured 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.
4
<PAGE> 11
"Capital Expenditures Testing Quarter" means any fiscal quarter
immediately following a Measurement Quarter in which Measurement Quarter the
SEC PV10 of TransTexas (based on TransTexas' then most recent Reserve Report)
is less than 90% of the Net Debt of TransTexas, measured as of the last day of
such Measurement Quarter.
"Capital Improvement Program" means the expansion and improvement
program at TARC that will be executed in two phases: Phase I and Phase II.
The most significant projects include: (i) conversion of the visbreaker unit
to a delayed coking unit to process vacuum tower bottoms into lighter petroleum
products, (ii) modernization and upgrade of 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.
"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 TARC
as more specifically defined in the TARC Mortgage, together with all personal
property of TARC 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.
5
<PAGE> 12
"Change of Control" means (i) the liquidation or dissolution of, or
the adoption of a plan of liquidation by, the Company, (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
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 or (iii) any event which results in the Company or any
of its Subsidiaries having beneficial ownership of at least some of TARC or
TransTexas Capital Stock, respectively, but less than 50%, on a fully diluted
basis, of (x) the total voting power of TARC's or TransTexas' then outstanding
Voting Stock, respectively, or (y) the economic value of the outstanding
Capital Stock of TARC or TransTexas, respectively; unless, at the time of the
occurrence of an event specified in clause (ii) or (iii), the Notes have an
Investment Grade Rating; provided, however, that if at any time within 120
days after such occurrence, the Notes cease having an Investment Grade Rating,
such event shall be a "Change of Control."
"Collateral" shall mean the TARC Collateral and the TransTexas
Collateral as well as all of the Company's ownership interest in the Capital
Stock of TARC and TransTexas and any future Subsidiaries of the Company and all
of the Company's rights under the TARC Intercompany Loan and the TransTexas
Intercompany Loan and the assets of the Company which are pledged to the
Trustee in accordance with the TransAmerican Energy Corporation Pledge and
Security Agreement.
"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
6
<PAGE> 13
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 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, and (d) Consolidated EBITDA and Consolidated
Fixed Charges of any Person shall be calculated by giving pro forma effect to
the TTXD Spin-off and each other transaction described in the Offering Circular
under the heading "Offering Circular Summary -- The Transactions" as if such
transactions had occurred on the first day of the Reference Period, in each
case, other than the TTXD Spin-off, only if such transaction has occurred
during the Reference Period.
"Consolidated Fixed Charges" of any Person for any period means
(without duplication) the sum of (i) Consolidated Interest Expense of such
Person for such period, (ii) dividend requirements of such Person and its
consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to Preferred
Stock paid, accrued, or scheduled to be paid or accrued during such period, in
each case to the extent attributable to such period and excluding items
eliminated in consolidation and (iii) fees paid, accrued, or scheduled to be
paid or accrued during such period by such Person and its 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
7
<PAGE> 14
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 operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule, or governmental regulation
applicable to such Subsidiary.
"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.
"Continuing Operations" means the operations of the TransTexas
Entities after giving effect to the sale by TransTexas of the stock of
TransTexas Transmission Corporation.
"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 or representing the
balance deferred and unpaid of the purchase price of any property acquired by
such Person or services received by such Person (other than long-term service
or supply contracts which require minimum periodic payments), (c) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks or Swap
Obligations, (d) for the payment of money relating to a Capitalized Lease
Obligation, (e) the Attributable Debt associated with any Sale and Leaseback
Transaction or (f) Dollar-Denominated Production Payments that TransTexas or
any of its Subsidiaries elect to treat as Debt (excluding all other Permitted
Production Payment Obligations); (ii) reimbursement obligations of such Person
with respect to letters of credit; (iii) all liabilities of others of the kind
described in the preceding clause (i) or (ii) that such Person has guaranteed
or that is otherwise its legal liability (to the extent of such guaranty or
other legal liability) 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
8
<PAGE> 15
to be limited to the fair market value of such property or assets determined as
of the end of the preceding fiscal quarter); and (v) any and all deferrals,
renewals, extensions, refinancings, and refundings (whether direct or indirect)
of, or amendments, modifications, or supplements to, any liability of the kind
described in any of the preceding clauses (i) through (iv) regardless of
whether between or among the same parties.
"Default" means an event or condition, the occurrence of which is, or
with the lapse of time or giving of notice or both would be, an Event of
Default.
"Definitive Notes" means, collectively, the Definitive Senior Secured
Notes and the Definitive Senior Secured Discount Notes.
"Definitive Senior Secured Discount Notes" means Senior Secured
Discount Notes that are in the form of the Notes attached hereto as Exhibit B,
and that do not include the information called for by footnotes 1 and 2
thereof.
"Definitive Senior Secured Notes" means Senior Secured 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 TARC,
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 15, 2002.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Drilling Program" means any arrangement between TransTexas or any
Subsidiary of TransTexas and another Person pursuant to which (i) such Person
agrees (x) to drill, complete or perform operations to enhance recovery from, a
well or wells on mineral interests owned by TransTexas or such Subsidiary or
(y) to pay to TransTexas or such Subsidiary all or a portion of the costs paid
or incurred in connection with drilling, completing or performing such other
operations (or to reimburse TransTexas or such Subsidiary for such costs within
6 months of the incurrence thereof) and (ii) TransTexas or such Subsidiary
9
<PAGE> 16
agrees to convey or assign to such person an interest in such well or wells in
accordance with clause (l) of the definition of "Permitted TransTexas Liens."
"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, as to (i) TransTexas or any of its
Subsidiaries, all of such Person's now owned or hereafter acquired Vehicles,
drilling rigs, workover rigs, fracture stimulation equipment, well site
compressors, rolling stock and related equipment and other assets accounted for
as equipment by such Person on its financial statements, all proceeds thereof,
and all documents of title, books, records, ledger cards, files,
correspondence, and computer files, tapes, disks and related data processing
software that at any time evidence or contain information relating to the
foregoing; provided, however, that "Equipment" shall not include any assets
constituting part of a natural gas pipeline or the compression or dehydration
equipment used in the operation of any such pipeline and (ii) TARC or any of
its Subsidiaries, all of such Person's 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; provided,
however, that "Equipment" shall not include any assets constituting part of
TARC's refinery or fixed assets used in TARC's processing or storage
operations.
"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.
"Excess Cash" means the Net Cash Proceeds received by the Company from
Asset Sales by the Company and the aggregate amount of cash and Cash
Equivalents received by the Company from its Subsidiaries, including from
dividends or payments in respect of Intercompany Loan Redemptions less the sum
(without duplication) of (a) the provision for income and other taxes of the
Company or, in the case of subclause (iii) of this clause (a), TransAmerican,
(i) for the current fiscal year, (ii) for the immediately preceding fiscal year
or (iii) relating to the sale by TransTexas of the Capital Stock of TransTexas
Transmission Corporation, (b) without duplication, amounts received pursuant to
the Services Agreement, (c) amounts used to pay consent fees in connection with
a solicitation of waivers or amendments to the Notes, (d) dividends received
from an Accounts Receivable Subsidiary; provided, that such funds are then
contributed to TARC, (e) payments of interest and principal on loans by the
Company to TARC or TransTexas which loans are permitted by the terms of the
Indenture and (f) scheduled payments of interest and principal pursuant to the
terms of the Intercompany Loans.
"Excess Cash Acceptance Amount" shall have the meaning given to it in
Section 4.21.
10
<PAGE> 17
"Excess Cash Offer" shall have the meaning given to it in Section
4.21.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Assets" means assets acquired by TARC or TransTexas or any
Subsidiary of either of them in exchange for assets of TARC or TransTexas or
such Subsidiary, respectively, in connection with an Asset Sale, which acquired
assets in the case of exchanges of assets by TransTexas or any of its
Subsidiaries include proved reserves with a value that, together with the cash
or Cash Equivalents received therefor by TransTexas or any of its Subsidiaries,
is equal to or greater than the value of the proved reserves included in the
assets disposed of by TransTexas or such Subsidiary in connection with such
Asset Sale; provided, that during any fiscal year TransTexas or any of its
Subsidiaries can collectively acquire assets (other than proved reserves, cash
or Cash Equivalents) with a fair market value of up to $40,000,000 in exchange
for assets of TransTexas or such Subsidiaries with proved reserves, and such
assets acquired by TransTexas or such Subsidiaries shall constitute "Exchange
Assets" hereunder.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Series B Senior
Secured Notes for Series A Senior Secured Notes and Series B Senior Secured
Discount Notes for Series A Senior Secured Discount Notes.
"FCC Unit" means the fluid catalytic cracking unit being constructed
and upgraded as part of the Capital Improvement Program.
"First Lien Debt" means any Debt or other obligation secured by a
Permitted TransTexas Lien described in clause (c), (d), (e), (f), (i), (k),
(l), (o), (q), (r) to the extent that the Incurrence of the Permitted Lien to
which such clause relates is one of the other clauses listed here, (s) or (t)
of the definition of "Permitted TransTexas Liens," a Permitted TARC Lien
described in clause (c), (d), (g), (j), (k), (m), (o), (p), (q), (r) to the
extent that the Incurrence of the Permitted Lien to which such clause relates
is one of the other clauses listed here, (s), (t) and (y) of the definition of
"Permitted TARC Liens," or a Permitted TEC Lien described under clause (g) of
Permitted TEC Liens including, in each case, any refinancings thereof.
"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 TARC 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 Notes", means, collectively, the Global Senior Secured Note
and the Global Senior Secured Discount Note.
"Global Senior Secured Discount Note" means a Senior Secured Discount
Note in the form of the Note attached hereto as Exhibit B and that contains the
paragraph referred to in footnote 1 and the additional schedule referred to in
footnote 2.
11
<PAGE> 18
"Global Senior Secured Note" means a Senior Secured Note that contains
the paragraph referred to in footnote 1 and the additional schedule referred to
in footnote 2 in the form of the Note attached hereto as Exhibit A.
"Guarantee" means any guarantee of the obligations of TARC under the
TARC Intercompany Loan or of TransTexas under the TransTexas Intercompany Loan
by any Guarantor.
"Guarantor" means each of TARC's or TransTexas' Subsidiaries that
becomes a guarantor of either the TARC Intercompany Loan or the TransTexas
Intercompany Loan in compliance with the provisions of this Indenture.
"HDS Unit" means the hydrodesulfurization unit being constructed as
part of the Capital Improvement Program.
"Hedging Subsidiary" means a Subsidiary of TransTexas engaged solely
in the business of facilitating Permitted Hedging Transactions with TransTexas
or any of its Subsidiaries.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"Hydrocarbons" means oil, natural gas, condensate, and natural gas
liquids.
"Incur" shall have the meaning specified in Section 4.11.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Independent Director" means an individual that is not and has not
been affiliated (other than as a director of TransAmerican or its past or
present subsidiaries) with, and is not and has not been a Related Person (other
than solely as a director of TransAmerican or one of its past or present
subsidiaries) with respect to John R. Stanley, TransAmerican or the Company or
its Subsidiaries.
"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.
"Intercompany Loans" means the TransTexas Intercompany Loan and the
TARC Intercompany Loan.
"Intercompany Loan Redemption" means an optional redemption by TARC or
TransTexas of all or a portion of the accreted value or principal amount, as
the case may be, then outstanding under the TARC Intercompany Loan or the
TransTexas Intercompany Loan, respectively, in cash at a redemption price equal
to (a) 105% of the accreted value of the TARC Intercompany Loan and the
principal amount of the TransTexas Intercompany Loan for redemptions made on or
prior to December 31, 1997, (b) 108% of the accreted value of the TARC
Intercompany Loan and the principal amount of the TransTexas Intercompany Loan
for redemptions made during the period from January 1, 1998 through June 14,
2000,
12
<PAGE> 19
(c) at a price equal to 105.750% of the accreted value of the TARC Intercompany
Loan and the principal amount of the TransTexas Intercompany Loan for
redemptions made during the period from June 15, 2000 through June 14, 2001 and
(d) 100.000% of the accreted value of the TARC Intercompany Loan and the
principal amount of the TransTexas Intercompany Loan for redemptions made on or
after June 15, 2001, in each case, plus accrued and unpaid interest, if any, to
and including the redemption date.
"Intercreditor Agreements" means the TARC Intercreditor Agreement and
the TransTexas Intercreditor Agreement.
"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, (i) as to TransTexas, all of
TransTexas' now owned or hereafter acquired casing, drill pipe and other
supplies accounted for as inventory by TransTexas on its financial statements
(excluding any Hydrocarbons), all proceeds thereof, and all documents of title,
books, records, ledger cards, files, correspondence, and computer files,
tapes, disks and related data processing software that at any time evidence or
contain information relating to the foregoing and (ii) as to TARC, feedstocks,
refined products, chemicals and catalysts, other supplies and storeroom items
and similar items accounted for as inventory by TARC 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 "-" 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.
"Legal Holiday" shall have the meaning provided in Section 13.7.
13
<PAGE> 20
"Lobo Sale" shall have the meaning given to it in the Offering
Circular.
"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 Change" means an increase or decrease of more than 10% since
the then most recent Reserve Report in the discounted future net cash flows
(excluding changes that result from changes in prices) from proved oil and gas
reserves of TransTexas and its consolidated Subsidiaries (before any state or
federal income tax); provided, however, that the following will be excluded
from the Material Change calculation: (i) any acquisitions since the then most
recent Reserve Report of oil and gas reserves that have been estimated by
independent petroleum engineers and on which a report or reports have been
prepared by such independent petroleum engineers within 12 months of the
acquisition, (ii) any reserves added since the then most recent Reserve Report
attributable to the drilling or recompletion of wells not included in previous
reserve estimates and (iii) any disposition of properties existing on the date
of then most recent Reserve Report that have been disposed of.
"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.
"Measurement Quarter" means any fiscal quarter ending on or after April
30, 1998.
"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 an amount equal to the aggregate amount of
cash received by the Company and its Subsidiaries in respect of an Asset Sale
or a Non-Collateral Asset Sale, less the sum of (i) all reasonable out-of-
pocket fees, commissions, and other expenses incurred in connection with such
Asset Sale or Non-Collateral Asset Sale, as the case may be, including the
amount (estimated in good faith by the Company) of income, franchise, sales and
other applicable taxes to be paid, payable or accrued by the Company or any
Subsidiary of the Company (in each case as estimated in good faith by the
Company or such Subsidiary without giving effect to tax attributes unrelated to
such Asset Sale) in connection with such Asset Sale or Non-Collateral Asset
Sale, as the case may be, and (ii) the aggregate amount of cash so received
which is used to retire any then existing Debt of the Company or its
Subsidiaries (other than the Intercompany Loans or the Notes), as the case may
be, which is required by the terms of such Debt to be repaid in connection with
such Asset Sale or Non-Collateral Asset Sale, as the case may be.
14
<PAGE> 21
"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).
"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 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from 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.
"No. 2 Reformer" means the no. 2 reformer being constructed as part of
the Capital Improvement Program.
"NNM" means the Nasdaq National Market.
"Nominee" means any Person who has or holds any right, title or
interest in any oil and gas or mineral lease as a nominee for TransTexas or any
of its Subsidiaries.
"Nominee Property" means any property, lease, interest or other asset
with respect to which any Person has or holds any right, title or interest as a
Nominee.
"Non-Collateral Asset Sale" means any direct or indirect conveyance,
sale, transfer or other disposition (including through damage or destruction
for which Insurance Proceeds are paid or by condemnation), in one or a series
of related transactions, of any of the properties, businesses or assets of the
Company or any Subsidiary of the Company (other than properties, businesses or
assets of any of the TTXD Entities after the TTXD Spin-off), whether owned on
the Issue Date or thereafter acquired, which properties, businesses or assets
do not constitute Collateral.
15
<PAGE> 22
"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, a Change of Control Offer or an Excess Cash
Offer; provided that all Notes purchased are delivered to the Trustee for
cancellation promptly upon their receipt by the Company.
"Notes" means, collectively, the Senior Secured Notes and the Senior
Secured Discount Notes.
"NYSE" means the New York Stock Exchange.
"Offering Circular" means the offering circular dated as of June 5,
1997 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.
"Offsite Facilities" means additional supporting equipment and
facilities being constructed as part of the Capital Improvement Program.
"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.
"Paying Agent" shall have the meaning specified in Section 2.3.
16
<PAGE> 23
"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 or the
TransTexas 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 such transactions
do not in the case of TransTexas or its Subsidiaries, on a monthly basis,
relate to more than 90% of the TransTexas Entities' average net natural gas
production per month from the Continuing Operations for the most recent 3-month
period measured at the time of such incurrence; provided, further, that, at
the time of such transaction (i) the counter party to any such transaction is
an Eligible Institution or a Person that has an Investment Grade Rating or has
an issue of debt securities or preferred stock outstanding with an Investment
Grade Rating or (ii) such counter party's obligation pursuant to such
transaction is unconditionally guaranteed in full by, 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
TransTexas or its wholly owned Subsidiaries in wholly owned Subsidiaries of
TransTexas (other than TTXD) that are engaged in Related TransTexas Businesses
and Investments by TARC or its wholly owned Subsidiaries in wholly owned
Subsidiaries of TARC that are engaged in Related TARC Businesses; (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 $3,000,000 in the aggregate outstanding at
any time in the case of each of (i) the TARC Entities and (ii) the TransTexas
Entities; (vii) margin deposits in connection with Permitted Hedging
Transactions; (viii) an Investment in one or more Unrestricted Subsidiaries of
(a) TransTexas in an aggregate amount, net of return on such Investment, not in
excess of $25,000,000 less the amount of any Unrestricted Non-Recourse Debt
outstanding of TransTexas or any of its Subsidiaries and (b) TARC of the assets
comprising the CATOFIN(R) Unit owned by TARC as of the date hereof; (ix)
Investments and expenditures made in the ordinary course of business by
TransTexas or its Subsidiaries, and of a nature that is or shall have become
customary in, the oil and gas business as a means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil or gas through agreements, transactions, interests or
arrangements which permit a person to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives
customarily achieved through the conduct of the oil and gas business jointly
with third parties, including, without limitation, (a) ownership interests in
oil and gas properties or gathering systems and (b) Investments and
expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties (including Unrestricted Subsidiaries); provided, that in the case of
any joint venture engaged in processing, gathering, marketing or transporting
oil or gas (i) all Debt of such joint venture (other than a joint venture that
is an Unrestricted Subsidiary) that would not otherwise constitute Debt of one
of the TransTexas Entities shall be deemed Debt of TransTexas in proportion to
its direct or indirect ownership interest in such joint venture and (ii) such
joint venture shall be reasonably calculated to enhance the value of the
reserves of the TransTexas Entities or marketability of production from such
reserves; (x) a guaranty by any Subsidiary of the Company permitted under
Section 4.11; (xi) deposits permitted by the definition of Permitted Liens or
any extension, renewal, or replacement of any of them, (xii) the TTXD Equity
Investment (in addition to any contribution by TransTexas pursuant to clause
(xiii) below), (xiii) capital contributions by
17
<PAGE> 24
TransTexas to TTXD or to a joint venture, a partnership, a limited liability
company or a similar entity of TransTexas' drilling and energy services
business and pipeline services business and related assets, (xiv) any
acquisition by TARC of tank storage facilities (or the company that owns such
facilities) in the vicinity of the TARC refinery, (xv) guarantees by TransTexas
of Debt of TTXD to the extent that such Debt relates to assets contributed to
TTXD pursuant to clause (xiii) hereof, (xvi) Investments in Accounts
Receivables Notes by TARC in amounts not to exceed the greater of $20,000,000
or 20% of the TARC Borrowing Base at any one time, (xvii) loans from the
Company to its Subsidiaries (other than the TTXD Entities prior to the TTXD
Spin-off) with (i) the excess of the Excess Cash Offer Amount (after reserving
the full Interest Reserve Amount) over the Excess Cash Acceptance Amount,
provided, that such loans are on terms no less favorable to the Company than
were disclosed to the Holders of the Notes in the Excess Cash Offer or (ii) the
excess of the Additional Interest Excess Cash Offer Amount over the Additional
Interest Excess Cash Acceptance Amount, provided, that such loans are on terms
no less favorable to the Company than were disclosed to the Holders of the
Notes in the Additional Interest Excess Cash Offer, (xviii) an Investment in
Capital Stock resulting from an Asset Sale pursuant to clause (xiii) of Section
4.14, (xix) Investments by the Company in an Accounts Receivable Subsidiary, or
by the Company or TARC in a reincorporation subsidiary in each case in
connection with the initial capitalization thereof and not to exceed $1,000,
(xx) Investments by the Company or TARC or a wholly owned Subsidiary of either
of them solely for the purpose of facilitating a repurchase of the TARC
Warrants in connection with a merger, (xxi) other Investments not in excess of
$5,000,000 at any time outstanding, (xxii) 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 $3,000,000 in the aggregate outstanding at any one time,
(xxiii) Investments by the Company in its Subsidiaries in an aggregate amount
not to exceed the proceeds of Subordinated Debt permitted to be incurred
pursuant to clause (5)(d) of Section 4.11, (xxiv) Investments by the Company in
TARC in an amount not to exceed the amounts received by the Company from an
Accounts Receivable Subsidiary, (xxv) a capital contribution by TTXD of any or
all of its assets to a joint venture, a partnership, a limited liability
company or a similar entity, (xxvi) a capital contribution by the Company to
TARC in an amount not to exceed $226,000,000 (inclusive of any equity
contribution made as described in the Offering Circular under the heading "The
Transactions -- TARC Equity Contribution"), (xxvii) any deposit or escrow of
funds in connection with adjustments to the Lobo Sale purchase price or
(xxviii) loans made by the Company to TransTexas or TARC which in the aggregate
do not exceed $50,000,000 principal amount outstanding at any one time.
"Permitted Liens" means Permitted TARC Liens, Permitted TEC Liens and
Permitted TransTexas Liens.
"Permitted Production Payment Obligations" means Volumetric Production
Payments and Dollar-Denominated Production Payments each as permitted to be
made hereunder, and similar burdens on the property of TransTexas or any
Subsidiary of TransTexas to the extent such burdens are limited in recourse to
(x) the properties subject to such interests or agreements, (y) the
Hydrocarbons produced from such properties, and (z) the proceeds of such
Hydrocarbons.
"Permitted 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
18
<PAGE> 25
Entities 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 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,
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; (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
$3,000,000; (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; (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 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 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 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 to
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
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 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
19
<PAGE> 26
connection with the Port Commission Bond Financing; provided, that such 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 the Company or
its assignee under the Security Documents and (y) Liens on tank storage
facilities in the vicinity of the TARC refinery acquired after the date hereof.
"Permitted TEC 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 Company
in accordance with GAAP; (b) 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; (c) any extension,
renewal, or replacement of Liens created pursuant to either of clauses (a) or
(b) of this definition, provided that such Liens would have otherwise been
permitted under such clauses, and further provided that the Liens permitted by
this clause (c) shall not be spread to cover any additional Debt or property;
(d) Liens of the trustee under this Indenture and related collateral documents
governing the terms of the Senior TARC Mortgage Notes and the Senior TARC
Discount Notes; (e) deposits of cash or Cash Equivalents to secure appeal or
supersedeas bonds (or to secure reimbursement obligations or letters of credit
in support of such bonds), (f) pledges or deposits made in the ordinary course
of business in connection with worker's compensation, unemployment insurance,
and other types of social security legislation, property insurance and
liability insurance or (g) a Lien on the stock of an Accounts Receivable
Subsidiary securing a guaranty of the Debt of an Accounts Receivable Subsidiary
described in the definition of Unrestricted Non-Recourse Debt.
"Permitted TransTexas 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
TransTexas Entities 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 any of the TransTexas Entities in accordance
with GAAP; (c) (i) pledges of assets or deposits of cash or Cash Equivalents to
secure the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business (or to
secure reimbursement obligations or letters of credit in support of such bonds)
in an aggregate amount not in excess of 5% of the SEC PV10 indicated on
TransTexas' most recent Reserve Report at the time such pledges or deposits are
made or (ii) pledges of assets, the fair market value of which is not in excess
of $40,000,000 in the aggregate pledged at any one time, or deposits of cash or
Cash Equivalents, in each case, to secure appeal or supersedeas bonds (or to
secure reimbursement obligations or letters of credit in support of such
bonds); (d) Liens encumbering customary initial deposits and margin deposits
securing Swap Obligations or Permitted Hedging Transactions; (e) pledges of
assets including, without limitation, the mortgage of a production payment by a
Hedging Subsidiary, to secure margin obligations, settlement obligations,
reimbursement obligations or letters of credit in connection with Permitted
Hedging Transactions; provided that, at the time such pledge is made (or, if
such pledge secures future Permitted Hedging Transactions, at the time any such
Permitted Hedging Transaction is entered into), the maximum
20
<PAGE> 27
aggregate exposure under such Permitted Hedging Transactions does not exceed
the greater of (i) $25,000,000 or (ii) 10% of the SEC PV10 indicated on
TransTexas' then most recent Reserve Report; (f) easements, rights-of-way,
zoning, similar restrictions and other similar encumbrances or title defects
incurred in the ordinary course of business which, in the aggregate, are not
material in amount, and which do not in any case materially detract from the
value of the property subject thereto (as such property is used by any of the
TransTexas Entities) or materially interfere with the ordinary conduct of the
business of any of the TransTexas Entities; (g) Liens arising by operation of
law in connection with judgments, only to the extent, for an amount and for a
period not resulting in an Event of Default with respect thereto; (h) Liens
securing Debt or other obligations not in excess of $3,000,000 in the aggregate
outstanding at any one time and Liens existing on the date of this Indenture;
(i) pledges or deposits made in the ordinary course of business in connection
with worker's compensation, unemployment insurance, and other types of social
security legislation, property insurance and liability insurance; (j) Liens
granted on Equipment, Inventory or Receivables; (k) Liens granted in connection
with the Presale of Gas, provided that all of the proceeds from such Presale of
Gas shall be applied to an Intercompany Loan Redemption; (l) Liens created on
acreage drilled or to be drilled pursuant to Drilling Programs, on Hydrocarbons
produced therefrom and on the proceeds of such Hydrocarbons to secure
TransTexas' obligations thereunder, provided that (i) the number of wells
included in such program commenced in any fiscal year does not exceed 30 per
fiscal year (plus the number of wells included in programs commenced in prior
years but not yet completed), (ii) such obligations are limited to a percentage
of production from such wells, (iii) such Liens survive only until the Person
to whom such Lien was granted has received production with a value equal to the
reimbursable costs, expenses and fees related to property and services provided
or paid for by such Person plus an agreed-upon interest component, and (iv)
such Liens secure obligations that are nonrecourse to each of the Company or
its Subsidiaries; (m) Liens on the assets of any entity existing at the time
such assets are acquired by any of the TransTexas 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 TransTexas Entities and (ii) do not extend to any other assets of
any of the Company or its Subsidiaries; (n) any extension, renewal, or
replacement of Liens created pursuant to any of clauses (a) through (g), (i),
(k) through (m) or (q) through (t) of this definition, provided that such Liens
would have otherwise been permitted under such clauses, and further provided
that the Liens permitted by this clause (n) do not secure any additional Debt
or encumber any additional property; (o) Liens securing (i) Royalty Payment
Obligations and (ii) Permitted Production Payment Obligations; (p) Liens on the
assets of any of the TransTexas Entities in favor of another TransTexas Entity;
(q) Liens that secure Unrestricted Non-Recourse Debt; provided however, that at
the time of incurrence the aggregate fair market value of the assets securing
such Lien (exclusive of the stock of the applicable Unrestricted Subsidiary)
shall not exceed the amount of allowed Unrestricted Non-Recourse Debt of
TransTexas; (r) Liens on the proceeds of any property subject to a Permitted
TransTexas Lien or on deposit accounts containing any such proceeds; (s) Liens
on the proceeds of any property that is not Collateral; (t) Liens (including
extensions and renewals thereof) on real or personal property, acquired after
the Issue Date ("New TransTexas Property"); provided, however, that (i) such
Lien is created solely for the purpose of securing Debt Incurred to finance the
cost (including the cost of improvements or construction) of New TransTexas
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 TransTexas Property, (ii) the
principal amount of the Debt secured by such Lien does not exceed 100% of such
cost including costs and fees related to the financing thereof, (iii) any such
Lien shall not extend to or cover any property or assets other than such item
of New TransTexas property and any improvements on such New TransTexas
Property; (u) Liens of the trustee under the Indenture and related collateral
documents governing the terms of the TransTexas Senior Notes and (v) Liens in
favor of the Company or its assignee under the Security Documents.
21
<PAGE> 28
"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" means the first phase of the Capital Improvement Program
including the following process units and supporting facilities: the Delayed
Coking Unit, the HDS Unit, the Naphtha Pretreater, the No. 2 Reformer, the
Sulfur Recovery System and the Offsite Facilities.
"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, TARC'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" means the second phase of the Capital Improvement Program
including the following process units and supporting facilities: the FCC Unit,
the Alkylation Unit and the Offsite Facilities.
"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, TARC'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 TARC as used in the Disbursement Agreement, which describe and show
the proposed expansion and modification of TARC's refinery and (b) a budget
prepared by or on behalf of TARC as used in the Disbursement Agreement.
"Pledged Stock" shall have the meaning given to it in Section 12.7
hereof.
"Port Commission Bond Financing" means a financing transaction
involving the following elements: (a) the transfer of TARC's interest in all or
some of the following assets which are under construction in or near TARC's
refinery: (i) the Prospect Road tank farm; (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 (the "Tax-Exempt Issuer") or its affiliate 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 of proceeds from
such bonds to TARC or one of its Subsidiaries for the purpose of financing the
completion of the Port Facility Assets.
22
<PAGE> 29
"Preferred Stock" means, with respect to any corporation, any class or
classes (however designated) of Capital Stock of such Person that is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation over
shares of Capital Stock of any other class of such corporation.
"Presale of Gas" means any advance payment agreement or other
arrangement pursuant to which TransTexas or any Guarantor of the TransTexas
Intercompany Loan, having received full payment of the purchase price for a
specified quantity of Hydrocarbons prior to the first scheduled date of
delivery, is required to deliver, in one or more installments subsequent to the
date of such agreement or arrangement, such quantity of Hydrocarbons to the
purchaser of such Hydrocarbons pursuant to and during the term of such
agreement or arrangement; provided, however, that the term "Presale of Gas"
shall not include (i) any such agreement or other arrangement covering
deliveries of Hydrocarbons for a period not exceeding three calendar months and
pursuant to which TransTexas or such Guarantor has received full payment of the
purchase price within 120 days of the last scheduled date of delivery, (ii) a
transaction to the extent and only to the extent that it results in the
creation of any Permitted TransTexas Lien under clauses (l) or (o) of the
definition of "Permitted TransTexas Liens," (iii) Permitted Hedging
Transactions or (iv) an Asset Sale involving Hydrocarbon reserves.
"principal amount" when used with respect to the Senior Secured
Discount Notes means the principal amount of such Debt as indicated on the face
of such Debt instrument.
"Prior Notes" means, collectively, the Senior TransTexas Notes, the
Senior TARC Mortgage Notes and the Senior TARC Discount Notes.
"Project Costs" means, with respect to a proposed expansion or
modification of TARC's refinery, the aggregate costs required to complete such
expansion or modification of the refinery in accordance with the Plans therefor
and applicable legal requirements, including direct costs related thereto such
as construction, engineering and design costs and the cost of site work,
construction permits, certificates and bonds, fixtures, machinery, and
equipment.
"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.
"QIB" shall mean "qualified institutional buyer" as defined in Rule
144A.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Receivables" means and includes, as to any Person, any and all of
such Person's now owned or hereafter acquired "accounts" as such term is
defined in Article 9 of the Uniform Commercial Code in the State of New York,
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.
23
<PAGE> 30
"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 and Exhibit B.
"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 and Exhibit B, 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
(i) the Notes and (ii) the capital stock of TARC, TransTexas and TTXD pledged
or to be pledged to the Trustee, in each case among the Company and the
Trustee, as in effect on the Issue Date and as amended from time to time,
provided that any such amendment is not materially adverse to the holders of
the Notes.
"Reimbursement and Credit Facility" means the Reimbursement and Credit
Agreement dated January 25, 1996, pursuant to which a third party caused a
$20,000,000 letter of credit to be issued to collateralize a supersedeas bond
on behalf of TransTexas, as amended from time to time in a manner not adverse
to the Holders of the Notes.
"Related Business" means any of the Related TARC Business, the Related
TransTexas Business and the Related TTXD Business.
"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).
"Related TARC 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, (ii) owning and
24
<PAGE> 31
\operating an Accounts Receivable Subsidiary and (iii) 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.
"Related TransTexas Business" means (i) the exploration for,
acquisition of, development of, production, transportation, gathering, and
processing (in connection with natural gas and natural gas liquids only) of,
crude oil, natural gas, condensate, and natural gas liquids; provided that the
Related TransTexas Business shall not include any refining or distilling of
Hydrocarbons other than processing and fractionating natural gas and natural
gas liquids, (ii) the drilling and energy services business and pipeline
services business or (iii) owning and operating a Hedging Subsidiary.
"Related TTXD Business" means the drilling and energy services
business and pipeline services business.
"Release Request" means a written request of the Company (or with
respect to the Security Documents, the grantor of the security interest
thereunder) in the form of an Officers' Certificate delivered pursuant to
Article XII.
"Required Phase I Completion Date" means March 31, 1999.
"Reserve Report" means a report prepared by independent petroleum
engineers with respect to Hydrocarbon reserves in accordance with guidelines
published by the SEC.
"Restricted Investment" means any direct or indirect Investment by the
Company or any Subsidiary of the Company other than a Permitted Investment.
"Restricted Notes" means, collectively, the Restricted Senior Secured
Notes and the Restricted Senior Secured Discount Notes.
"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 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 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 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 Transfer
Agreement, the TransTexas Drilling Agreement, the Services Agreement, the
Office Leases or the Tax Allocation Agreement, (v) any dividend, distribution
or other payment to TARC by any of its Subsidiaries or TransTexas by any of its
Subsidiaries, (vi) any Intercompany Loan Redemptions, (vii) any redemption,
repurchase or other retirement for value of the TARC Warrants by the Company or
TARC, including any
25
<PAGE> 32
premium paid thereon, (viii) any redemption, repurchase or other retirement for
value of the TEC Preferred Stock by the Company, including any premium paid
thereon, (ix) any redemption, defeasance, repurchase or other retirement for
value of the Senior TARC Mortgage Notes by TARC, including any premium paid
thereon, (x) any redemption, defeasance, repurchase or other retirement for
value of the Senior TARC Discount Notes by TARC, including any premium paid
thereon, (xi) any redemption, defeasance, repurchase or other retirement for
value of the Senior TransTexas Notes by TransTexas, including any premium paid
thereon, (xii) an Investment by TransTexas in, or distribution by TransTexas
on, its Capital Stock pursuant to share repurchases or dividends on its Capital
Stock in each case as described in the Offering Circular under the caption
"Transactions" in an aggregate amount not to exceed $400,000,000, (xiii) 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 (1)(g), (3)(j), 4(j) or 5(e) of Section 4.11,
(xiv) the distribution by TransTexas of shares of capital stock of TTXD in
connection with the TTXD Spin-off, (xv) after the repayment of the TARC
Intercompany Loan or the TransTexas Intercompany Loan, dividends or other
distributions on shares of common stock of TARC or TransTexas, respectively,
provided that each such dividend or distribution is paid to all holders of
common stock of such entity on a pro rata basis, (xvi) the purchase by TARC or
TransTexas of shares of Capital Stock of TARC, TransTexas or TTXD in connection
with each of their 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 non-affiliates of the issuer measured from the date of the first
such purchase, (xvii) dividends or other payments not to exceed $23,000,000 in
the aggregate from the Company to TransAmerican, and (xviii) any repayment or
retirement for value by TARC or TransTexas of any loan from the Company
incurred pursuant to clause (1)(q), (1)(r), (2)(o), (2)(p), (3)(u), (3)(v),
(4)(s), or (4)(t) of Section 4.11.
"Restricted Senior Secured Discount Notes" means Senior Secured
Discount Notes that bear or are required to bear the legends set forth in
Exhibit B hereto.
"Restricted Senior Secured Notes" means Senior Secured Notes that bear
or are required to bear the legends set forth in Exhibit A hereto.
"Revolving Credit Facility" means any revolving credit facility
between TransTexas, on the one hand, and any banks or other lenders, on the
other hand.
"Royalty Payment Obligations" means (i) royalties, overriding
royalties, revenue interests, net revenue interests, net profit interests, and
reversionary interests, (ii) the interests of others in pooling or unitization
agreements, production sales contracts and operating agreements, (iii) Liens
arising under, in connection with or related to farm-out, farm-in, joint
operating, pooling, unitization or area of mutual interest agreements or other
similar or customary arrangements, agreements or interests, and (iv) similar
burdens on the property of TransTexas or any Subsidiary of TransTexas; each as
incurred in the ordinary course of business and to the extent such burdens are
limited in recourse to (x) the properties subject to such interests or
agreements, (y) the Hydrocarbons produced from such properties, and (z) the
proceeds of such Hydrocarbons.
"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.
26
<PAGE> 33
"Sale and Leaseback Transaction" means an arrangement relating to
property owned on the Issue Date or thereafter acquired whereby the Company or
a Subsidiary of the Company transfers such property to a Person and leases it
back from such Person.
"SEC" means the Securities and Exchange Commission.
"SEC PV10" means the standardized measure of future net cash flows
discounted at 10%, determined in all material respects in accordance with the
rules and regulations of the SEC, including the assumption of the continuation
of existing economic conditions and estimated by applying period-end gas and
condensate prices, adjusted for future price changes as allowed by contract, to
estimated future production of period-end proved reserves.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Security Documents" means the TARC Security Documents and the
TransTexas Security Documents and a collateral assignment by the Company of
each of these to the Trustee and a pledge by the Company of substantially all
of its assets, including its interest in the TEC Disbursement Account, the
Capital Stock of TARC, TransTexas and any other future Subsidiaries and the
Intercompany Notes and each other agreement relating to any Guarantee or the
pledge of assets to secure the Notes or the TransTexas Intercompany Loan or the
TARC Intercompany Loan that may be entered into on or after the Issue Date
pursuant to the terms of this Indenture.
"Security Interests" means the Liens on the Collateral created by the
Security Documents in favor of the Trustee (and TEC with respect to the TARC
Security Documents and the TransTexas Security Documents) for the benefit of
the Holders.
"Senior Debt" means, with respect to any Person, any Debt that is not
Subordinated Debt.
"Senior Secured Discount Notes" means, collectively, the Series A
Senior Secured Discount Notes and the Series B Senior Secured Discount Notes.
"Senior Secured Notes" means, collectively, the Series A Senior
Secured Notes and the Series B Senior Secured Notes.
"Senior TARC Discount Notes" means the Guaranteed First Mortgage
Discount Notes due 2002 issued by TARC and guaranteed by the Company.
"Senior TARC Mortgage Notes" means the Guaranteed First Mortgage Notes
due 2002 issued by TARC and guaranteed by the Company.
"Senior TransTexas Notes" means the 11 1/2% Senior Secured Notes due
2002 of TransTexas.
"Series A Senior Secured Discount Notes" means the Company's 13%
Series A Senior Secured Discount Notes due 2002, as authenticated and issued
under this Indenture.
"Series A Senior Secured Notes" means the Company's 11 1/2% Series A
Senior Secured Notes due 2002, as authenticated and issued under this
Indenture.
27
<PAGE> 34
"Series B Senior Secured Discount Notes" means the Company's 13%
Series B Senior Secured Discount Notes due 2002, as authenticated and issued
under this Indenture.
"Series B Senior Secured Notes" means the Company's 11 1/2% Series B
Senior Secured Notes due 2002, as authenticated and issued under this
Indenture.
"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 15,
2002.
"Subordinated Debt" means Debt of TARC or TransTexas that (i) requires
no payment of principal prior to or on the date on which all principal of and
interest on the respective Intercompany Loans is paid in full and (ii) is
subordinate and junior in right of payment to the respective Intercompany Loans
in the event of a liquidation.
"Subordinated Notes" means the $189,000,000 principal amount of 13
1/4% Series A Senior Subordinated Discount Notes due 2003 of TransTexas, in the
form in existence on the date hereof, the 13 1/4% Series B Senior Subordinated
Discount Notes due 2003 of TransTexas, the 13 3/4% Series C Senior Subordinated
Notes due 2001 of TransTexas and the 13 3/4% Series D Senior Subordinated Notes
due 2001 of TransTexas.
"Subordination Agreement" means each instrument of subordination
executed and delivered or to be executed and delivered by the Trustee (and any
trustee or collateral agent under or with respect to any of the Security
Documents) pursuant to Section 12.2(b).
"Subordination Request" means a written request of the Company (or
with respect to the Security Documents, the grantor of the security interest
thereunder) in the form of an Officers' Certificate delivered pursuant to
Section 12.2(b).
"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, a joint venture an investment in which would
constitute a Permitted Investment under clause (ix) of the definition thereof,
(ii) any Unrestricted Subsidiary of such Person, except for purposes of Section
4.10 or (iii) an Accounts Receivable Subsidiary.
28
<PAGE> 35
"Substitute Collateral" means property that is substituted for
Collateral in accordance with Section 12.6.
"Sulfur Recovery System" means the two sulfur units being constructed
as part of the Capital Improvement Program.
"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.
"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 TARC 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 TARC 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, TARC may utilize, to the extent reasonable, the most recent
available information for purposes of calculating the TARC Borrowing Base.
"TARC Collateral" means (x) the assets of TARC which are mortgaged or
pledged to the Company as security for the TARC Intercompany Loan in accordance
with the TARC Security Documents and (y) the Guarantees by the Subsidiaries of
TARC of the TARC Intercompany Loan.
"TARC Disbursement Account" means a segregated deposit account from
which funds will be disbursed pursuant to the terms of the Disbursement
Agreement.
"TARC Entities" means TARC and each of its Subsidiaries.
"TARC Guarantor Mortgage" means each mortgage, deed of trust,
assignment, security agreement and financing statement by each Guarantor of the
TARC Intercompany Loan to the trustee named therein for the benefit of the
Company.
"TARC Guarantor Security Agreement" means each Security Agreement,
Pledge and Financing Statement by each Guarantor of the TARC Intercompany Loan
in favor of the Company.
"TARC Intercompany Loan" means the senior secured promissory note from
TARC to the Company in the fully accreted principal amount of $920,000,000 upon
substantially the terms described in the form attached hereto as Exhibit I.
"TARC Intercreditor Agreement" means the Intercreditor and Collateral
Agency Agreement among the Trustee, the trustee under the indenture relating to
the Senior TARC Mortgage Notes and the
29
<PAGE> 36
Senior TARC Discount Notes, the Company and Firstar Bank of Minnesota, N.A., as
collateral agent, in substantially the form attached hereto as Exhibit M.
"TARC Interest Increase" means the .25% per annum increase in the rate
of interest borne by the TARC Intercompany Loan on or after June 15, 1999 which
occurs if the cost to complete Phase I is in excess of $245,000,000.
"TARC Mortgage" means the Mortgage, Assignment of Leases and Rents,
Security Agreement and Financing Statement from TARC in favor of the Company.
"TARC Pledge Agreement" means the Pledge Agreement between TARC and the
Company.
"TARC Security Agreement" means the Security Agreement between TARC and
the Company.
"TARC Security Documents" means the TARC Security Agreement, the TARC
Pledge Agreement, the Disbursement Agreement, the TARC Mortgage, the TARC
Intercreditor Agreement, a registration rights agreement relating to the shares
of TARC Common Stock pledged to the Indenture Trustee and each other agreement
relating to the pledge of assets to secure the TARC Intercompany Loan and any
guarantee of the obligations of TARC under the TARC Intercompany Loan by any
Guarantor that may be entered into after the date of the TARC Intercompany
Loan, pursuant to the terms of the TARC Intercompany Loan.
"TARC Shared Collateral" means the Collateral securing the Senior TARC
Mortgage Notes, the Senior TARC Discount Notes, and the TARC Intercompany Loan.
"TARC Warrants" means the Common Stock Purchase Warrants of TARC
issued on February 23, 1995.
"Tax Allocation Agreement" means the Tax Allocation Agreement, dated
as of August 24, 1993, among TNGC Holdings Corporation, the Company and certain
Subsidiaries, as in effect on the Issue Date and as amended from time to time,
provided that any such amendment is not materially adverse to the holders of
the Notes.
"TEC Disbursement Account" means a segregated deposit account from
which funds will be disbursed pursuant to the Disbursement Agreement.
"TEC Preferred Stock" means the 1,000 shares of Preferred Stock issued
on February 23, 1995.
"Third Party Consent Agreement" means any mineral lease, right-of-way,
easement, or any farm-out, farm-in, joint operating, joint venture or area of
mutual interest agreement to which TransTexas or any of its Subsidiaries is a
party (i) that is included in the Collateral or relates to an asset included in
the Collateral, (ii) that requires the consent or approval of any Person (a)
for the creation, perfection, maintenance or protection of a valid security
interest in, or Lien against, any of the Collateral in favor of the Company or
the Trustee or (b) upon foreclosure of the Trustee's Lien, for the Company or
the Trustee to acquire or sell, assign, dispose of or otherwise transfer such
mineral lease, right-of-way, easement, or farm-out, farm-in, joint operating,
joint venture or area of mutual interest agreement or any right or interest of
TransTexas or any of its Subsidiaries thereunder, or for the Company or the
Trustee to exercise any or
30
<PAGE> 37
all of its rights or remedies under any of the Security Documents and (iii)
with respect to which such consent or approval has not yet been obtained.
"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, 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.
"TransTexas Borrowing Base" means, as of any date, an amount equal to
the sum of (a) 85% of the book value of all accounts receivable owned by
TransTexas and its Subsidiaries (excluding any accounts receivable that are
more than 90 days past due, less (without duplication) the allowance for
doubtful accounts attributable to such current accounts receivable) calculated
on a consolidated basis and in accordance with GAAP and (b) 70% of the current
market value of all inventory owned by TransTexas 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, TransTexas may utilize, to the
extent reasonable, the most recent available information for purposes of
calculating the TransTexas Borrowing Base.
"TransTexas Collateral" means (x) the assets of TransTexas which are
mortgaged or pledged to the Company pursuant to the terms of the TransTexas
Security Documents and (y) the guarantees by the Subsidiaries of TransTexas of
the TransTexas Intercompany Loan.
"TransTexas Disbursement Agreement" means the Disbursement Agreement
among TransTexas, the Company, the Trustee and the disbursement agent named
therein, as amended pursuant to the terms thereof.
"TransTexas Drilling Agreement" means a drilling services agreement
between TransTexas and TTXD relating to the provision by TTXD to TransTexas of
drilling and related services at market rates, upon the terms approved by the
board of directors of each of TTXD and TransTexas.
"TransTexas Entities" means TransTexas and each of its Subsidiaries.
"TransTexas Guarantor Mortgage" means each mortgage, deed of trust,
assignment, security agreement and financing statement by each Guarantor of the
TransTexas Intercompany Loan to the trustee named therein for the benefit of
the Company.
31
<PAGE> 38
"TransTexas Guarantor Security Agreement" means each security
agreement, pledge and financing statement by each Guarantor of the TransTexas
Intercompany Loan in favor of the Company.
"TransTexas Intercompany Loan" means the senior secured promissory
note from TransTexas to the Company in the principal amount of $450,000,000
upon substantially the terms described in the form attached hereto as Exhibit
L.
"TransTexas Intercreditor Agreement" means the Intercreditor and
Collateral Agency Agreement among the Trustee, the trustee under the indenture
relating to the Senior TransTexas Notes, the Company and Firstar Bank of
Minnesota, N.A., as collateral agent, upon substantially the terms described in
the form attached hereto as Exhibit N.
"TransTexas Interest Increase" means an increase in the rate of
interest borne by the TransTexas Intercompany Loan from 10 7/8% to 12 7/8%
during a TransTexas Interest Increase Quarter.
"TransTexas Interest Increase Quarter" means any fiscal quarter
immediately following a Capital Expenditure Testing Quarter, in which Capital
Expenditure Testing Quarter the Capital Expenditures of TransTexas exceeded the
Consolidated EBITDA of TransTexas for the fiscal quarter immediately preceding
such Capital Expenditure Testing Quarter.
"TransTexas Mortgage" means the several Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statements by
TransTexas to the trustee named therein for the benefit of the Company.
"TransTexas Security Agreement" means the Security Agreement, Pledge
and Financing Statement by TransTexas, in favor of the Company.
"TransTexas Security Documents" means the TransTexas Mortgage, the
TransTexas Security Agreement, the TransTexas Disbursement Agreement, the
TransTexas Intercreditor Agreement, a registration rights agreement relating to
the shares of TransTexas common stock pledged to the Indenture Trustee and each
other agreement relating to the pledge of assets to secure the TransTexas
Intercompany Loan and any guarantee of the obligations of TransTexas under the
TransTexas Intercompany Loan by any Guarantor that may be entered into after
the date of the TransTexas Intercompany Loan, pursuant to the terms of the
TransTexas Intercompany Loan.
"TransTexas Shared Collateral" means the Collateral securing the
Senior TransTexas Notes and the TransTexas Intercompany Loan.
"Trust Officer" means any officer within the corporate trust
department (or any successor group) of the Trustee including any vice
president, assistant vice president, secretary, assistant secretary or any
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the Persons who at that time shall be
such officers, and also means, with respect to a particular corporate trust
matter, any other officer of the corporate trust department (or any successor
group) of the Trustee to whom such trust matter is referred because of his
knowledge of and familiarity with the particular subject.
32
<PAGE> 39
"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 the Investments
described herein under clauses (xii) and (xiii) under the definition of
"Permitted Investments" contained herein.
"TTXD Entities" means TTXD and each of its Subsidiaries.
"TTXD Equity Investment" means an equity Investment by TransTexas in
TTXD in an aggregate amount not in excess of $75,000,000.
"TTXD Spin-off" means (i) the transfer of the drilling and integrated
services business and pipeline services business and related assets from
TransTexas to TTXD and (ii) the (x) dividend of shares of common stock of TTXD
to holders of TransTexas common stock or (y) any other transaction that would
result, in the case of (x) or (y), in TransTexas being the beneficial owner of
less than 50% of the common stock of TTXD.
"Unrestricted Non-Recourse Debt" of the Company or any of its
Subsidiaries means (i) Debt of such Person that is secured solely (other than
with respect to 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 (x)
$25,000,000 in the case of TransTexas or (y) 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 clauses (i) or (ii), as applicable,
of Section 4.3.
"Unrestricted Subsidiary" of any Person means any other Person ("Other
Person") that would, but for this definition of "Unrestricted Subsidiary" be a
Subsidiary of such Person organized or acquired after the Issue Date as to
which all of the following conditions apply: (i) neither such Person nor any of
its other Subsidiaries provides credit support of any Debt of such Other Person
(including any undertaking, agreement or instrument evidencing such Debt),
other than Unrestricted Non-Recourse Debt; (ii) such Other Person is not
liable, directly or indirectly, with respect to any Debt other than
Unrestricted Subsidiary Debt; (iii) neither such Person nor any of its
Subsidiaries has made an Investment in such Other Person unless such Investment
was permitted by the provisions of Section 4.3 and (iv) the Board of Directors
of such Person, as provided below, shall have designated such Other Person to
be an Unrestricted Subsidiary on or prior to the date of organization or
acquisition of such Other Person. Any such designation by the Board of
Directors of such Person shall be evidenced to the Trustee by delivering to the
Trustee a resolution thereof giving effect to such designation and an Officers'
Certificate certifying that such designation complies with the foregoing
conditions. The Board of Directors of any Person may designate any Unrestricted
Subsidiary of such Person as a Subsidiary of such Person; provided, that, (a)
if the Unrestricted Subsidiary has any Debt outstanding or is otherwise liable
for any Debt or has a negative Net Worth, then immediately after giving pro
forma effect to such designation, such Person could incur
33
<PAGE> 40
at least $1.00 of additional Debt pursuant to the provisions described in
Section 4.11 (assuming, for purposes of this calculation, that each dollar of
negative Net Worth is equal to one dollar of Debt), (b) all Debt of such
Unrestricted Subsidiary shall be deemed to be incurred by a Subsidiary of the
Person on the date such Unrestricted Subsidiary becomes a Subsidiary, and (c)
no Default or Event of Default would occur or be continuing after giving effect
to such designation. Any subsidiary of an Unrestricted Subsidiary shall be an
Unrestricted Subsidiary for purposes of this Indenture. Notwithstanding the
foregoing TransTexas Exploration Corporation shall be deemed to be an
Unrestricted Subsidiary of TransTexas.
"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, (a) when used with respect to Senior
Secured Discount Notes prior to June 15, 1999, the Accreted Value of such
Senior Secured Discount Notes, and (b) when used with respect to (i) Senior
Secured Discount Notes on or after June 15, 1999 or (ii) Senior Secured Notes,
the outstanding principal amount of such Notes, plus all accrued and unpaid
interest thereon.
"Vehicles" means all trucks, automobiles, trailers and other vehicles
covered by a certificate of title.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means Capital Stock of a Person having generally the
right to vote in the election of directors of such Person.
"Weighted Average Life" means, as of the date of determination, with
respect to any debt instrument, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such debt instrument
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
Section 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:
34
<PAGE> 41
"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 3 Rules of Construction. Unless the context otherwise
requires:
(l) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words
in the plural include the singular;
(5) provisions apply to successive events and
transactions;
(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 1 Form and Dating. The Senior Secured 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 Senior Secured Discount Notes and the
Trustee's certificate of authentication, in respect thereof, shall be
substantially in the form of Exhibit B hereto, 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,
35
<PAGE> 42
legends or endorsements not contained in the forms of Note attached as Exhibit
A or Exhibit B 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 Senior Secured Notes will be issued (i) in global form (the
"Global Senior Secured 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 Senior Secured Notes"), substantially in
the form of Exhibit A attached hereto (excluding the text referred to in
footnotes 1 and 2 thereto). The Global Senior Secured Note shall represent the
aggregate amount of outstanding Senior Secured Notes from time to time endorsed
thereon; provided, that the aggregate amount of outstanding Senior Secured
Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of the
Global Senior Secured Note to reflect the amount of any increase or decrease in
the amount of outstanding Senior Secured 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.
The Senior Secured Discount Notes will be issued (i) in global form
(the "Global Senior Secured Discount Note"), substantially in the form of
Exhibit B attached hereto (including the text referred to in footnotes 1 and 2
thereto) and (ii) in definitive form (the "Definitive Senior Secured Notes"),
substantially in the form of Exhibit B attached hereto (excluding the text
referred to in footnotes 1 and 2 thereto). The Global Senior Secured Discount
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 Senior Secured Discount Note to reflect the amount of any increase or
decrease in the amount of outstanding Senior Secured Discount 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 Execution and Authentication. Two Officers shall sign,
or one Officer shall sign and one Officer or any Assistant Secretary shall
attest to, the Notes for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Notes and may be in facsimile form.
If an Officer whose signature is on a Note was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless and the Company
shall nevertheless be bound by the terms of the Notes and this Indenture.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note but such signature
shall be conclusive evidence that the Note has been authenticated pursuant to
the terms of this Indenture.
The Trustee shall authenticate Senior Secured Notes for original issue
in the aggregate principal amount of up to $475,000,000, and Senior Secured
Discount Notes for original issue in the aggregate principal amount of up to
$1,130,000,000, upon a written order of the Company in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated. The
aggregate principal amount of Senior Secured Notes
36
<PAGE> 43
outstanding at any time may not exceed $475,000,000, and the aggregate
principal amount of Senior Secured Discount Notes outstanding at any time may
not exceed $1,130,000,000, 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 in substitution of Notes originally issued to reflect any
name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless otherwise provided in the appointment,
an authenticating agent may authenticate Notes 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 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 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
37
<PAGE> 44
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 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 6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Senior Secured Notes. When
Definitive Senior Secured Notes are presented by a Holder to the Registrar with
a request (1) to register the transfer of the Definitive Senior Secured Notes
or (2) to exchange such Definitive Senior Secured Notes for an equal principal
amount of Definitive Senior Secured 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
Senior Secured 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 Senior Secured Note, such request shall be
accompanied by the following additional documents:
(i) if such Restricted Senior Secured 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 Senior Secured 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 Senior Secured 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 Senior Secured Note for a Beneficial
Interest in a Global Senior Secured Note. A Definitive Senior Secured Note may
be exchanged for a beneficial interest in a Global Senior Secured Note only
upon receipt by the Trustee of a Definitive Senior Secured 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 Senior Secured Note to reflect an increase
in the aggregate principal amount of the Senior Secured Notes
represented by the Global Senior Secured Note, and
(ii) if such Definitive Senior Secured Note is a Restricted
Senior Secured Note, a certification (in substantially the form of
Exhibit C attached hereto) to the effect that
38
<PAGE> 45
such Definitive Senior Secured Note is being transferred to a QIB in
accordance with Rule 144A;
in which case the Trustee shall cancel such Definitive Senior Secured Note and
cause the aggregate principal amount of Senior Secured Notes represented by the
Global Senior Secured Note to be increased accordingly. If no Global Senior
Secured Note is then outstanding, the Company shall issue and the Trustee shall
authenticate a new Global Senior Secured Note in the appropriate principal
amount.
(c) Transfer and Exchange of Global Senior Secured Notes. The
transfer and exchange of Global Senior Secured 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 Senior Secured Note
for a Definitive Senior Secured 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 Senior Secured 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 Senior Secured 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 Senior Secured Note
in the appropriate principal amount; provided, that in the case of a Restricted
Senior Secured 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 Senior Secured Notes issued in exchange for a beneficial
interest in a Global Senior Secured 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 Senior Secured Notes.
Notwithstanding any other provision of this Indenture, the Global Senior
Secured 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:
39
<PAGE> 46
(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 Senior
Secured Notes under this Indenture,
then the Company shall execute and the Trustee shall authenticate and make
available for delivery, Definitive Senior Secured Notes in an aggregate
principal amount equal to the aggregate principal amount of the Global Senior
Secured Note in exchange for such Global Senior Secured Note.
(f) Cancellation and/or Adjustment of Global Senior Secured Notes.
At such time as all beneficial interests in the Global Senior Secured Note have
either been exchanged for Definitive Senior Secured Notes, redeemed,
repurchased or cancelled, the Global Senior Secured 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 Senior Secured Note is
exchanged for Definitive Senior Secured Notes, redeemed, repurchased or
cancelled, the aggregate principal amount of Senior Secured Notes represented
by such Global Senior Secured Note shall be reduced accordingly and an
endorsement shall be made on such Global Senior Secured Note by the Trustee to
reflect such reduction.
(g) General Provisions Relating to Transfers and Exchanges of Senior
Secured Notes. To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Senior Secured
Notes and Global Senior Secured Notes at the Registrar's request. All
Definitive Senior Secured Notes and Global Senior Secured Notes issued upon any
registration of transfer or exchange of Definitive Senior Secured Notes or
Global Senior Secured 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 Senior Secured Notes or Global Senior Secured
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 Senior Secured Notes during a period beginning at the opening of
business 15 days before the day of any selection of Senior Secured 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 Senior
Secured Note so selected for redemption in whole or in part, except the
unredeemed portion of any Senior Secured Note being redeemed in part; or (iii)
register the transfer of or exchange a Senior Secured Note between a record
date and the next succeeding interest payment date.
Prior to due presentment for the registration of a transfer of any
Senior Secured Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Senior Secured Note is registered as the absolute
owner of such Senior Secured Note for all purposes, and neither the Trustee,
any Agent nor the Company shall be affected by notice to the contrary.
40
<PAGE> 47
(h) Exchange of Series A Senior Secured Notes for Series B Senior
Secured Notes. The Series A Senior Secured Notes may be exchanged for Series B
Senior Secured 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 Senior Secured Notes, the
transactions contemplated by the Exchange Offer have been
consummated; and
(B) the principal amount of Series A Senior Secured Notes properly
tendered in the Exchange Offer that are represented by a
Global Senior Secured Note and the principal amount of Series
A Senior Secured Notes properly tendered in the Exchange Offer
that are represented by Definitive Senior Secured Notes, the
name of each Holder of such Definitive Senior Secured Notes,
the principal amount at maturity properly tendered in the
Exchange Offer by each such Holder and the name and address to
which Definitive Senior Secured Notes for Series B Senior
Secured Notes shall be registered and sent for each such
Holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Series B Senior Secured 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 and (iii) a Company Order,
shall authenticate (A) a Global Senior Secured Note for Series B Senior Secured
Notes in an aggregate principal amount equal to the aggregate principal amount
of Series A Senior Secured Notes represented by a Global Senior Secured Note
indicated in such Officers' Certificate as having been properly tendered and
(B) Definitive Senior Secured Notes representing Series B Senior Secured 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 Senior Secured Note
for the Series B Senior Secured Notes is less than the principal amount at
maturity of the Global Senior Secured Note for the Series A Senior Secured
Notes, the Trustee shall make an endorsement on such Global Senior Secured Note
for Series A Senior Secured Notes indicating a reduction in the principal
amount at maturity represented thereby.
The Trustee shall deliver such Definitive Senior Secured Notes for
Series B Senior Secured Notes to the Holders thereof as indicated in such
Officers' Certificate.
(i) Transfer and Exchange of Definitive Senior Secured Discount
Notes. When Definitive Senior Secured Discount Notes are presented by a Holder
to the Registrar with a request (1) to register the transfer of the Definitive
Senior Secured Discount Notes or (2) to exchange such Definitive Senior Secured
Discount Notes for an equal principal amount of Definitive Senior Secured
Discount 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 Senior Secured Discount
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 Senior Secured Discount Note, such request shall be accompanied
by the following additional documents:
41
<PAGE> 48
(i) if such Restricted Senior Secured Discount 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 D attached hereto); or
(ii) if such Restricted Senior Secured Discount 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 D
attached hereto); or
(iii) if such Restricted Senior Secured Discount 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 D 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.
(j) Transfer of a Definitive Senior Secured Discount Note for a
Beneficial Interest in a Global Senior Secured Discount Note. A Definitive
Senior Secured Discount Note may be exchanged for a beneficial interest in a
Global Senior Secured Discount Note only upon receipt by the Trustee of a
Definitive Senior Secured Discount 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 Senior Secured Discount Note to reflect an
increase in the aggregate principal amount of the Senior Secured
Discount Notes represented by the Global Senior Secured Discount Note,
and
(ii) if such Definitive Senior Secured Discount Note is a
Restricted Senior Secured Discount Note, a certification (in
substantially the form of Exhibit D attached hereto) to the effect
that such Definitive Senior Secured Discount Note is being transferred
to a QIB in accordance with Rule 144A;
in which case the Trustee shall cancel such Definitive Senior Secured Discount
Note and cause the aggregate principal amount of Senior Secured Discount Notes
represented by the Global Senior Secured Discount Note to be increased
accordingly. If no Global Senior Secured Discount Note is then outstanding,
the Company shall issue and the Trustee shall authenticate a new Global Senior
Secured Discount Note in the appropriate principal amount.
(k) Transfer and Exchange of Global Senior Secured Discount Notes.
The transfer and exchange of Global Senior Secured Discount 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.
(l) Transfer of a Beneficial Interest in a Global Senior Secured
Discount Note for a Definitive Senior Secured Discount 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
Senior Secured Discount Note, the Trustee shall, in accordance with the
standing instructions and procedures existing between the Depository and the
Trustee,
42
<PAGE> 49
cause the aggregate principal amount of Global Senior Secured Discount 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 Senior Secured Discount Note in the appropriate
principal amount; provided, that in the case of a Restricted Security, 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 D
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 D 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 D 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 Senior Secured Discount Notes issued in exchange for a
beneficial interest in a Global Senior Secured Discount Note shall be
registered in such names and in such authorized denominations as the Depository
shall instruct the Trustee.
(m) Transfer and Exchange of Global Senior Secured Discount Notes.
Notwithstanding any other provision of this Indenture, the Global Senior
Secured Discount 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 Senior
Secured Discount Notes under this Indenture,
then the Company shall execute and the Trustee shall authenticate and make
available for delivery, Definitive Senior Secured Discount Notes in an
aggregate principal amount equal to the aggregate principal amount of the
Global Senior Secured Discount Note in exchange for such Global Senior Secured
Discount Note.
(n) Cancellation and/or Adjustment of Global Senior Secured Discount
Notes. At such time as all beneficial interests in the Global Senior Secured
Discount Note have either been exchanged for Definitive Senior Secured Discount
Notes, redeemed, repurchased or cancelled, the Global Senior Secured Discount
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
Senior Secured Discount Note is exchanged for Defini-
43
<PAGE> 50
tive Senior Secured Discount Notes, redeemed, repurchased or cancelled, the
aggregate principal amount of Senior Secured Discount Notes represented by such
Global Senior Secured Discount Note shall be reduced accordingly and an
endorsement shall be made on such Global Senior Secured Discount Note by the
Trustee to reflect such reduction.
(o) General Provisions Relating to Transfers and Exchanges of Senior
Secured Discount Notes. To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Definitive Senior
Secured Discount Notes and Global Senior Secured Discount Notes at the
Registrar's request. All Definitive Senior Secured Discount Notes and Global
Senior Secured Discount Notes issued upon any registration of transfer or
exchange of Definitive Senior Secured Discount Notes or Global Senior Secured
Discount 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 Senior Secured Discount Notes or Global Senior
Secured Discount 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, 3.7, 4.10, 4.14, 4.21, 4.24 and 9.5 of this Indenture).
The Company shall not be required to (i) issue, register the transfer
of or exchange Senior Secured Discount Notes during a period beginning at the
opening of business 15 days before the day of any selection of Senior Secured
Discount 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 Senior Secured Discount Note so selected for redemption in whole
or in part, except the unredeemed portion of any Senior Secured Discount Note
being redeemed in part; or (iii) register the transfer of or exchange a Senior
Secured Discount Note between a record date and the next succeeding interest
payment date.
Prior to due presentment for the registration of a transfer of any
Senior Secured Discount Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Senior Secured Discount Note is
registered as the absolute owner of such Senior Secured Discount Note for all
purposes, and neither the Trustee, any Agent nor the Company shall be affected
by notice to the contrary.
(p) Exchange of Series A Senior Secured Discount Notes for Series B
Senior Secured Discount Notes. The Series A Senior Secured Discount Notes may
be exchanged for Series B Senior Secured Discount 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 Senior Secured Discount Notes,
the transactions contemplated by the Exchange Offer have been
consummated; and
(B) the principal amount of Series A Senior Secured Discount Notes
properly tendered in the Exchange Offer that are represented
by a Global Senior Secured Discount Note and the principal
amount of Series A Senior Secured Discount Notes properly
tendered in the Exchange Offer that are represented by
Definitive Senior Secured Discount Notes, the name
44
<PAGE> 51
of each Holder of such Definitive Senior Secured Discount
Notes, the principal amount at maturity properly tendered in
the Exchange Offer by each such Holder and the name and
address to which Definitive Senior Secured Discount Notes for
Series B Senior Secured Discount Notes shall be registered and
sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Series B Senior Secured Discount
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 and (iii) a Company
Order, shall authenticate (A) a Global Senior Secured Discount Note for Series
B Senior Secured Discount Notes in an aggregate principal amount equal to the
aggregate principal amount of Series A Senior Secured Discount Notes
represented by a Global Senior Secured Discount Note indicated in such
Officers' Certificate as having been properly tendered and (B) Definitive
Senior Secured Discount Notes representing Series B Senior Secured Discount
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 Senior Secured
Discount Note for the Series B Senior Secured Discount Notes is less than the
principal amount at maturity of the Global Senior Secured Discount Note for the
Series A Senior Secured Discount Notes, the Trustee shall make an endorsement
on such Global Senior Secured Discount Note for Series A Senior Secured
Discount Notes indicating a reduction in the principal amount at maturity
represented thereby.
The Trustee shall deliver such Definitive Senior Secured Discount
Notes for Series B Senior Secured Discount Notes to the Holders thereof as
indicated in such Officers' Certificate.
Section 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 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
45
<PAGE> 52
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 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 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 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 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
46
<PAGE> 53
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 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 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
47
<PAGE> 54
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 Senior Secured Notes in exchange for Series A Senior Secured Notes and Series
B Senior Secured Discount Notes for Series A Senior Secured Discount Notes
accepted for exchange in the Exchange Offer. The Series B Senior Secured Notes
and the Series B Senior Secured Discount Notes shall not bear the legends
required by subsection (a) above unless the Holder of such Series B Senior
Secured Notes or Series B Senior Secured Discount Notes is either (A) a
broker-dealer who purchased such Series B Senior Secured Notes or Series B
Senior Secured Discount 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 Senior Secured Notes
or Series B Senior Secured Discount Notes or (C) a Person who is an affiliate
(as defined in Rule 144A) of the Company.
ARTICLE III
REDEMPTION
Section 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, with the net proceeds of any Public Equity Offering, at any time on
or after the Issue Date and before June 15, 2000, up to 35% of the aggregate
principal amount of the Senior Secured Notes and up to 35% of the Accreted
Value of the Senior Secured Discount Notes, in each case, in cash at the
applicable Redemption Prices specified in Paragraph 5 of the forms of Note
attached as Exhibit A and Exhibit B hereto, set forth therein under the caption
"Optional Redemption," in each case, including accrued and unpaid interest, if
any, to the Redemption Date. 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 or after June
15, 2000, at the applicable Redemption Prices specified in Paragraph 5 of the
forms of Note attached as Exhibit A and Exhibit B hereto, set forth therein
under the caption "Optional Redemption," in each case, including accrued and
unpaid interest to the Redemption Date.
Section 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 Selection of Notes to Be Redeemed. If less than all of
the Notes are to be redeemed pursuant to Paragraph 5 thereof, the Company may
elect to redeem from either the Senior Secured Notes or the Senior Secured
Discount Notes or a combination thereof, and the Trustee shall select the Notes
to be redeemed from within the Senior Secured Notes or the Senior Secured
Discount Notes, 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,
48
<PAGE> 55
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 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.
49
<PAGE> 56
Section 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. 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 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 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 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
50
<PAGE> 57
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 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 3 Limitation on Restricted Payments. The Company shall
not, and shall not permit any of its Subsidiaries (other than any of the
TTXD Entities after the TTXD Spin-off) to, directly or indirectly, 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 (except (x) to TransTexas by any of its Subsidiaries or (y) to
TARC by any of its Subsidiaries) unless such dividends, distributions, or
payments are made in cash or Capital Stock or a combination thereof (other than
the TTXD Spin-off or a dividend of the common stock of TransTexas by TARC to
the Company). In addition, the Company shall not, and shall not permit any of
its Subsidiaries (other than any of the TTXD Entities after the TTXD Spin-off)
to, directly or indirectly, make any Restricted Payment; provided, however,
that TransTexas or TARC 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:
(i) in the case of Restricted Payments by TransTexas:
(a) the Consolidated Fixed Charge Coverage Ratio of TransTexas
exceeds 2.25 to 1;
51
<PAGE> 58
(b) TransTexas' Adjusted Consolidated Tangible Assets are
equal to or greater than 150% of the total consolidated principal amount or
accreted value, as the case may be, of Debt of TransTexas and its Subsidiaries
(excluding, for purposes of the calculation of Debt, any Swap Obligations); and
(c) the aggregate amount of all Restricted Payments made by
TransTexas and its Subsidiaries, 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 the sum of (x) 25% of Adjusted
Consolidated Net Income of TransTexas accrued for the period (taken as one
accounting period), commencing with the first full fiscal quarter that
commenced after the Issue Date, to and including the fiscal quarter ended
immediately prior to the date of each calculation (or, in the event Adjusted
Consolidated Net Income for such period is a deficit, then minus 100% of such
deficit), minus (y) 100% of the amount of any write-downs, write-offs, other
negative revaluations, and other negative extraordinary charges not otherwise
reflected in Adjusted Consolidated Net Income of TransTexas during such period,
plus (z) the aggregate Net Proceeds received by TransTexas from the issuance or
sale (other than to the Company or a Subsidiary of the Company) of its
Qualified Capital Stock from and after the Issue Date and on or prior to the
date of such Restricted Payment); or
(ii) in the case of Restricted Payments by TARC:
(a) TARC'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) 25% of Adjusted
Consolidated Net Income of TARC 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 TARC'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 TARC from the
issuance or sale (other than to the Company or a Subsidiary of the Company) of
its Qualified Capital Stock from and after the Issue Date and on or prior to
the date of such Restricted Payment, minus (z) 100% of the amount of any
write-downs, write-offs, other negative revaluations, and other negative
extraordinary charges not otherwise reflected in TARC'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 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
52
<PAGE> 59
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 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 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. In addition, all such insurance shall be payable to the
Trustee as loss payee under a "standard" or "Texas" loss payee clause. Without
limiting the foregoing, each of the Company and its Subsidiaries shall (i) keep
all of its physical property insured with hazard insurance on an "all risks"
basis, with broad form flood and earthquake coverages and electronic data
processing coverage, with a full replacement cost endorsement and an "agreed
amount" clause in an amount equal to 100% of the full replacement cost of such
property, (ii) maintain all such workers' compensation or similar insurance as
may be required by law and (iii) maintain, in amounts and with deductibles
equal to those generally maintained by businesses engaged in similar activities
in similar geographic areas, general public liability insurance against claims
of bodily injury, death or property damage occurring on, in or about the
properties of the Company and its Subsidiaries.
All policies of insurance shall provide for at least fifteen days'
prior written cancellation notice to the Trustee. In the event of failure by
the Company and its Subsidiaries to provide and maintain insurance as herein
provided, the Trustee may, at its option, provide such insurance and charge the
amount thereof to the Company and its Subsidiaries. The Company and its
Subsidiaries shall furnish the Trustee with certificates of insurance and
policies evidencing compliance with the foregoing insurance provision.
Section 7 Compliance Certificate; Notice of Default.
53
<PAGE> 60
(a) The Company shall deliver to the Trustee within 60 days after the
end of each of its fiscal quarters, or 90 days after the end of a fiscal
quarter that is also the end of a fiscal year, an Officers' Certificate
complying with Section 314(a)(4) of the TIA and stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
quarter has been made under the supervision of the signing Officers with a view
to determining whether the Company and its Subsidiaries have kept, observed,
performed and fulfilled its obligations (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 8 SEC Reports. The Company shall deliver to the Trustee
and each Holder, within 15 days after it files the same with the SEC, copies of
all reports and information (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe), if any, which the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. The Company agrees to continue to be subject to and comply with
the filing and reporting requirements of the Commission as long as any of the
Notes are outstanding.
Concurrently with the reports delivered pursuant to the preceding
paragraph, the Company shall deliver to the Trustee and to each Holder annual
and quarterly financial statements with appropriate footnotes of the Company
and its Subsidiaries, all prepared and presented in a manner substantially
consistent with those of the Company required by the preceding paragraph. The
Company shall also comply with the other provisions of TIA Section 314(a).
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.
54
<PAGE> 61
Section 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 10 Limitation on Transactions with Related Persons.
(a) The Company shall not, and shall not permit any of its
Subsidiaries (other than any of the TTXD Entities after the date of the TTXD
Spin-off) to, enter directly or indirectly into, or permit to exist, any
transaction or series of related transactions with any Related Person
(excluding any Related Person which is a Related Person solely because the
party engaging in such transaction has the ability to control the Related
Person under the definition of "Control" contained within the definition of
"Related Person") (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), (xii), (xiii), (xv), (xvi), (xvii), (xix), (xx), (xxii), (xxiii),
(xxiv) or (xxvi) 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 (w) between the Company and any of its
Wholly Owned Subsidiaries or transactions between Wholly Owned Subsidiaries of
the Company, (x) among the TTXD Entities, (y) among the TARC Entities, or (z)
among the TransTexas Entities, (D) transactions pursuant to the Services
Agreement, the Transfer Agreement, the Tax Allocation Agreement, the Gas
Purchase Agreement, the Drilling Agreement, the Intercompany Notes, the
Security Documents, and the Registration Rights Agreements (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 $2,000,000 per year, (F) any sale and leaseback or other
transfer of TransTexas' headquarters building located at 1300 North Sam Houston
Parkway East, Houston, Texas, (G) any employee compensation arrangement in an
amount which together with the amount of all other cash compensation paid to
such employee by the Company and its Subsidiaries does not provide for cash
compensation in excess of $2,000,000 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, (H) loans
to TARC and TransTexas which are permitted to be Incurred pursuant to the terms
of Section 4.11; (I) the amounts payable by the Company and its Subsidiaries to
Southeast Contractors for employee services provided to TARC 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
(J) the Company and its Subsidiaries may pay a management fee to TransAmerican
in an amount not to exceed $2,500,000 per year.
Notwithstanding the foregoing, the Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly (excluding clauses
(I) and (J) of Section 4.10(a)), loan or advance any funds to
55
<PAGE> 62
John R. Stanley, and the aggregate amount of total compensation to John R.
Stanley shall not exceed (i) $1,000,000 per year in the aggregate from the
Company and TransTexas and (ii) following the Phase II Completion Date,
$1,000,000 from TARC.
(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)-(xii), (xiv), (xv), (xvi) and (xvii) of the proviso contained
in the definition of "Restricted Payments"), (C), (D), (E), (F) or (H) of
Section 4.10(a)) with an aggregate value in excess of $1,000,000, such
transaction must first be approved by a majority of the Board of Directors of
the Company 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)- (xii), (xiv), (xv), (xvi) and
(xvii) of the proviso contained in the definition of "Restricted Payments")
(C), (D), (E), (F), (G) or (H) of Section 4.10(a)) with an aggregate value in
excess of $5,000,000, the Company must first obtain a favorable written opinion
as to the fairness of such transaction to the Company or such Subsidiary, as
the case may be, from a financial point of view, from a "big 6 accounting firm"
or a nationally recognized investment banking firm; provided that such opinion
shall not be necessary 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 11 Limitation on Incurrences of Additional Debt and
Issuances of Disqualified Capital Stock. Except as set forth in this Section
4.11, from and after the Issue Date, the Company shall not, and shall not
permit any of its Subsidiaries (other than any of the TTXD Entities after the
TTXD Spin-off) to, directly or indirectly, create, incur, assume, guarantee, or
otherwise become liable for, contingently or otherwise (to "Incur" or, as
appropriate, an "Incurrence"), any Debt or issue any Disqualified Capital
Stock, except:
(1) in the case of TransTexas or its Subsidiaries prior to
the earlier to occur of (x) the Phase I Completion Date or (y) the Notes being
rated "B2" or better by Moody's Investors Services, Inc. or "BB-" or better by
Standard and Poor's Corporation, Inc.:
(a) Debt evidenced by the TransTexas Intercompany Loan or the
Guarantees;
(b) Subordinated Debt of TransTexas solely to any wholly owned
Subsidiary of TransTexas, or Debt of any wholly owned Subsidiary of TransTexas
solely to TransTexas or to any wholly owned Subsidiary of TransTexas;
(c) Debt outstanding under a Revolving Credit Facility in an
aggregate principal amount not to exceed at any one time the greater of
$30,000,000 or the TransTexas Borrowing Base;
(d) Debt in an aggregate principal amount outstanding not to exceed
at any one time $35,000,000;
56
<PAGE> 63
(e) Debt of TransTexas secured by a Permitted TransTexas Lien that
meets the requirements of clause (c), (d), (e), (i), (k), (l), (m), (o) or (r)
of the definition of "Permitted TransTexas Liens," to the extent that such
Liens would give rise to Debt under clauses (i), (ii), or (iii) of the
definition of "Debt";
(f) any guaranty of Debt permitted by clauses (c), (d), (e) or (g)
hereof, which guaranty is subordinated in right of payment to the TransTexas
Intercompany Loan to the same extent that the Debt permitted to be incurred
pursuant to such clauses would be required to be subordinated to the TransTexas
Intercompany Loan and which guaranty shall not be included in the determination
of the amount of Debt which may be Incurred pursuant to (c), (d), (e) or (g)
hereof;
(g) TransTexas may Incur Debt as an extension, renewal, replacement,
or refunding of any of the Debt permitted to be Incurred by clauses (m) or (o)
hereof, or this clause (g) (such Debt is collectively referred to as "Pre-Phase
I TransTexas Refinancing Debt"), provided, that (1) the maximum principal
amount of Pre-Phase I TransTexas Refinancing Debt (or, if such Pre-Phase I
TransTexas Refinancing Debt is issued with original issue discount, the
original issue price of such Pre-Phase I TransTexas Refinancing Debt) permitted
under this clause (g) may not exceed the lesser of (x) the principal amount of
the Debt being extended, renewed, replaced, or refunded plus reasonable
financing fees and other associated reasonable out-of-pocket expenses including
consent payments, premium, if any, and related fees, in each case other than
those paid to a Related Person (collectively, "Refinancing Fees"), or (y) if
such Debt being extended, renewed, replaced, or refunded was issued at an
original issue discount, the original issue price, plus amortization of the
original issue discount as of the time of the Incurrence of the Pre- Phase I
TransTexas Refinancing Debt plus Refinancing Fees, (2) the Pre-Phase I
TransTexas Refinancing Debt has a Weighted Average Life and a final maturity
that is equal to or greater than the Debt being extended, renewed, replaced, or
refunded at the time of such extension, renewal, replacement, or refunding and
(3) the Pre-Phase I TransTexas Refinancing Debt shall rank with respect to the
Notes and the TransTexas Intercompany Loan to an extent no less favorable in
respect thereof to the Holders than the Debt being refinanced;
(h) Debt represented by trade payables or accrued expenses, in each
case incurred on normal, customary terms in the ordinary course of business,
not overdue for a period of more than 90 days (or, if overdue for a period of
more than 90 days, being contested in good faith and by appropriate proceedings
and adequate reserves with respect thereto being maintained on the books of
Trans Texas in accordance with GAAP) and not constituting any amounts due to
banks or other financial institutions;
(i) Swap Obligations of TransTexas;
(j) Unrestricted Non-Recourse Debt of TransTexas;
(k) Debt evidenced by the Senior TransTexas Notes;
(l) TransTexas may enter into an agreement for the Presale of Gas for
cash if the net proceeds from such sale are used to make an Intercompany Loan
Redemption;
(m) Debt relating to the Reimbursement and Credit Facility;
(n) letters of credit and reimbursement obligations relating thereto
to the extent collateralized by cash or Cash Equivalents;
57
<PAGE> 64
(o) Debt evidenced by the Subordinated Notes;
(p) guarantees of Debt of TTXD to the extent that such Debt was Debt
of TransTexas on the Issue Date and relates to assets contributed to TTXD
pursuant to clause (xiii) of the definition of "Permitted Investment";
(q) Debt of TransTexas or any of its Subsidiaries owed to the Company
which is loaned pursuant to terms of the fourth paragraph of either Section
4.21 and Section 4.24; and
(r) Debt of TransTexas owed to the Company which together with any
Debt incurred pursuant to clauses (2)(p), (3)(v) and (4)(t) hereof does not in
the aggregate exceed $50,000,000 principal amount outstanding at any one time;
provided that such Debt must have a maturity date which is not after the
maturity date of the Notes; and provided further, that such loan must bear cash
interest which, together with any cash interest payable (i) on Debt Incurred
pursuant to clauses (2)(p), (3)(v) and (4)(t) hereof, (ii) the TARC
Intercompany Loan, (iii) the TransTexas Intercompany Loan and (iv) any other
intercompany loan payable to the Company, is sufficient to satisfy all interest
payments on the Notes through their stated maturity.
(2) in the case of TARC or its Subsidiaries prior to the
earlier to occur of (x) the Phase I Completion Date or (y) the Notes being
rated "B2" or better by Moody's Investors Services, Inc. or "BB" or better by
Standard and Poor's Corporation, Inc.:
(a) Debt evidenced by the TARC Intercompany Loan or the Guarantees;
(b) Subordinated Debt of TARC solely to any wholly owned Subsidiary
of TARC, or Debt of any wholly owned Subsidiary of TARC solely to TARC or to
any wholly owned Subsidiary of TARC;
(c) Debt of TARC outstanding at any time in an aggregate principal
amount not to exceed the greater of (x) $100,000,000 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 TARC).
(d) Debt in an aggregate principal amount not to exceed at any one
time $10,000,000;
(e) Debt incurred in connection with the Port Commission Bond
Financing, and any Attributable Debt related thereto, in each case in an
aggregate amount not to exceed $65,000,000;
(f) Debt secured by a Permitted TARC Lien that meets the requirements
of clause (c), (g), (m), (o) and (r) of the definition of "Permitted TARC
Liens", to the extent that such Liens would give rise to Debt under clauses
(i), (ii), or (iii) of the definition of "Debt";
(g) Any guaranty of Debt permitted by clauses (c), (d) or (f) hereof
which guaranty is subordinated in right of payment to the Notes and the TARC
Intercompany Loan to the same extent that the Debt permitted to be incurred
pursuant to such clauses would be required to be subordinated to the Notes and
the TARC Intercompany Loan and which guaranty shall not be included in the
determination of the amount of Debt which may be Incurred pursuant to (c), (d)
or (f) hereof;
58
<PAGE> 65
(h) Debt of TARC represented by trade payables or accrued expenses,
in each case, incurred on normal, customary terms in the ordinary course of
business, not overdue for a period of more than 90 days (or, if overdue for a
period of more than 90 days, being contested in good faith and by appropriate
proceedings and adequate reserves with respect thereto being maintained on the
books of TARC in accordance with GAAP) and not constituting any amounts due to
banks or other financial institutions;
(i) Swap Obligations of TARC;
(j) Unrestricted Non-Recourse Debt of TARC;
(k) Debt evidenced by the Senior TARC Mortgage Notes;
(l) Debt or Attributable Debt Incurred in connection with the
acquisition of tank storage facilities in the vicinity of the refinery or a
substantially contemporaneous Sale and Leaseback Transaction with respect
thereto;
(m) letters of credit and reimbursement obligations relating thereto
to the extent collateralized by cash or Cash Equivalents;
(n) Debt evidenced by the Senior TARC Discount Notes;
(o) Debt of TARC or any of its Subsidiaries owed to the Company which
is loaned pursuant to terms of the fourth paragraph of either Section 4.21 or
4.24;
(p) Debt of TARC owed to the Company which together with any Debt
Incurred pursuant to clauses (l)(r), (3)(v) and (4)(t) hereof does not in the
aggregate exceed $50,000,000 principal amount outstanding at any one time;
provided that such Debt must have a maturity date which is not after the
maturity date of the Notes; and provided further, that such loan must bear cash
interest which, together with any cash interest payable (i) on Debt Incurred
pursuant to clauses (l)(r), (3)(v) and (4)(t) hereof, (ii) the TARC
Intercompany Loan, (iii) the TransTexas Intercompany Loan and (iv) any other
intercompany loan payable to the Company, is sufficient to satisfy all interest
payments on the Notes through their stated maturity; and
(q) TARC may Incur Debt as an extension, renewal, replacement, or
refunding of any of the Debt permitted to be Incurred by clause (e) hereof, or
this clause (q) (such Debt is collectively referred to as "Pre-Phase I TARC
Refinancing Debt"), provided, that (l) the maximum principal amount of
Pre-Phase I TARC Refinancing Debt (or, if such Pre-Phase I TARC Refinancing
Debt is issued with original issue discount, the original issue price of such
Pre-Phase I TARC Refinancing Debt) permitted under this clause (q) 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 Pre-Phase I TARC Refinancing
Debt plus Refinancing Fees, (2) the Pre-Phase I TARC Refinancing Debt has a
Weighted Average Life and a final maturity that is equal to or greater than the
Debt being extended, renewed, replaced, or refunded at the time of such
extension, renewal, replacement, or refunding and (3) the Pre-Phase I TARC
Refinancing Debt shall rank with respect to the Notes and the TARC Intercompany
Loan to an extent no less favorable in respect thereof to the Holders than the
Debt being refinanced.
59
<PAGE> 66
(3) in the case of TransTexas or its Subsidiaries after the
earlier to occur of (x) the Phase I Completion Date or (y) the Notes being
rated "B2" or better by Moody's Investors Services, Inc. or "BB-" or better by
Standard and Poor's Corporation, Inc.:
(a) Debt evidenced by the TransTexas Intercompany Loan or the
Guarantees;
(b) Subordinated Debt of TransTexas solely to any wholly owned
Subsidiary of TransTexas, or Debt of any wholly owned Subsidiary of TransTexas
solely to TransTexas or to any wholly owned Subsidiary of TransTexas;
(c) (i) if the Phase I Completion Date has not occurred but the Notes
have been rated "B2" by Moody's Investors Services, Inc. or "BB-" by Standard
and Poor's Corporation, Inc., TransTexas may Incur Subordinated Debt with
initial net proceeds to TransTexas not in excess of $75,000,000 in the
aggregate, (ii) if the Phase I Completion Date has not occurred but the Notes
are rated at least "B1" or better by Moody's Investors
Services, Inc. or "BB" or better by Standard and Poor's Corporation, Inc.,
TransTexas may Incur Subordinated Debt with initial net proceeds to TransTexas
not in excess of $125,000,000 in the aggregate, less any Subordinated Debt
Incurred pursuant to subclause (i) above, and (iii) if the Phase I Completion
Date has occurred, TransTexas may Incur Subordinated Debt with initial net
proceeds to TransTexas not in excess of $125,000,000 in the aggregate, less any
Subordinated Debt Incurred pursuant to subclauses (i) and (ii) above;
(d) Debt outstanding under a Revolving Credit Facility in an
aggregate principal amount not to exceed at any one time the greater of
$40,000,000 or the TransTexas Borrowing Base, less any Debt outstanding
pursuant to clause (c) of clause (l) above;
(e) Debt in an aggregate principal amount outstanding not to exceed
at any one time $35,000,000, less any Debt outstanding pursuant to clause (d)
of clause (l) above;
(f) Debt secured by Liens permitted pursuant to clauses (j) or (t) of
Permitted TransTexas Liens, in an aggregate principal amount not to exceed
$35,000,000;
(g) The Attributable Debt Incurred in connection with a Sale and
Leaseback Transaction of TransTexas' headquarters building located at 1300
North Sam Houston Parkway East, Houston, Texas, and the properties, including
various buildings and site improvements, located (i) on U.S. Highway 359, known
as "TransTexas Gas Corporation," in Webb County, Texas and (ii) two (2) miles
west of Zapata, Texas, on Farm-To-Market Road 496, known as "TransTexas Gas
Corporation," in Zapata County, Texas;
(h) Debt of TransTexas secured by a Permitted TransTexas Lien that
meets the requirements of clause (c), (d), (e), (i), (k), (l), (m), (o) or (r)
of the definition of "Permitted TransTexas Liens," to the extent that such
Liens would give rise to Debt under clauses (i), (ii), or (iii) of the
definition of "Debt";
(i) any guaranty of Debt permitted by clauses (c), (d), (e), (f), (h)
or (j) hereof, which guaranty is subordinated in right of payment to the
TransTexas Intercompany Loan to the same extent that the Debt permitted to be
incurred pursuant to such clauses would be required to be subordinated to the
TransTexas Intercompany Loan and which guaranty shall not be included in the
determination of the amount of Debt which may be Incurred pursuant to (c), (d),
(e), (f), (h) or (j) hereof;
60
<PAGE> 67
(j) TransTexas may Incur Debt as an extension, renewal, replacement,
or refunding of any of the Debt permitted to be Incurred by clauses (c), (j),
(q) or (s) hereof, or the third paragraph of this section or Debt permitted to
be refinanced pursuant to clause (l) (g) hereof (such Debt is collectively
referred to as "TransTexas Refinancing Debt"), provided, that (1) the maximum
principal amount of TransTexas Refinancing Debt (or, if such TransTexas
Refinancing Debt is issued with original issue discount, the original issue
price of such TransTexas Refinancing Debt) permitted under this subclause (j)
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 TransTexas Refinancing
Debt plus Refinancing Fees, (2) the TransTexas Refinancing Debt has a Weighted
Average Life and a final maturity that is equal to or greater than the Debt
being extended, renewed, replaced, or refunded at the time of such extension,
renewal, replacement, or refunding and (3) the TransTexas Refinancing Debt
shall rank with respect to the Notes and the TransTexas Intercompany Loan to an
extent no less favorable in respect thereof to the Holders than the Debt being
refinanced;
(k) Debt represented by trade payables or accrued expenses, in each
case incurred on normal, customary terms in the ordinary course of business,
not overdue for a period of more than 90 days (or, if overdue for a period of
more than 90 days, being contested in good faith and by appropriate proceedings
and adequate reserves with respect thereto being maintained on the books of
TransTexas in accordance with GAAP) and not constituting any amounts due to
banks or other financial institutions;
(l) Swap Obligations of TransTexas;
(m) Unrestricted Non-Recourse Debt of TransTexas;
(n) Debt evidenced by the Senior TransTexas Notes;
(o) Dollar-Denominated Production Payment Obligations that TransTexas
elects to treat as Debt not to exceed $40,000,000 in the aggregate at any one
time outstanding;
(p) TransTexas may enter into an agreement for the Presale of Gas for
cash if the net proceeds from such sale are used to make an Intercompany Loan
Redemption;
(q) Debt relating to the Reimbursement and Credit Facility;
(r) letters of credit and reimbursement obligations relating thereto
to the extent collateralized by cash or Cash Equivalents;
(s) Debt evidenced by the Subordinated Notes;
(t) guarantees of Debt of TTXD to the extent that such Debt was Debt
of TransTexas on the Issue Date and relates to assets contributed to TTXD
pursuant to clause (xiii) of the definition of "Permitted Investment";
(u) Debt of TransTexas or any of its Subsidiaries owed to the Company
which is loaned pursuant to terms of the fourth paragraph of either of Section
4.21 or 4.24; and
61
<PAGE> 68
(v) Debt of TransTexas owed to the Company which together with any
Debt Incurred pursuant to clauses (1) (r), (2) (p) and (4) (t) hereof does not
in the aggregate exceed $50,000,000 principal amount outstanding at any one
time; provided that such Debt must have a maturity date which is not after the
maturity date of the Notes; and provided further, that such loan must bear cash
interest which, together with any cash interest payable (i) on Debt Incurred
pursuant to clauses (1)(r), (2)(p) and (4)(t) hereof, (ii) the TARC
Intercompany Loan, (iii) the TransTexas Intercompany Loan and (iv) any other
intercompany loan payable to the Company, is sufficient to satisfy all interest
payments on the Notes through their stated maturity.
(4) in the case of TARC or its Subsidiaries after the earlier to
occur of (x) the Phase I Completion Date or (y) the Notes being rated "B2" or
better by Moody's Investors Services, Inc. or "BB-" or better by Standard and
Poor's Corporation, Inc.:
(a) Debt evidenced by the TARC Intercompany Loan or the Guarantees;
(b) Subordinated Debt of TARC solely to any wholly owned Subsidiary
of TARC, or Debt of any wholly owned Subsidiary of TARC solely to TARC or to
any wholly owned Subsidiary of TARC;
(c) Subordinated Debt of TARC with initial net proceeds to TARC not
in excess of $150,000,000 in the aggregate;
(d) Debt of TARC outstanding at any time in an aggregate principal
amount not to exceed the greater of (x) $100,000,000 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 TARC) and any Debt outstanding pursuant to
clause (c) of clause (2) above;
(e) Debt in an aggregate principal amount not to exceed at any one
time $10,000,000, less any Debt outstanding pursuant to clause (d) of clause
(2) above;
(f) Debt secured by Liens permitted pursuant to clauses (h) and (j)
of Permitted TARC Liens, in an aggregate principal amount not to exceed
$35,000,000;
(g) Debt incurred in connection with the Port Commission Bond
Financing, and any Attributable Debt related thereto, in each case in an
aggregate amount not to exceed $65,000,000, less any Debt incurred pursuant to
clause (e) of clause (2) above;
(h) Debt secured by a Permitted TARC Lien that meets the requirements
of clause (c), (g), (m), (o) and (r) of the definition of "Permitted TARC
Liens," to the extent that such Liens would give rise to Debt under clauses
(i), (ii), or (iii) of the definition of "Debt";
(i) Any guaranty of Debt permitted by clauses (c), (d), (e), (f), (h)
or (j) hereof which guaranty is subordinated in right of payment to the Notes
and the TARC Intercompany Loan to the same extent that the Debt permitted to be
incurred pursuant to such clauses would be required to be subordinated to the
Notes and the TARC Intercompany Loan and which guaranty shall not be included
in the determination of the amount of Debt which may be Incurred pursuant to
(c), (d), (e), (f), (h) or (j) hereof;
(j) TARC may Incur Debt as an extension, renewal, replacement, or
refunding of any of the Debt permitted to be Incurred by clauses (c) or (g)
above, the fourth paragraph of this section or this subclause
62
<PAGE> 69
(j) or Debt permitted to be refinanced pursuant to clause (2)(q) hereof (such
Debt is collectively referred to as "TARC Refinancing Debt"), provided, that
(1) the maximum principal amount of TARC Refinancing Debt (or, if such TARC
Refinancing Debt is issued with original issue discount, the original issue
price of such TARC Refinancing Debt) permitted under this subclause (j) 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 at the time of the Incurrence of the TARC Refinancing Debt plus
Refinancing Fees, (2) the TARC Refinancing Debt has a Weighted Average Life and
a final maturity that is equal to or greater than the Debt being extended,
renewed, replaced, or refunded at the time of such extension, renewal,
replacement, or refunding and (3) the TARC Refinancing Debt shall rank with
respect to the Notes and the TARC Intercompany Loan to an extent no less
favorable in respect thereof to the Holders than the Debt being refinanced;
(k) Debt of TARC represented by trade payables or accrued expenses,
in each case, incurred on normal, customary terms in the ordinary course of
business, not overdue for a period of more than 90 days (or, if overdue for a
period of more than 90 days being contested in good faith and by appropriate
proceedings and adequate reserves with respect thereto being maintained on the
books of TARC in accordance with GAAP) and not constituting any amounts due to
banks or other financial institutions;
(l) Swap Obligations of TARC;
(m) Unrestricted Non-Recourse Debt of TARC;
(n) Debt evidenced by the Senior TARC Mortgage Notes;
(o) Debt or Attributable Debt Incurred in connection with the
acquisition of tank storage facilities in the vicinity of the refinery or a
substantially contemporaneous Sale and Leaseback Transaction with respect
thereto;
(p) letters of credit and reimbursement obligations relating thereto
to the extent collateralized by cash;
(q) Debt evidenced by the Senior TARC Discount Notes;
(r) Debt of TARC Incurred in connection with the acquisition,
construction or improvement of a CATOFIN(R) Unit not in excess of 20% of TARC'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;
(s) Debt of TARC or any of its Subsidiaries owed to the Company which
is loaned pursuant to terms of the fourth paragraph of either Section 4.21 or
4.24; and
63
<PAGE> 70
(t) Debt of TARC owed to the Company which together with any Debt
Incurred pursuant to clauses (l)(r), (2)(p) and (3)(v) hereof does not in the
aggregate exceed $50,000,000 principal amount outstanding at any one time;
provided that such Debt must have a maturity date which is not after the
maturity date of the Notes; and provided further, that such loan must bear cash
interest which, together with any cash interest payable (i) on Debt Incurred
pursuant to clauses (l)(r), (2)(p) and (3)(v) hereof, (ii) the TARC
Intercompany Loan, (iii) the TransTexas Intercompany Loan and (iv) any other
intercompany loan payable to the Company, is sufficient to satisfy all interest
payments on the Notes through their stated maturity.
(5) in the case of the Company or its Accounts Receivable
Subsidiary;
(a) Debt evidenced by the Notes pursuant to this Indenture;
(b) guarantees of the Senior TARC Mortgage Notes and the Senior TARC
Discount Notes;
(c) Debt of an Accounts Receivable Subsidiary in an amount permitted
by Section 4.20;
(d) Subordinated Debt of the Company with initial net proceeds to the
Company not in excess of $150,000,000 in the aggregate; and
(e) The Company may Incur Debt as an extension, renewal, replacement,
or refunding of any of the Debt permitted to be Incurred by subclauses (d)
hereof, or this subclause (e) (such Debt is collectively referred to as "TEC
Refinancing Debt"), provided, that (1) the maximum principal amount of TEC
Refinancing Debt (or, if such TEC Refinancing Debt is issued with original
issue discount, the original issue price of such Refinancing Debt) permitted
under this subclause (e) 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 TEC Refinancing Debt plus Refinancing Fees, (2) the TEC Refinancing Debt
has a Weighted Average Life and a final maturity that is equal to or greater
than the Debt being extended, renewed, replaced, or refunded at the time of
such extension, renewal, replacement, or refunding and (3) the TEC 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.
For the purpose of determining the amount of outstanding Debt that has
been Incurred pursuant to clause (o) or (m) of clause (1) above, clause (e) of
clause (2) above, clause (c), (s) or (q) of clause (3) above, clause (c) or (g)
of clause (4) above or clause (d) of clause (5) above, there shall be included
in each such case the principal amount then outstanding of any Debt originally
Incurred pursuant to such clause and, after any refinancing or refunding of
such Debt, any outstanding Debt Incurred pursuant to clause (g) of clause (1)
above, clause (q) of clause (2) above, clause (j) of clause (3) above, clause
(j) of clause (4) above and clause (e) of clause (5) above so as to refinance
or refund such Debt Incurred pursuant to such subclauses and any subsequent
refinancings or refundings thereof.
Notwithstanding the foregoing provisions of this covenant, after the
Phase I Completion Date, TransTexas may (1) Incur Senior Debt and may issue
Disqualified Capital Stock if, at the time such Senior Debt is Incurred or such
Disqualified Capital Stock is Issued, (i) no Default or Event of Default shall
have occurred and be continuing at the time or immediately after giving effect
to such transaction on a pro forma
64
<PAGE> 71
basis, and (ii) immediately after giving effect to the Consolidated Fixed
Charges in respect of such Debt being incurred and the application of the
proceeds therefrom to the extent used to reduce Debt or retire Disqualified
Capital Stock, on a pro forma basis, the Consolidated Fixed Charge Coverage
Ratio of TransTexas for the Reference Period is greater than 2.5 to 1, and
(iii) TransTexas' Adjusted Consolidated Tangible Assets are equal to or greater
than 150% of the total consolidated principal amount or accreted value, as the
case may be, of Debt of the TransTexas Entities (excluding, for purposes of
this calculation, the negative Net Worth of any Subsidiary which was formerly
designated as an Unrestricted Subsidiary); and (2) 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, (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 TransTexas for the Reference Period is greater than 2.0 to 1,
and (iii) TransTexas' Adjusted Consolidated Tangible Assets are equal to or
greater than 125% of the total consolidated principal amount or accreted value,
as the case may be, of Debt of the TransTexas Entities (excluding, for purposes
of this calculation, the negative Net Worth of any Subsidiary which was
formerly designated as an Unrestricted Subsidiary).
Notwithstanding the foregoing provisions of this covenant, (a) TARC
may Incur Senior Debt and TARC 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 TARC for the Reference Period is
greater than 2.5 to 1, and (b) TARC 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 TARC for the Reference Period is greater than 2.0 to 1.
Debt Incurred and Disqualified Capital Stock issued by any Person that
is not a Subsidiary of TransTexas or TARC, 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 TransTexas or TARC or
one of their 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 TransTexas or TARC,
respectively, or one of their respective 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.
65
<PAGE> 72
Section 12 Limitations on Restricting Subsidiary Dividends. The
Company shall not, and shall not permit any of its Subsidiaries (other than
TARC, TransTexas or any of the TTXD Entities) to, directly or indirectly,
create, assume, or suffer to exist any consensual encumbrance or restriction on
the ability of any Subsidiary of the Company (other than TARC, TransTexas or
any of the TTXD Entities) 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, neither TARC nor TransTexas may create an
encumbrance or restriction on their ability to pay premium, if any, principal
of, or interest on, the Intercompany Loans.
Section 13 Limitation on Liens. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, Incur, or suffer to
exist any Lien upon any of its respective property or assets, whether now owned
or hereafter acquired which property or assets constitute Collateral, other
than (a) in the case of the Company, Permitted TEC Liens, (b) in the case of
TARC, Permitted TARC Liens, and (c) in the case of TransTexas, Permitted
TransTexas 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.
Section 14 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (A) an amount equal to the Net
Cash Proceeds therefrom is (i) in the case of an Asset Sale by the Company,
applied as described under Section 4.21 (ii) in the case of an Asset Sale by
one of the TransTexas Entities, applied to an Intercompany Loan Redemption of
the TransTexas Intercompany Loan, (iii) in the case of an Asset Sale by one of
the TARC Entities, applied to an Intercompany Loan Redemption of the TARC
Intercompany Loan, (iv) used to make cash payments in the ordinary course of
business and consistent with past practices that are not otherwise prohibited
by this Indenture, provided that the aggregate amount so used pursuant to this
clause (iv) from and after the Issue Date does not exceed $25,000,000 with
respect to TransTexas, or $15,000,000 with respect to TARC (without duplication
of amounts used to acquire any Capital Assets in accordance with clauses (v),
(vi) and (vii) of this paragraph (a) below), (v) with respect to an Asset Sale
by TransTexas or any of its Subsidiaries (x) to the extent such Asset Sale
occurs prior to the payment in full of the TransTexas Intercompany Loan (and
any other loans from the Company pursuant to clauses (xvii) or (xxvii) of the
definition of "Permitted Investment") and includes proved reserve assets, used
for Capital Expenditures in a Related TransTexas Business within 180 days after
the date of such Asset Sale, provided that TransTexas' most recent Reserve
Report indicates that TransTexas and its Subsidiaries, after giving effect to
the Asset Sale and to the addition of proved reserves associated with any
assets acquired in connection with such Asset Sale, have proved reserves as
indicated on the most recent Reserve Report at least equal to (1) if such sale
occurs during the fiscal year ending January 31, 1998, 450 Bcfe of natural gas,
(2) if such sale occurs during the fiscal year ending January 31, 1999, 500
Bcfe of natural gas or with an SEC PV 10 of at least $600,000,000 and (3) if
such sale occurs during the fiscal year ending January 31, 2000 or thereafter,
600 Bcfe of natural gas or with an SEC PV 10 of at least $700,000,000, or (y)
to the extent such Asset Sale occurs substantially contemporaneously with or
after the payment in full of the TransTexas Intercompany Loan (and any other
loan to TransTexas
66
<PAGE> 73
from the Company pursuant to clauses (xvii) or (xxviii) of the definition of
"Permitted Investment") or involves assets that do not include proved reserves,
used for Capital Expenditures in a Related TransTexas Business within 180 days
after the date of such Asset Sale; (vi) with respect to an Asset Sale by TARC
or any of its Subsidiaries after the Phase II Completion Date, used for Capital
Expenditures in a Related TARC Business within 180 days after the date of such
Asset Sale; provided that, prior to the payment in full of the TARC
Intercompany Loan (and any other loan to TARC from the Company pursuant to
clauses (xvii) or (xxviii) of the definition of "Permitted Investment"), the
aggregate amount does not exceed $10,000,000 or (vii) with respect to an Asset
Sale by TransTexas or TARC or any of their Subsidiaries resulting from (x) the
damage to or destruction of assets for which Insurance Proceeds are paid or (y)
condemnation, eminent domain or similar type proceedings, in each case, used
for Capital Expenditures in a Related TransTexas Business (in the case of Asset
Sales by any of the TransTexas Entities) or a Related TARC Business (in the
case of Asset Sales by any of the TARC Entities) within 360 days after the date
of such Asset Sale; and (B) in the case of any Asset Sale or series of related
Asset Sales for total proceeds in excess of $5,000,000, at least 85% of the
value of the consideration for such Asset Sale consists of cash, Cash
Equivalents or Exchange Assets or any combination thereof.
(b) Notwithstanding the foregoing limitations on Asset Sales and
restrictions on the use of Net Cash Proceeds therefrom:
(i) TransTexas or any Subsidiary of TransTexas may convey,
sell, lease, transfer, or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to TransTexas or a
wholly owned Subsidiary of TransTexas;
(ii) TARC or any Subsidiary of TARC may convey, sell, lease,
transfer, or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to TARC or any wholly owned
Subsidiary of TARC;
(iii) the Company and its Subsidiaries may engage in Asset
Sales in the ordinary course of business;
(iv) the Company and its Subsidiaries may engage in Asset
Sales not otherwise permitted in clauses (i) through (iii) or (v)
through (xiii) of this sentence provided that the aggregate proceeds
from all such Asset Sales do not exceed $5,000,000 in any twelve-month
period;
(v) the Company and its Subsidiaries may engage in Asset
Sales pursuant to and in accordance with the provisions of Article V;
(vi) 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;
(vii) TARC and its Subsidiaries may sell accounts receivable to
an Accounts Receivable Subsidiary in accordance with the provisions
described under Section 4.20;
(viii) TARC and its Subsidiaries may convey, sell, transfer or
otherwise dispose of crude oil and refined products in the ordinary
course of business;
67
<PAGE> 74
(ix) the Company and its Subsidiaries may engage in Asset
Sales (a) the Net Cash Proceeds of which are used for payment of cash
interest on the Notes or the Intercompany Loans, (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;
(x) TransTexas may sell, convey, contribute or otherwise
transfer the assets comprising the Related TTXD Business to TTXD;
(xi) TARC may transfer the Port Facility Assets in connection
with the Port Commission Bond Financing;
(xii) TransTexas and its Subsidiaries may convey, sell,
transfer or otherwise dispose of Hydrocarbons or other mineral
products in the ordinary course of business;
(xiii) Prior to the TTXD Spin-off, TransTexas may sell, transfer,
contribute or otherwise dispose of the capital stock of TTXD or the
assets comprising the drilling and energy services business and
pipeline services business of TransTexas provided that (a) in the case
of a transfer, contribution or other distribution to a company which
has a class of equity securities publicly traded on a national
securities exchange or on the NNM, (x) at least 50% of the value of
the consideration for such Asset Sale consists of cash and up to 50%
of the value of the consideration for such Asset Sale may consist of
Capital Stock and (y) the Net Cash Proceeds from such Asset Sale are
applied pursuant to clause (a)(ii) of the prior paragraph or (b) in
the case of a transfer, contribution or other distribution to a joint
venture, partnership, limited liability company or similar entity
newly formed for the purpose of this transfer, up to 100% of the value
of the consideration for such Asset Sale may consist of Capital Stock
or other equity interests in such entity; provided, that any Net Cash
Proceeds from such Asset Sale are applied pursuant to clause (a)(ii)
of the prior paragraph;
(xiv) The Company and TARC may sell shares of TransTexas Common
Stock in connection with a transaction contemplated by the TransTexas
Disbursement Agreement and clause (xii) of the definition of
"Restricted Payments," and
(xv) Unless otherwise required by the foregoing clauses (i)
through (xiv), the proceeds of any Asset Sale permitted thereby shall
be used by the Company or its Subsidiaries for purposes not otherwise
prohibited by this Indenture.
(c) The Company shall not, and shall not permit any of its
Subsidiaries to, consummate a Non-Collateral Asset Sale unless an amount equal
to the Net Cash Proceeds therefrom is used for Capital Expenditures in (A) a
Related TARC Business in the case of Non-Collateral Asset Sales by any of the
TARC Entities or (B) a Related TransTexas Business in the case of
Non-Collateral Asset Sales by any of the TransTexas Entities, in each case
within 180 days after the date of such Non-Collateral Asset Sale.
68
<PAGE> 75
Section 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 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 16 Guarantee by Subsidiaries. If TARC or TransTexas or any
of their respective Subsidiaries shall make Investments in an aggregate amount,
or otherwise transfer (including by capital contribution) or cause to be
transferred, in a manner otherwise permitted pursuant to this Indenture, any
assets (tangible or intangible), businesses, divisions, real property, or
equipment having a book value as shown in the Company's most recent
consolidated balance sheet or the notes thereto (or if greater, a fair market
value at the time of transfer) in excess of $1,000,000 in or to any Subsidiary
of the Company that is not a Guarantor or an obligor on either the TransTexas
Intercompany Loan or the TARC Intercompany Loan, other than TTXD or any
Subsidiary of TTXD after the TTXD Spin-off, the Company shall (a) cause such
transferee Subsidiary to (x) guarantee payment of the TransTexas Intercompany
Loan, in the case of Subsidiaries of TransTexas, or the TARC Intercompany Loan
in the case of Subsidiaries of TARC, by executing a Guarantee and (y) execute
the appropriate security document, in substantially the form of the relevant
Security Document attached hereto, necessary to grant a security interest in
all of the assets of such
69
<PAGE> 76
Subsidiary (other than Equipment, Inventory and Receivables) to secure such
Guarantee and (b) deliver to the Trustee an Opinion of Counsel, in form
reasonably satisfactory to the Trustee, that such Guarantee is a valid, binding
and enforceable obligation of such Subsidiary, subject to customary exceptions
for bankruptcy, fraudulent transfer and equitable principles. If TARC or
TransTexas or any of their Subsidiaries shall subsequently sell or otherwise
transfer all of the Capital Stock of such Subsidiary held by TARC, TransTexas
or any of their Subsidiaries, the Guarantee required hereby shall be withdrawn
or cancelled. In addition, if the TTXD Spin-off has occurred the Guarantee by
TTXD or any of its Subsidiaries shall be withdrawn or cancelled.
The liability of each Guarantor under its Guarantee will be limited to
the amount of its Adjusted Net Assets. Each Guarantor that makes a payment
under its Guarantee of the TARC Intercompany Loan or the TransTexas
Intercompany Loan shall be entitled to assert a claim for reimbursement from
each other Guarantor of the respective Intercompany Loan, in each case in an
amount not to exceed the product of (x) the other Guarantor's Adjusted Net
Assets times (y) a fraction, the numerator of which is the other Guarantor's
Adjusted Net Assets and the denominator of which is the sum of the Adjusted Net
Assets of all Guarantors of the same Intercompany Loan.
Section 17 Intentionally Omitted.
Section 18 Limitations on Line of Business. Neither the TransTexas
Entities nor the TARC Entities shall directly or indirectly engage to any
substantial extent in any line or lines of business activity other than a
Related TransTexas Business or a Related TARC Business respectively and, in
each case, such other business activities as are reasonably related or
incidental thereto. Neither the Company nor any Affiliate of John R. Stanley
(other than Persons who are Affiliates solely by being directors or Affiliates
of directors of one or more companies affiliated with John R. Stanley and
other than TARC, TransTexas, TTXD or any of their Subsidiaries) may engage to
any substantial extent in any line or lines of business activity that is a
Related Business. The Company shall not have any direct Subsidiaries other than
TARC, TTXD, TransTexas, an Accounts Receivable Subsidiary, and any wholly owned
Subsidiary formed solely for the purpose of facilitating the reincorporation of
TARC in Delaware or the repurchase of the TARC Warrants.
Section 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;
70
<PAGE> 77
(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) it will maintain procedures designed to assure that all
written communications of the Company and its Subsidiaries, including, without
limitation, letters, invoices, purchase orders, contracts, statements and
applications, will appropriately identify the entity on whose behalf such
communication is made.
Section 20 Accounts Receivable Subsidiary.
(a) Notwithstanding the provisions of Section 4.3, TARC 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
TARC 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
$20,000,000 or 20% of the TARC Borrowing Base at any time;
(b) TARC shall not, and shall not 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
$20,000,000 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 shall not permit an Accounts Receivable Subsidiary to
sell any accounts receivable purchased from TARC and its Subsidiaries or
participation interests therein to any other Person except on an arm's length
basis and solely for consideration in the form of cash or Cash Equivalents;
(d) The Company shall not, and shall not 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 or a guarantee limited in recourse solely to the
stock of 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 TARC or any of its Subsidiaries with respect
to the accounts receivable sold by TARC or any of its Subsidiaries to an
Accounts Receivable Subsidiary or with respect to the servicing thereof;
provided that neither TARC nor any of its Subsidiaries shall at any time
guarantee or be otherwise liable for the collectability of accounts receivable
sold by them;
(e) The Company shall not permit an Accounts Receivable Subsidiary to
engage in any business or transaction other than the purchase and sale of
accounts receivable or participation interests therein of TARC and its
Subsidiaries and activities incidental thereto, including incurring Debt
pursuant to clause (f) below;
71
<PAGE> 78
(f) The Company shall not permit an Accounts Receivable Subsidiary to
incur any Debt other than the Accounts Receivable Subsidiary Notes, Debt owed
to TARC, and Non-Recourse Debt; provided that the aggregate principal amount of
all such Debt of an Accounts Receivable Subsidiary shall not exceed the book
value of its total assets as determined in accordance with GAAP;
(g) The Company shall cause any Accounts Receivable Subsidiary to
remit to the Company on a monthly basis as a distribution all available cash
and Cash Equivalents not held in a collection account pledged to lenders,
acquirors of accounts receivable or participation interests therein, to the
extent not applied (i) to pay interest or principal on the Accounts Receivable
Subsidiary Notes or any Debt of such Accounts Receivable Subsidiary permitted
by clause (f) above, (ii) to pay or maintain reserves for reasonable operating
expenses of such Accounts Receivable Subsidiary or to satisfy reasonable
minimum operating capital requirements, or (iii) to finance the purchase of
additional accounts receivable of TARC and its Subsidiaries; and
(h) TARC shall not, and shall not 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 21 Excess Cash. Not later than 20 Business Days after any
date on which the Accumulated Amount (as defined below) exceeds $50,000,000,
the Company shall make an irrevocable, unconditional offer (an "Excess Cash
Offer") to the Holders to purchase the maximum amount of Notes which could be
acquired by application of the Accumulated Amount as defined below (the "Excess
Cash Offer Amount"), at a purchase price (the "Excess Cash Offer Price") equal
to 105% of the Accreted Value of the Senior Secured Discount Notes and the
principal amount of the Senior Secured Notes for offers made on or prior to
December 31, 1997, at a price equal to 108% of the Accreted Value of the Senior
Secured Discount Notes and the principal amount of the Senior Secured Notes for
offers made during the period from January 1, 1998 through June 15, 2000 and
thereafter at the optional redemption prices set forth under Article III, in
each case, plus accrued and unpaid interest, if any, to and including, the date
the Notes tendered are purchased and paid for in accordance with this
Indenture, which date shall be no later than 25 Business Days after the first
date on which the Excess Cash Offer is required to be made (the "Excess Cash
Purchase Date"). The Excess Cash Offer Amount required to be paid hereunder
shall be reduced by the amount needed to pay the cash interest on the Notes
through maturity (less any interest payable to the Company on the TARC
Intercompany Loan, and the TransTexas Intercompany Loan and any other
intercompany loan payable to the Company) after giving effect to the Notes
repurchased pursuant to the Excess Cash Offer (the "Interest Reserve Amount").
The Company shall send notice of an Excess Cash Offer at least 20 Business Days
prior to the close of business on the third Business Day prior to the Excess
Cash Purchase Date (the "Final Put Date"), by first-class mail, to each Holder
at his address set forth upon the registry of the Company, with a copy to the
Trustee. The notice to the Holders will contain all
72
<PAGE> 79
information, instructions, and materials required by applicable law or
otherwise material to such Holders' decision to tender Notes pursuant to the
Excess Cash Offer. An amount equal to the aggregate of all Excess Cash received
by the Company is referred to as the "Accumulated Amount." Prior to making any
Excess Cash Offer, the Company shall invest the Accumulated Amount only in cash
and Cash Equivalents. The Company may, at its option, elect to make an Excess
Cash Offer in the manner specified herein prior to the time that the
Accumulated Amount exceeds $50,000,000.
To the extent applicable and if required by law, the Company shall
comply with Section 14 of the Exchange Act and the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act and other securities
laws, rules, and regulations which may then be applicable to any Excess Cash
Offer by the Company to purchase the Notes. The Company shall give the Trustee
prompt notice if the Accumulated Amount exceeds $50,000,000.
On or before an Excess Cash Purchase Date, the Company shall (a)
accept for payment Notes or portions thereof properly tendered pursuant to the
Excess Cash Offer prior to the close of business on the Final Put Date (on a
pro rata basis between the issues (the maximum extent possible) based on the
Value of the Notes actually tendered if Notes with a Value in excess of the
Value of Notes to be acquired are tendered and not withdrawn), (b) deposit with
the Paying Agent U.S. Legal Tender sufficient to pay the Excess Cash Offer
Price through the Excess Cash Purchase Date of all Notes or portions thereof so
accepted, and (c) deliver to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail or deliver to Holders of
Notes so accepted, payment in an amount equal to the Excess Cash Offer Price
through the Excess Cash Purchase Date for such Notes. The Trustee shall
promptly cancel all Notes accepted by the Company pursuant to the Excess Cash
Offer and authenticate and mail or deliver to the Holders of Notes so accepted
a new Note equal in Value 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
Excess Cash Offer on or as soon as practicable after the Excess Cash Payment
Date.
If the amount required to acquire all Notes tendered by Holders
pursuant to the Excess Cash Offer (the "Excess Cash Acceptance Amount") shall
be less than the aggregate Excess Cash Offer Amount, the excess of the Excess
Cash Offer Amount over the Excess Cash Acceptance Amount shall be (i) invested
in cash or Cash Equivalents, (ii) used by the Company to make a Note Repurchase
or (iii) used by the Company to make loans to its Subsidiaries, provided that
such loans (x) are on terms no less favorable to the Company than the economic
terms described to the Holders of Notes in the Excess Cash Offer, (y) are made
to the parties described in the Excess Cash Offer, and (z) have a maturity date
which is not after the maturity date of the Notes. Upon consummation of any
Excess Cash Offer made in accordance with the terms of the Indenture, the
Accumulated Amount will be reduced to zero.
Notwithstanding anything contained in the foregoing to the contrary,
the Company shall immediately deposit any cash received by it that the Company
has allocated to the Interest Reserve Amount or the provision for income taxes,
in each case in the manner contemplated by the definition of "Excess Cash,"
into a segregated cash collateral account in which the Trustee has a perfected
first priority security interest pending such uses.
Notwithstanding anything contained in the foregoing to the contrary,
at any time after June 15, 2000, the Company may elect to make an optional
redemption at the prices and in the manner described under Article III in lieu
of making an Excess Cash Offer. In the event that the Company makes a
73
<PAGE> 80
redemption pursuant to Article III, the Accumulated Amount shall be reduced by
an amount equal to the redemption price actually paid in connection with such
redemption.
Section 22 Third Party Consents. TransTexas shall use its best
efforts to obtain, as soon as reasonably practicable, all consents and
approvals that may be required under any Third Party Consent Agreement (i) for
the creation, perfection, maintenance or protection of a valid security
interest in, or lien against, any of the Collateral in favor of the Trustee or
(ii) upon foreclosure of the Trustee's lien, for the Trustee to acquire or
sell, assign, dispose of or otherwise transfer such Third Party Consent
Agreement, or any right or interest of the Company or any of its Subsidiaries
thereunder, or for the Trustee to exercise any or all of its rights or remedies
under any of the Security Documents. The use of its "best efforts" shall not
require TransTexas to pay consideration for such consents or approvals or to
take actions other than use its good faith efforts to request such consents and
approvals. TransTexas shall not, and shall not permit any of its Subsidiaries
to, permit to exist as of the end of any fiscal quarter, any Third Party
Consent Agreement if, after giving effect to such Third Party Consent
Agreement, the aggregate of all Third Party Consent Agreements entered into
after the date of this Indenture includes or relates to properties constituting
more than 25% of the net acreage owned or leased by TransTexas or any of its
Subsidiaries or Nominees after the date of this Indenture.
Section 23 Limitation on Assets Held by Nominees. Within 270 days
of the acquisition of any Nominee Property by any Nominee (to the extent the
aggregate expenditures for all then existing Nominee Property exceeds
$10,000,000), TransTexas and its Subsidiaries shall cause such Nominee to
assign and transfer to TransTexas, or such of its Subsidiaries, as the case may
be, all of such Nominee's right, title and interest in and to such Nominee
Property.
Section 24 Additional Interest Excess Cash Offer. Upon the
occurrence of a TARC Interest Increase or a TransTexas Interest Increase the
Company shall be obligated to make an offer to purchase the Notes upon the
terms and subject to the conditions described below. Not later than 20 Business
Days after any date on which the Additional Interest Accumulated Amount (as
defined below) exceeds $10,000,000, the Company shall make an irrevocable,
unconditional offer (an "Additional Interest Excess Cash Offer") to the Holders
to purchase the maximum amount of Notes which could be acquired by application
of the Additional Interest Accumulated Amount (as defined below) (the
"Additional Interest Excess Cash Offer Amount"), at a purchase price (the
"Additional Interest Excess Cash Offer Price") equal to 101% of the Accreted
Value of the Senior Secured Discount Notes and the principal amount of the
Senior Secured Notes, in each case, plus accrued and unpaid interest, if any,
to and including the date the Notes tendered are purchased and paid for in
accordance with the Indenture, which date shall be no later than 25 Business
Days after the first date on which the Additional Interest Excess Cash Offer is
required to be made (the "Additional Interest Excess Cash Purchase Date"). The
Company shall send notice of an Additional Interest Excess Cash Offer at least
20 Business Days prior to the close of business on the third Business Day prior
to the Additional Interest Excess Cash Purchase Date (the "Additional Interest
Final Put Date"), by first-class mail, to each Holder at his address set forth
upon the registry of the Company, with a copy to the Trustee. The notice to the
Holders will contain all information, instructions, and materials required by
applicable law or otherwise material to such Holders' decision to tender Notes
pursuant to the Additional Interest Excess Cash Offer. An amount equal to the
aggregate of all Additional Interest Excess Cash received by the Company is
referred to as the "Additional Interest Accumulated Amount." Prior to making
any Additional Interest Excess Cash Offer, the Company shall invest the
Additional Interest Accumulated Amount only in cash and Cash Equivalents. The
Company may, at its option, elect to make an Additional Interest Excess Cash
Offer in the manner specified herein prior to the time that the Additional
Interest Accumulated Amount exceeds $10,000,000.
74
<PAGE> 81
To the extent applicable and if required by law, the Company shall
comply with Section 14 of the Exchange Act and the provisions of Regulation l4E
and any other tender offer rules under the Exchange Act and other securities
laws, rules, and regulations which may then be applicable to any Additional
Interest Excess Cash Offer by the Company to purchase the Notes. The Company
shall give the Trustee prompt notice if the Additional Interest Accumulated
Amount exceeds $10,000,000.
On or before an Additional Interest Excess Cash Purchase Date, the
Company shall (a) accept for payment Notes or portions thereof properly
tendered pursuant to the Additional Interest Excess Cash Offer prior to the
close of business on the Additional Interest Final Put Date (on a pro rata
basis between the issues (to the maximum extent possible) based on the Value of
the Notes actually tendered if Notes with a Value in excess of the Value of
Notes to be acquired are tendered and not withdrawn), (b) deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Additional Interest Excess
Cash Offer Price through the Additional Interest Excess Cash Purchase Date of
all Notes or portions thereof so accepted, and (c) deliver to the Trustee Notes
so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail or deliver to Holders of Notes so accepted, payment in an amount
equal to the Additional Interest Excess Cash Offer Price through the Additional
Interest Excess Cash Purchase Date for such Notes. The Trustee shall promptly
cancel all Notes accepted by the Company pursuant to the Additional Interest
Excess Cash Offer and authenticate and mail or deliver to the Holders of Notes
so accepted a new Note equal in Value 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 Additional Interest Excess Cash Offer on or as soon as
practicable after the Additional Interest Excess Cash Payment Date.
If the amount required to acquire all Notes tendered by Holders
pursuant to the Additional Interest Excess Cash Offer (the "Additional Interest
Excess Cash Acceptance Amount") shall be less than the aggregate Additional
Interest Excess Cash Offer Amount, the excess of the Additional Interest Excess
Cash Acceptance Amount shall be (i) invested in cash or Cash Equivalents, (ii)
used by the Company to make a Note Repurchase or (iii) used by the Company to
make loans to its Subsidiaries, provided that such loans (x) are on terms no
less favorable to the Company than the economic terms described to the Holders
in the Additional Interest Excess Cash Offer, (y) are made to the parties
described in the Excess Cash Offer and (z) have a maturity date which is not
after the maturity date of the Notes. Upon consummation of any Additional
Interest Excess Cash Offer made in accordance with the terms of the Indenture,
the Additional Interest Accumulated Amount will be reduced to zero.
Notwithstanding anything contained in the foregoing to the contrary,
the Company shall immediately deposit any cash received by it that the Company
has allocated to the Additional Interest Reserve Amount into a segregated cash
collateral account in which the Trustee has a perfected first priority security
interest pending such uses.
75
<PAGE> 82
ARTICLE V
SUCCESSOR CORPORATION
Section 1 When the Company May Merge, Etc.
(a) The Company shall not, and shall not permit TARC or TransTexas
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, TARC or TransTexas, 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, TARC or
TransTexas, as the case may be, is merged or to which all or substantially all
of the properties and assets of the Company, TARC or TransTexas, as the case
may be, are transferred as an entirety or substantially as an entirety (the
Company, TARC or TransTexas, 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 and any supplements to any Security Documents
as the Trustee in its sole discretion may require, 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, TARC or
TransTexas, as the case may be, under the Notes, the TARC Intercompany Loan,
the TransTexas Intercompany Loan, the Security Documents, the Registration
Rights Agreements, 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 TARC into a wholly
owned Subsidiary of the Company 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 TARC Warrants, the Surviving Person could
incur $1.00 of additional Senior Debt pursuant to the third or fourth 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 TARC into a wholly owned
Subsidiary of the Company 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 TARC Warrants, at the time of or within 120
days after the occurrence of the event specified above, the Notes have not been
or are not downgraded by Standard
76
<PAGE> 83
& 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, TARC or
TransTexas, which properties and assets, if held by the Company, TARC or
TransTexas instead of such Subsidiaries, would constitute all or substantially
all of the properties and assets of the Company, TARC or TransTexas, as the
case may be, on a consolidated basis, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company, TARC or
TransTexas, as the case may be.
(c) Notwithstanding anything contained in the foregoing to the
contrary, any Subsidiary of TARC or TransTexas with a Net Worth greater than
zero, may merge into TARC or TransTexas, respectively (or a wholly owned
Subsidiary of TARC or TransTexas, respectively) at any time, provided, that
TARC or TransTexas, as the case may be, 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 TARC, provided, that such merger does not
result in a Default or Event of Default hereunder.
(d) Notwithstanding anything contained in this Article V to the
contrary, none of TARC or TransTexas may merge into the Company or any of its
Subsidiaries.
Section 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, TARC or TransTexas, 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, TARC or TransTexas, as the case may be,
under this Indenture with the same effect as if such Surviving Person had been
named as the Company, TARC or TransTexas, 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 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):
77
<PAGE> 84
(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 Change of Control Purchase Price in accordance
with Article XI, the Additional Interest Excess Cash Offer Price in accordance
with Section 4.24, or the Excess Cash Offer Price in accordance with Section
4.21;
(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 or any of the Security Documents
(other than a default in the performance of any covenant, agreement or warranty
which is specifically dealt with elsewhere in this Section 6.1), and
continuance of such default or breach for the period and after the notice, if
any, specified below;
(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under any mortgage,
indenture or instrument under which there is outstanding any Debt of the
Company or any of its Subsidiaries with an aggregate principal amount in excess
of $25,000,000, or failure to pay such Debt at its stated maturity, provided
that a waiver by all of the lenders of such debt of such default shall
constitute a waiver hereunder for the same period;
(e) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudging the Company or any of its Subsidiaries as
bankrupt or insolvent, or ordering relief against the Company or any of its
Subsidiaries in response to the commencement of an involuntary bankruptcy case,
or approving as properly filed a petition seeking reorganization or liquidation
of the Company or any of its Subsidiaries under any bankruptcy or similar law,
and such decree or order shall have continued undischarged and unstayed for a
period of 60 days; or a decree or order of a court of competent jurisdiction
over the appointment of a receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of the Company, any of its Subsidiaries, or of the
property of any such Person, or for the winding up or liquidation of the
affairs of any such Person, shall have been entered, and such decree, judgment,
or order shall have remained in force undischarged and unstayed for a period of
60 days;
(f) the Company or any of its Subsidiaries shall institute voluntary
bankruptcy proceedings, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking
reorganization or liquidation under any bankruptcy or similar law or similar
statute, or shall consent to the filing of any such petition, or shall consent
to the appointment of a Custodian, receiver, liquidator, trustee, or assignee
in bankruptcy or insolvency of it or any of its assets or property, or shall
make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due, or shall,
within the meaning of any Bankruptcy Law, become insolvent, fail generally to
pay its debts as they become due, or take any corporate action in furtherance
of or to facilitate, conditionally or otherwise, any of the foregoing;
(g) final judgments not covered by insurance for the payment of
money, or the issuance of any warrant of attachment against any portion of the
property or assets of the Company or any Subsidiary, which, in the aggregate,
equal or exceed $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
78
<PAGE> 85
final judgment which provides for payment over time, which shall so remain
unstayed, unbonded or undischarged beyond any applicable payment date provided
therein);
(h) any of the Security Documents shall for any reason cease to be in
full force and effect (except where no material adverse effect to the Holders
would result), or shall cease to give the Trustee for the ratable benefit of
the Holders the Liens, rights, powers and privileges purported to be created
thereby including but not limited to, a perfected security interest in, and
Lien on, the Collateral in accordance with the terms thereof, except where the
failure to have such Lien, rights, powers and privileges shall not have a
material adverse effect on the Holders;
(i) Independent Directors not constituting a majority of the Board of
Directors of the Company for a period of 90 days in the aggregate in any
twelve-month period;
(j) if the Phase I Completion Date has not occurred by the Required
Phase I Completion Date; or
(k) if the Phase II Completion Date has not occurred by January 31,
2000.
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 Excess Cash Offer Price,
Additional Interest Excess Cash Offer Price or 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, 4.21, 4.24 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 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
79
<PAGE> 86
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.
Section 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
80
<PAGE> 87
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 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.
81
<PAGE> 88
Section 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 Priorities. Subject to the provisions of the
Intercreditor Agreements, 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 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
82
<PAGE> 89
enforce any right under this Indenture, except in the manner herein provided
and for the equal and ratable benefit of all the Holders.
Section 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 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 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 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 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
83
<PAGE> 90
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.
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 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 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 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.
84
<PAGE> 91
(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 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 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.
85
<PAGE> 92
(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 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 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 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 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).
86
<PAGE> 93
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 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time compensation for its services (in whatever capacity
rendered) in accordance with the Trustee's fee schedule, as may be amended from
time to time. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and counsel.
The Company shall indemnify the Trustee (in its capacity as Trustee)
and each of its officers, directors, attorneys-in-fact and agents for, and hold
it harmless against, any claim, demand, expense (including but not limited to,
compensation, disbursements and expenses of the Trustees' agents and counsel),
loss or liability incurred by it without negligence or bad faith on its part,
arising out of or in connection with the administration of this trust and its
rights or duties hereunder including the reasonable costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the Trustee for which
it may seek indemnity. The Company shall defend the claim and the Trustee
shall provide reasonable cooperation at the Company's expense in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel; provided that the Company will not be
required to pay such fees and expenses if it assumes the Trustee's defense and
there is no conflict of interest as reasonably determined by the Trustee
between the Company and the Trustee in connection with such defense. The
Company need not pay for any settlement made without its written consent, which
shall not be unreasonably withheld. The Company need not reimburse any expense
or indemnify against any loss or liability to the extent incurred by the
Trustee through its 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 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;
87
<PAGE> 94
(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.
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 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 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 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 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 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
88
<PAGE> 95
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 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 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 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
89
<PAGE> 96
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 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 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 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
90
<PAGE> 97
acknowledge in writing the discharge the Company's obligations under this
Indenture except for those surviving obligations specified in Section 8.3.
Section 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 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 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 subrogated 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 1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Company, when authorized by Board
Resolutions, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto or amendments to the Security
91
<PAGE> 98
Documents, the Intercreditor Agreements, the TransTexas Disbursement Agreement
or the Disbursement Agreement, 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, the Security Documents, the Intercreditor Agreement or the
Disbursement Agreement 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 provide for additional collateral for the Notes;
(d) to evidence the succession of another Person to the Company and
the assumption by any such successor of the obligations of the Company herein
and in the Notes in accordance with Article V; or
(e) to comply with the TIA.
Section 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 any of the Security Documents 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 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 Excess Cash Offer is required to be
made, reduce the Excess Cash Offer Price or alter the provisions of Section
4.21 in a manner adverse to the Holders, (iii) prior to the date upon which an
Additional Interest Excess Cash Offer is required to be made, reduce the
Additional Interest Excess Cash Offer Price or alter the provisions of Section
4.24 in a manner adverse to the Holders or (iv) alter the provisions of Article
XII or any of the Security Documents 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
Excess Cash Offer is required to be made, reducing the Excess Cash Offer Price
or altering the provisions of Section 4.21 in a manner adverse to the Holders,
(iii) prior to the date upon which an Additional Interest Excess Cash Offer is
required to be made, reducing the Additional Interest Excess Cash Offer Price
or altering the provisions of Section 4.24 in a manner adverse
92
<PAGE> 99
to the Holders or (iv) altering the provisions of Article XII or any of the
Security Documents 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 Excess
Cash Offer is required to be made, reduce the Excess Cash Offer Price or (iv)
reduce the Offer Price or the Redemption Price or (v) after the date upon which
an Additional Interest Excess Cash Offer is required to be made, reduce the
Additional Interest Excess Cash Offer 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 or
(iii) after the date upon which an Excess Cash Offer is required to be made,
alter the terms or provisions of Section 4.21 or (iv) after the date upon which
an Additional Interest Excess Cash Offer is required to be made, alter the
terms or provisions of Section 4.24; in any case, in a manner adverse to any
Holder;
(f) make any changes in the provisions concerning waivers of Defaults
or Events of Default by Holders of the 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.
93
<PAGE> 100
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 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 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 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 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.
94
<PAGE> 101
ARTICLE X
MEETINGS OF NOTEHOLDERS
Section 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 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 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
95
<PAGE> 102
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 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 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 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
96
<PAGE> 103
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 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 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 Accreted Value thereof, in the
case of the Senior Secured Discount Notes or 101% of the principal amount
thereof, in the case of the Senior Secured Notes thereof, plus accrued and
unpaid interest, if any, in each case, 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;
97
<PAGE> 104
(2) the Change of Control Purchase Price, the Change of
Control Payment Date and the Final Change of Control Put Date (as defined
below);
(3) that any Note, or portion thereof, not tendered or
accepted for payment will continue to accrue interest, if interest is then
accruing;
(4) that, unless the Company defaults in depositing U.S.
Legal Tender with the Paying Agent in accordance with the last paragraph of
this clause (c), or payment is otherwise prevented, any Note, or portion
thereof, accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Note, or portion
thereof, purchased pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect 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 Accreted
Value or principal amount, as applicable, 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.
98
<PAGE> 105
ARTICLE XII
SECURITY
Section 1 Grant of Security Interest. In order to secure the
payment and performance of all obligations of the Company with respect to the
Notes including the due and punctual payment of the principal of, interest on
and premium, if any, on the Notes when and as the same shall become due and
payable, whether on an interest payment date, at a Maturity Date, by
acceleration, call for redemption or otherwise, and interest on the overdue
principal and interest, if any, of the Notes, the Company hereby covenants to
execute, deliver and file of record for the benefit of the Holders, the
Security Documents to which it is a party and this Indenture. The Security
Documents shall grant to the Trustee a security interest in the collateral
therein described and when filed shall be deemed hereby incorporated by
reference herein to the same extent and as fully as if set forth in their
entirety at this place, and reference is made hereby to each Security Document
for a more complete description of the terms and provisions thereof. Each
Holder, by accepting a Note, agrees to all of the terms and provisions of the
Security Documents and the Trustee agrees to all of the terms and provisions of
the Security Documents signed by it.
Section 2 Trustee's Execution of Intercreditor Agreements and
Subordination Agreements.
(a) The Trustee, at the Company's expense, will execute, deliver,
file and record, all instruments and do all acts and other things as may be
reasonably necessary to provide, pursuant to the Intercreditor Agreements, (i)
that the TransTexas Intercompany Loan and the TARC Intercompany Loan will be
subordinated in right of payment (except regularly scheduled payments, provided
no default under the indenture governing the Senior TransTexas Notes or the
Senior TARC Discount Notes and the Senior TARC Mortgage Notes, respectively,
exists or would result therefrom) and lien priority to the Senior TransTexas
Notes or the Senior TARC Discount Notes and the Senior TARC Mortgage Notes,
respectively, (ii) that (a) in the event of any liquidation or reorganization
of TransTexas or TARC, as the case may be, any cash or other assets paid or
distributed on account of the TransTexas Intercompany Loan or the TARC
Intercompany Loan, as the case may be, will be applied, after payment of
reasonable costs and expenses relating to obtaining such proceeds, to the
payment of the Senior TransTexas Notes or the Senior TARC Discount Notes and
the Senior TARC Mortgage Notes, as the case may be, and only after the Senior
TransTexas Notes or the Senior TARC Discount Notes and the Senior TARC Mortgage
Notes, as the case may be, have been paid in full, to the payment of the
TransTexas Intercompany Loan or the TARC Intercompany Loan, respectively, and
(b) in any other event, any such proceeds will be applied so as not to impair
or affect the right of the holders of the Senior TransTexas Notes or the Senior
TARC Discount Notes and the Senior TARC Mortgage Notes, to receive payments as
and when due (but nothing contained in the Intercreditor Agreements shall be
construed to prohibit, limit or otherwise affect the rights of TransTexas or
TARC to transfer, dispose of or otherwise deal with its properties and assets
included within the TransTexas Shared Collateral securing both the Senior
TransTexas Notes and the TransTexas Intercompany Loan or the TARC Shared
Collateral securing the Senior TARC Discount Notes, the Senior TARC Mortgage
Notes, and the TARC Intercompany Loan, respectively, and the proceeds thereof,
in any manner permitted under the indenture for the Senior TransTexas Notes and
the TransTexas Intercompany Loan or the indenture for the Senior TARC Discount
Notes and the Senior TARC Mortgage Notes, and the TARC Intercompany Loan or the
security documents relating thereto, respectively) and (iii) that
determinations regarding the exercise of remedies against the TransTexas Shared
Collateral or the TARC Shared Collateral, as the case may be, will be made by a
majority of the outstanding principal amount of the Senior TransTexas Notes and
the TransTexas Intercompany Loan, or the Senior TARC Discount Notes, the Senior
TARC Mortgage Notes, and the TARC Intercompany Loan, respectively. The
Intercreditor Agreements will provide that nothing contained therein will
impair or affect the right of the holders of any
99
<PAGE> 106
Senior TransTexas Notes, Senior TARC Discount Notes or Senior TARC Mortgage
Notes, respectively, to institute suit for the enforcement of any payment
thereon as and when due.
(b) Upon receipt of a Subordination Request, the Trustee (and any
lender, trustee or collateral agent under or with respect to any of the
Security Documents), at the Company's expense, will execute and deliver, within
five Business Days from the receipt of such Subordination Request, any
instruments deemed by the Company (or with respect to the Security Documents,
the grantor of the security interest thereunder) to be reasonably necessary or
reasonably appropriate to subordinate the Security Interests to Permitted Liens
securing any First Lien Debt, if the provisions of this Section 12.2(b) have
been complied with. Any such Subordination Request shall request the Trustee
(and any such lender, trustee or collateral agent under or with respect to any
of the Security Documents) to execute one or more specifically described
instruments of subordination (which instruments of subordination accompany such
Subordination Request) and shall certify (i) that no Event of Default has
occurred and is continuing, and (ii) that one of the conditions of this Section
12.2(b) set forth below has been, or simultaneously with or immediately
following the subordination will be, fulfilled:
(i) the Company (or with respect to the Security Documents,
the grantor of the security interest thereunder) represents in the
Subordination Request that the Lien to which the Security Interests
are to be subordinated is a Permitted Lien securing only a Debt or
other obligation that constitutes First Lien Debt; or
(ii) Holders of not less than 66 2/3% of Value of the then
outstanding Notes have consented in writing to the subordination of
the Security Interests to such Lien.
Any subordination of the Security Interests in compliance with this Section
12.2(b) shall be deemed not to impair the Security Interests in contravention
of the provisions of this Indenture.
(c) The Trustee, at the Company's expense, will cooperate reasonably
with the Company (or with respect to the Security Documents, the grantor of the
security interest thereunder) in doing all such acts and things required by the
preceding provisions of this Section 12.2.
Section 3 Recording; Opinions of Counsel.
(a) The Company has executed, delivered, filed and recorded and
shall execute, deliver, file and record, all instruments and documents, and has
done and shall do all such acts and other things, at the expense of the
Company, as are reasonably necessary to subject the Collateral to the Security
Interests. As soon as practicable, the Company shall execute, deliver, file
and record all instruments and do all acts and other things as may be
reasonably necessary or advisable to perfect, maintain and protect the Security
Interests.
(b) The Company shall cause (x) TIA Section 314(b), relating to
Opinions of Counsel regarding the Lien of the Security Documents, and (y) TIA
Section 314(d), relating to the release of Collateral from the Lien of the
Security Documents and Officers' Certificates or other documents regarding fair
value of the Collateral, to be complied with to the extent applicable. Any
certificate or opinion required by TIA Section 314(d) may be made by an
Officer of the Company or any other obligor upon the Notes, as applicable, to
the extent permitted by TIA Section 314(d).
100
<PAGE> 107
(c) The Company shall furnish to the Trustee, within 30 days after
the end of the Company's first fiscal year after the date hereof, within 30
days after the end of each fiscal year thereafter, and at least 30 days prior
to the expiration of any financing statements filed in connection with the
Security Interests, an Officers' Certificate, dated as of such date, (i)
stating that either (A) all action has been taken with respect to the
recording, registering, filing, rerecording and refiling of this Indenture, all
supplemental indentures, the Security Documents, financing statements,
continuation statements and all other instruments of further assurance as are
necessary and desirable fully to maintain, protect and preserve the Security
Interests and the rights of the Holders and the Trustee hereunder and under the
Security Documents and reciting the details of such action or referring to
prior Officers' Certificates in which such details are given or (B) no such
action is necessary to maintain, preserve and protect the Security Interests
and the rights of the Holders and the Trustee hereunder and under the Security
Documents during such period, (ii) stating either (A) that, with respect to the
trademarks and service marks, all filings with the United States Patent and
Trademark Office, any state office or other appropriate governmental body
necessary to maintain, protect and preserve the Security Interests in the
trademarks and service marks have been made or (B) that no such action is
necessary and (iii) stating what, if any, action of the forgoing character is
necessary during the fiscal year so as to maintain, protect and preserve the
rights of the Holders and the Trustee hereunder and under the Security
Documents.
Section 4 Disposition of Certain Collateral Without Requesting
Release.
(a) Notwithstanding the provisions of Sections 12.5, 12.6, 12.7, 12.8
and 12.14, the Company (or with respect to the Security Documents, the grantor
of the security interest thereunder) may, without requesting or receiving the
consent of the Trustee (and any lender, trustee or collateral agent under any
of the Security Documents):
(i) sell, assign, transfer, license or otherwise dispose of,
free from the Security Interests, any personal property constituting
Collateral that has become worn out, obsolete, or unserviceable, upon
replacing the same with machinery or equipment constituting Collateral
not necessarily of the same character but, at the time of such sale,
assignment, transfer, license or other disposition, being of at least
equal value and utility as the property so disposed of, which property
shall without further action become Collateral subject to the Security
Interests;
(ii) (A) sell, assign, transfer, license or otherwise dispose
of, free from the Security Interests, inventory in the ordinary course
of business and consistent with past practices, (B) collect, liquidate,
sell, factor or otherwise dispose of, free from the Security Interests,
notes receivable in the ordinary course of business and consistent with
past practices or (C) make cash payments (including repayments of Debt
permitted to be Incurred hereby) that are not otherwise prohibited
by this Indenture;
(iii) sell, assign, lease, license, transfer, abandon or
otherwise dispose of (a) damaged, worn out or other obsolete property
in the ordinary course of business or (b) other property no longer
necessary for the proper conduct of its business; and
(iv) dispose of Collateral pursuant to clause (i), (ii), (iii),
(iv), (vii), (viii) or (xii) of Section 4.14(b).
101
<PAGE> 108
(b) Notwithstanding the provisions of subsection (a) above: (x) the
Company (or with respect to the Security Documents, the grantor of the security
interest thereunder) shall not dispose of or transfer (by lease, assignment,
sale or otherwise) Collateral pursuant to the provisions of Section 12.4(a)(ii)
or (iii), having, in the good faith judgment of the Company (or with respect to
the Security Documents, the grantor of the security interest thereunder) and,
if required by the TIA, an Appraiser, a fair value of 5% or more of the
aggregate fair value of all Collateral then existing in any transaction or any
series of related transactions without complying with Section 12.5; and (y) the
right of the Company (or with respect to the Security Documents, the grantor of
the security interest thereunder) to rely upon the provisions of Section
12.4(a)(ii) and (iii) from the date of this Indenture to December 31, 1997 and
for each twelve-month period thereafter beginning on January 1 (a "Twelve-Month
Period") shall be conditioned upon the Company (or with respect to the Security
Documents, the grantor of the security interest thereunder) delivering to the
Trustee, on or before January 30, 1998 and thereafter within 30 days following
the end of such Twelve-Month Period, an Officers' Certificate to the effect
that the proceeds of all of such dispositions, collections and cash payments
which involve Collateral during such Twelve-Month Period (other than those such
dispositions, collections or payments wherein the Company (or with respect to
the Security Documents, the grantor of the security interests thereunder) has
complied with Section 12.5) were used by the Company (or with respect to the
Security Documents, the grantor of the security interest thereunder) in
connection with their businesses.
(c) Any disposition of Collateral made in compliance with the
provisions of this Section 12.4 shall be deemed not to impair the Security
Interests in contravention of the provisions of this Indenture.
Section 5 Requesting Release of Collateral.
(a) Upon receipt of a Release Request, the Trustee shall execute and
deliver, within five Business Days from the receipt of such Release Request,
any instruments deemed by the Company (or with respect to the Security
Documents, the grantor of the security interests thereunder) to be reasonably
necessary or reasonably appropriate to release all or a part of the Collateral
from the Security Interests, if the provisions of this Section 12.5 have been
complied with. Any such Release Request shall request the Trustee to execute
one or more specifically described release instruments (which release
instruments shall accompany such Release Request) and shall certify (i) that no
Event of Default has occurred and is continuing (or with respect to a Release
Request relating to any of the Security Documents, that no event of default has
occurred and is continuing under the applicable Security Document) and (ii)
that one of the conditions of this Section 12.5(a) set forth below (specifying
such condition), and if such specified condition is described in clause (i),
(ii) or (iii) below, that the conditions of Section 12.4, 12.6 or 12.7, if
applicable, have been, or simultaneously with or immediately following the
release will be, fulfilled:
(i) the Collateral will be disposed of in compliance with
Section 12.4;
(ii) there is a substitution of Substitute Collateral in
accordance with Section 12.6;
(iii) there is a deposit of cash in a cash collateral account
in accordance with Section 12.7;
(iv) the Collateral to be released will be used within five
business days either to make redemptions or purchases of Notes which
will be delivered to the Trustee for cancellation;
102
<PAGE> 109
(v) the Collateral is to be released in connection with an
Asset Sale made in compliance with Section 4.14;
(vi) all of the conditions precedent to the termination of
the Security Document under which the Lien in the Collateral to be
released was created, or to the release of such Collateral from the
Lien created by such Security Document, as set forth in such Security
Document, have been satisfied;
(vii) Holders of not less than 66 2/3% in Value of the then
outstanding Notes have consented in writing to such release of
Collateral from the Security Interests;
(viii) the Collateral is to be released in connection with the
TTXD Spin-off;
(ix) the Collateral is to be released in connection with the
repurchase by TransTexas of its common stock made pursuant to the
terms of clause (xii) of the definition of "Restricted Payments"
contained herein; or
(x) the Collateral to be released relates to the lien of the
TARC Mortgage on a portion of Parcel B-1 of TARC's refinery (which
parcel is more particularly described in Exhibit "A" to the TARC
Mortgage) for dedication to a governmental authority (such parcel
being referred to as the "Dedicated Parcel") for the purpose of
relocating Prospect Avenue from the western boundary line of such
Parcel B-1 to the eastern and northern boundary lines of such Parcel
B-1, provided that (i) the fee interest in and to the real property
currently dedicated for use as Prospect Avenue is conveyed to TARC
(such parcel being referred to as the "Reconveyed Parcel"), (ii) TARC
executes and delivers a supplemental mortgage evidencing that the lien
of the TARC Mortgage encumbers the Reconveyed Parcel, (iii) the
Company executes and delivers a supplemental collateral assignment
with respect to such supplemental mortgage and (iv) the Company
delivers to the Trustee a certificate of the Construction Supervisor
certifying that the loss of the use of the Dedicated Parcel does not
have a material adverse affect on the use, operation or maintenance of
TARC's refinery or the Capital Improvement Program.
(xi) the Collateral to be released constitutes First Lien
Debt and the Company (or with respect to releases under the Security
Documents, the grantor of the security interest thereunder) has
satisfied all the requirements for obtaining subordination of the
Security Interests therein pursuant to Section 12.2 and such
Collateral is (or will be, upon obtaining such release) encumbered by
a Lien permitted pursuant to the terms of clauses (d), (k), (s) or (t)
of the definition of Permitted TARC Lien or clauses (f), (l) or (o) of
the definition of Permitted TransTexas Lien.
(b) As a condition to any release of Collateral under this Section
12.5, the Company shall deliver to the Trustee any certificate or opinion
required by TIA Section 314(d), as to the fair value to the obligor of any
Substitute Collateral and as to the fair value of any Collateral to be
released, or by TIA Section 314(c), as to the fulfillment of any condition
precedent to such release, dated as of a date not more than 60 days prior to
the date of substitution or release. Such certificate or opinion shall state
that the proposed release of Collateral will not impair the Security Interests
in contravention of the provisions of this Indenture. The person
103
<PAGE> 110
delivering such certificate or opinion must be independent with respect to the
Company if required by TIA Section 314(d).
(c) In addition to any certificates or opinions required by Section
12.5(b), as a condition to any release of Collateral pursuant to Section 12.6
or 12.7, the Company (or with respect to releases under the Security Documents,
the grantor of the security interest thereunder) shall deliver to the Trustee
an Opinion of Counsel to the effect that, in the opinion of such counsel,
subject to necessary qualifications, exceptions or limitations, the Trustee is
authorized to execute and deliver the instruments requested and such execution
and delivery will not result in a violation of the terms hereof or any
violation of applicable law and that either (a) all such instruments and
documents have been duly and validly executed and delivered and have been
properly recorded and filed so as to make effective the Security Interest
intended to be created by this Indenture and the Security Documents in the
Substitute Collateral or Cash Collateral to be substituted for the Collateral
to be released, and reciting the details of such action or referring to prior
Opinions of Counsel in which such details are given, or (b) no such action is
necessary to make the Security Interest in such Substitute Collateral or Cash
Collateral effective.
(d) At the request of the Company (or with respect to releases under
the Security Documents, the grantor of the security interest thereunder), the
Trustee shall, in lieu of releasing any Collateral pursuant to this Section
12.5, execute and deliver a Subordination Agreement with respect to such
Collateral.
(e) Any release or subordination of Collateral made in compliance
with the provisions of this Section 12.5 shall be deemed not to impair the
Security Interests in contravention of the provisions of this Indenture.
Section 6 Substitute Collateral Other Than Cash Collateral.
Subject to the provisions of Section 4.18:
(a) The Company (or with respect to releases under the Security
Documents, the grantor of the security interest thereunder) may, at its option,
obtain a release of Collateral by subjecting other proposed Collateral to the
respective Security Interests in place of and in exchange for such Collateral
to be released, all in accordance with the provisions and conditions of Section
12.5 and this Section 12.6. The Trustee shall not be bound to ascertain or
inquire as to the Company's (or with respect to substitutions of Collateral
under the Security Documents, the applicable grantor's) title in and to any
such Substitute Collateral or as to the existence of any Liens or encumbrances
on any such Substitute Collateral.
(b) The Company (or with respect to substitutions of Collateral under
the Security Documents, the grantor of the security interest) may substitute
Collateral pursuant to this Section 12.6, if all of the following conditions
are met:
(1) the Company (or with respect to substitutions of
Collateral under the Security Documents, the grantor of the security interest)
complies with Section 12.5(a) and the Company (or with respect to substitutions
of Collateral under the Security Documents, the grantor of the security
interest) delivers a Release Request to the Trustee stating, in addition to the
other requirements of Section 12.5, that the Company (or with respect to
substitutions of Collateral under the Security Documents, the grantor of the
security interest), as the case may be, intends to substitute the property
specifically described therein for the Collateral specifically described
therein;
104
<PAGE> 111
(2) the fair value of the proposed Substitute Collateral is
at least equal to the fair value of the Collateral to be released and, if and
only if the fair value of Collateral to be released, and the fair value of all
other Collateral released without an Appraisal pursuant to this Section 12.6
during the then current calendar year exceeds 10% of the aggregate principal
amount of the Notes, the Company shall deliver to the Trustee an Appraisal
stating that the Appraised Value of the real property Collateral to be released
or the dollar amount of the cash collateral to be released is less than or
equal to the Appraised Value of such proposed Substitute Collateral; and
(3) the Security Interests in the Substitute Collateral are
effective pursuant to the Security Documents and Section 12.3.
(c) Any release of Collateral made in compliance with the provisions
of this Section 12.6 shall be deemed not to impair the Security Interests in
contravention of the provisions of this Indenture.
Section 7 Substitution of Cash Collateral.
(a) The Company may, at its option, and in accordance with the
provisions and conditions of Section 12.5 and this Section 12.7, obtain the
release for sale by the Company of all or a portion of the shares of capital
stock from the TransAmerican Energy Corporation Security and Pledge Agreement
(the "Pledged Stock") if (i) the Net Cash Proceeds of such sale are immediately
deposited in a segregated cash collateral account in which the Trustee has a
perfected first priority security interest, and (ii) funds in such account are
released only to permit the Company to fund an Excess Cash Offer.
Notwithstanding the foregoing, no shares of Pledged Stock may be
released from the pledge pursuant to this Section 12.7 if at the time of such
proposed release, a Default or Event of Default has occurred and is continuing
or would occur as a result of such release.
The Company shall give written notice to the holders of Notes within
10 days of any release of Pledged Stock pursuant to this Section 12.7. Such
notice shall set forth the date of such release, the number of shares released,
and the provision of this Indenture pursuant to which such shares were
released.
(b) The Company shall deliver a Release Request to the Trustee,
stating, in addition to the other requirements of Section 12.5(a), that the
Company intends to substitute cash collateral for all or a portion of the
Pledged Stock specifically described therein.
(c) Any release of Collateral made in compliance with the provisions
of this Section 12.7 shall be deemed not to impair the Security Interests in
contravention of the provisions of this Indenture.
Section 8 Release Upon Defeasance or Satisfaction and Discharge of
this Indenture.
(a) In the event that the Company delivers an Officers' Certificate
certifying that all of the provisions of either Section 8.1 or 8.2 have been
satisfied, the Trustee shall disclaim and give up any and all rights it has in
or to the Collateral, and any rights it has under the Security Documents
(subject to Section 8.7).
(b) Any release of Collateral made in compliance with the provisions
of this Section 12.8 shall be deemed not to impair the Security Interests in
contravention of the provisions of this Indenture.
105
<PAGE> 112
Section 9 Reliance on Opinion of Counsel. The Trustee shall,
before taking any action under this Article XII, be entitled to receive an
Opinion of Counsel at the expense of the Company, stating the legal effect of
such action, and that such action will not be in contravention of the
provisions hereof, and such opinion shall be full protection to the Trustee for
any action taken or omitted to be taken in reliance thereon; provided that the
Trustee's action under this Article XII shall at all times be and remain
subject to its duties and protections under Article VII.
Section 10 Purchaser May Rely. A purchaser in good faith of the
Collateral or any part thereof or interest therein which is purported to be
transferred, granted or released by the Trustee as provided in this Article XII
(i) shall not be obligated to ascertain the validity of the transfer, grant or
release, and may rely on the authority of the Trustee to execute the document
evidencing such transfer, grant or release, (ii) shall not be obligated to
inquire as to the satisfaction of any conditions precedent to the exercise of
such authority, and (iii) shall not be obligated to determine whether the
application of the purchase price therefor complies with the terms hereof.
Section 11 Payment of Expenses. Without limiting Section 7.7, on
demand of the Trustee, the Company forthwith shall pay or satisfactorily
provide for all reasonable expenditures incurred by the Trustee under this
Article XII. In the event that the Company (or with respect to any Security
Documents, the grantor of the security interest thereunder) makes a Release
Request more often than once a month, the Trustee and the Company shall
negotiate an additional reasonable fee for each such request. All such sums
referred to in this Section 12.11 shall be a Lien upon the Collateral and shall
be secured thereby.
Section 12 Trustee's Duties. The powers and duties conferred upon
the Trustee by this Article XII are solely to protect the Security Interests
and shall not impose any duty upon the Trustee to exercise any such powers
except as expressly provided in this Indenture. The Trustee shall be under no
duty to the Company (or with respect to any Security Documents, the grantor of
the security interest thereunder) whatsoever to make or give any presentment,
demand for performance, notice of non-performance, protest, notice of protest,
notice of dishonor, or other notice or demand in connection with any
Collateral, or to take any steps necessary to preserve any rights against prior
parties except as expressly provided in this Indenture. The Trustee shall not
be liable to the Company (or with respect to any Security Documents, the
grantor of the security interest thereunder) for failure to collect or realize
upon any or all of the Collateral, or for any delay in so doing, nor shall the
Trustee be under any duty to the Company (or with respect to any Security
Documents, the grantor of the security interest thereunder) to take any action
whatsoever with regard thereto. The Trustee shall have no duty to the Company
(or with respect to any Security Documents, the grantor of the security
interest thereunder) to comply with any recording, filing, or other legal
requirements necessary to establish or maintain the validity, priority or
enforceability of the Security Interests in, or the Trustee's rights in or to,
any of the Collateral.
Section 13 Authorization of Actions to be Taken by the Trustee
Under the Security Documents. The Trustee may, in its sole discretion and
without the consent of the Holders, but subject to Article VII and the terms of
the Intercreditor Agreements, take all actions it deems necessary or
appropriate in order to (a) enforce or effect the Security Documents and (b)
collect and receive any and all amounts payable in respect of the obligations
of the Company hereunder of TARC under the TARC Intercompany Loan and of
TransTexas under the TransTexas Intercompany Loan in accordance with and to the
extent provided in the Security Documents. Such actions shall include, but not
be limited to, enforcing or effecting any term or provision of the Security
Documents or advising, instructing or otherwise directing the collateral agent
under the Intercreditor Agreements with respect to the enforcement of any term
or provision of the Security Documents. Subject to the provisions of the
Security Documents (and the Intercreditor Agreements), the
106
<PAGE> 113
Trustee shall have the power to institute and to maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the
Collateral by any acts which may be unlawful or in violation of the Security
Documents or this Indenture, and such suits and proceedings as the Trustee may
deem expedient to preserve or protect its interests and the interests of the
Holders in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative
or other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security hereunder or be prejudicial to the
interests of the Holders or of the Trustee). In addition, the Trustee may act
upon any Subordination Request or Release Request by the Company (or with
respect to any Security Documents, the grantor of the security interest
thereunder) on behalf of the Company.
ARTICLE XIII
MISCELLANEOUS
Section 1 TIA Controls. If any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by operation of the TIA, the
imposed duties, upon qualification of this Indenture under the TIA, shall
control.
Section 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 Energy Corporation
1300 North Sam Houston Parkway East, Suite 200
Houston, Texas 77032
Attention: Edwin B. Donahue
if to the Trustee:
Firstar Bank of Minnesota, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie
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).
107
<PAGE> 114
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 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 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; provided, however, that no
opinion of counsel shall be required in connection with an Excess Cash Offer
made pursuant to Section 4.21.
Section 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 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.
108
<PAGE> 115
Section 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 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. INSOFAR AS THIS INDENTURE
RELATES TO THE TARC MORTGAGE OR THE TRANSTEXAS MORTGAGE OR THE CREATION,
PERFECTION OR FORECLOSURE OF LIENS AND THE ENFORCEMENT OF RIGHTS AND REMEDIES
AGAINST THE COLLATERAL UNDER THE SECURITY DOCUMENTS, THE TARC SECURITY
DOCUMENTS OR THE TRANSTEXAS SECURITY DOCUMENTS, IT SHALL BE GOVERNED BY THE
LAWS OF THE JURISDICTION SPECIFIED IN SUCH DOCUMENTS. 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 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 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 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.
109
<PAGE> 116
Section 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 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 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.
110
<PAGE> 117
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
TRANSAMERICAN ENERGY CORPORATION
By:
------------------------------
Name:
Title:
[Seal]
Attest:
--------------------------------
FIRSTAR BANK OF MINNESOTA, N.A.,
as Trustee
By:
------------------------------
Name:
Title:
<PAGE> 118
EXHIBITS
Exhibit A - Form of Senior Secured Note
Exhibit B - Form of Senior Secured Discount Note
Exhibit C - Certificate of Transferor-Senior Secured Note
Exhibit D - Certificate of Transferor-Senior Secured Discount Note
Exhibit E - Form of TEC Security and Pledge Agreement
Exhibit F - Form of TEC Collateral Assignment Agreement
Exhibit G - Form of TARC Mortgage
Exhibit H - Form of TARC Security and Pledge Agreement
Exhibit I - Form of TARC Intercompany Loan
Exhibit J - Form of TransTexas Mortgage
Exhibit K - Form of TransTexas Security and Pledge Agreement
Exhibit L - Form of TransTexas Intercompany Loan
Exhibit M - Form of TARC Intercreditor Agreement
Exhibit N - Form of TransTexas Intercreditor Agreement
Exhibit O - Form of TransTexas Disbursement Agreement
Exhibit P - Form of TARC/TEC Disbursement Agreement
<PAGE> 119
EXHIBIT A
(FACE OF SENIOR SECURED 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> 120
[FORM OF SENIOR SECURED NOTE]
TRANSAMERICAN ENERGY CORPORATION
11 1/2% SENIOR SECURED NOTE DUE 2002
No.
$
CUSIP 8935
1L AA 9
TransAmerican Energy Corporation, a Delaware corporation
(hereinafter called the "Company," which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to ______________________, or registered assigns, the
principal sum of ________________ Dollars, on June 15, 2002.
Interest Payment Dates: June 15 and December 15,
commencing December 15, 1997
Record Dates: June 1 and December 1
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 ENERGY CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
Firstar Bank of Minnesota, N.A., as Trustee
A-2
<PAGE> 121
By:
----------------------------------
Authorized Signature
A-3
<PAGE> 122
(BACK OF SENIOR SECURED NOTE)
TRANSAMERICAN ENERGY CORPORATION
11 1/2% SENIOR SECURED NOTE DUE 2002
1. Interest.
TransAmerican Energy Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at a
rate of 11 1/2% per annum. To the extent it is lawful, the Company promises to
pay interest on any interest payment due but unpaid on such principal amount at
a rate of 13% per annum compounded semi- annually.
The Company will pay interest semi-annually on June 15 and December
15 of each year (each, an "Interest Payment Date"), commencing December 15,
1997. 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, Firstar Bank of Minnesota, N.A. (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 June 13,
1997 (the "Indenture"), among 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 secured obligations of the Company limited in
aggregate principal amount to $475,000,000.
A-4
<PAGE> 123
5. Optional Redemption.
The Company may redeem at its election, with the net proceeds of any
Public Equity Offering, at any time on or after the Issue Date and before June
15, 2000, up to 35% of the aggregate principal amount of the Notes in cash at a
Redemption Price equal to 111 1/2% of the principal amount of the Notes so
redeemed, including accrued and unpaid interest to the Redemption Date. The
Notes may be redeemed in whole or from time to time in part at any time on and
after June 15, 2000, at the option of the Company, at the Redemption Price
(expressed as a percentage of principal amount) set forth below with respect to
the indicated Redemption Date, in each case, together with any accrued but
unpaid interest to the Redemption Date.
<TABLE>
If redeemed during
the 12-month period
beginning June 15 Redemption Price
------------------- ----------------
<S> <C>
2000 . . . . . . . . . 105.750%
2001 and thereafter. . 100.000%
</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.
A-5
<PAGE> 124
9. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Company at its written request. Thereafter, all liability of the Trustee
and such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits into an irrevocable trust with
the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay
the principal of and interest on the 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 combined Value of the Notes and the Company's Senior
Secured Discount 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 combined Value of the Notes and the
Company's Senior Secured Discount 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.
A-6
<PAGE> 125
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 and the
Company's Senior Secured Discount 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 combined
Value of the Notes and the Company's Senior Secured Discount 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.
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
June 13, 1997, among the Company and the Trustee (the "Registration Rights
Agreement"), including but not limited to the obligations of the Holders with
respect
A-7
<PAGE> 126
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 Energy Corporation, 1300
North Sam Houston Parkway East, Suite 200, Houston, Texas 77032.
A-8
<PAGE> 127
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-9
<PAGE> 128
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.21, Section 4.24 or Article XI of the Indenture,
check the appropriate box:
[ ] Section 4.21, [ ] Section 4.24, [ ] Article XI
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.21, Section 4.24, 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-10
<PAGE> 129
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES (2)
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> 130
EXHIBIT B
(FACE OF SENIOR SECURED DISCOUNT 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.](3)
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.
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE TOTAL AMOUNT OF
ORIGINAL ISSUE DISCOUNT PER $1,000.00 OF STATED PRINCIPAL AMOUNT IS 61.3221%,
THE ISSUE DATE IS JUNE 13, 1997, THE ISSUE PRICE PER $1,000.00 OF STATED
PRINCIPAL AMOUNT IS 77.6779% AND THE YIELD TO MATURITY ON THE ISSUE DATE IS
13%, COMPOUNDED SEMIANNUALLY.
- ------------------------
(3) This paragraph should be included only if the Note is issued in global
form.
B-1
<PAGE> 131
[FORM OF SENIOR SECURED DISCOUNT NOTE]
TRANSAMERICAN ENERGY CORPORATION
13% SENIOR SECURED DISCOUNT NOTE DUE 2002
No.
$
CUSIP 89351L AB 7
TransAmerican Energy Corporation, a Delaware corporation
(hereinafter called the "Company," which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to ______________________, or registered assigns, the
principal sum of ________________ Dollars, on June 15, 2002.
Interest Payment Dates: June 15 and December 15,
commencing December 15, 1999
Record Dates: June 1 and December 1
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 ENERGY CORPORATION
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Trustee's Certificate of Authentication:
B-2
<PAGE> 132
This is one of the Notes referred to
in the within-mentioned Indenture:
Firstar Bank of Minnesota, N.A., as Trustee
By:
----------------------------------------
Authorized Signature
B-3
<PAGE> 133
(BACK OF SENIOR SECURED DISCOUNT NOTE)
TRANSAMERICAN ENERGY CORPORATION
13% Senior Secured Discount Note due 2002
1. Interest.
TransAmerican Energy Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at a
rate of 13% 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 14 1/2% per annum compounded semi-annually.
The Company will pay interest semi-annually on June 15 and December
15 of each year (each, an "Interest Payment Date"), commencing December 15,
1999. 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 June 15, 1999.
Interest on the Notes will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
The Notes will have the Accreted Value set forth below as of the dates
indicated:
<TABLE>
Accreted Value
(per $1,000
principal
Semi-Annual Accretion Date amount)
- -------------------------- --------------
<S> <C>
December 15, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 827.849
June 15, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881.659
December 15, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 938.967
June 15, 1999 and thereafter. . . . . . . . . . . . . . . . . . . . . 1,000.000
</TABLE>
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, Firstar Bank of Minnesota, N.A. (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.
B-4
<PAGE> 134
4. Indenture.
The Company issued the Notes under an Indenture, dated as of June 13,
1997 (the "Indenture"), among 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 secured obligations of the Company limited in
aggregate principal amount to $1,130,000,000.
5. Optional Redemption.
The Company may redeem at its election, with the net proceeds of any
Public Equity Offering, at any time on or after the Issue Date and before June
15, 2000, up to 35% of the Value of the Notes in cash at a Redemption Price
equal to 111 1/2% of the Accreted Value of the Notes so redeemed, including
accrued and unpaid interest to the Redemption Date. The Notes may be redeemed
in whole or from time to time in part at any time on and after June 15, 2000,
at the option of the Company, at the Redemption Price (expressed as a
percentage of principal amount) set forth below with respect to the indicated
Redemption Date, in each case, together with any accrued but unpaid interest to
the Redemption Date.
<TABLE>
If redeemed during
the 12-month period
beginning June 15 Redemption Price
------------------- ----------------
<S> <C>
2000 . . . . . . . . . 105.750%
2001 and thereafter. . 100.000%
</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
B-5
<PAGE> 135
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.
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 combined Value of the Notes and the Company's Senior
Secured 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 combined Value of the Notes and the Company's Senior
Secured 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
B-6
<PAGE> 136
Price equal to 101% of the Accreted Value 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 Notes and Senior Secured
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 combined Value of the Notes and Senior
Secured 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.
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
B-7
<PAGE> 137
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
June 13, 1997, among the Company and the Trustee (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 Energy Corporation, 1300
North Sam Houston Parkway East, Suite 200, Houston, Texas 77032.
B-8
<PAGE> 138
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).
B-9
<PAGE> 139
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.21, Section 4.24 or Article XI of the Indenture,
check the appropriate box:
[ ] Section 4.21, [ ] Section 4.24, [ ] Article XI
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.21, Section 4.24, 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).
B-10
<PAGE> 140
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES (4)
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>
- ---------------------------
(4) This should be included only if the Note is issued in global form.
B-11
<PAGE> 141
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF SENIOR SECURED NOTES
Re: [Series A] [Series B] 11 1/2% Senior Secured Notes due 2002 (the
"Notes") of TransAmerican Energy 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> 142
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF SENIOR SECURED DISCOUNT NOTES
Re: [Series A] [Series B] 13% Senior Secured Discount Notes due 2002
(the "Notes") of TransAmerican Energy 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.
D-1
<PAGE> 1
EXHIBIT 4.3
TRANSAMERICAN ENERGY CORPORATION
SECURITY AND PLEDGE AGREEMENT
by
TRANSAMERICAN ENERGY CORPORATION
in favor of
FIRSTAR BANK OF MINNESOTA, N.A.
as Indenture Trustee for the Holders of the
11 1/2% Senior Secured Notes due 2002
13%Senior Secured Discount Notes due 2002
Dated as of June 13, 1997
<PAGE> 2
TRANSAMERICAN ENERGY CORPORATION
SECURITY AND PLEDGE AGREEMENT
This Security and Pledge Agreement (this "Agreement") is made
and entered into as of June 13, 1997 by TransAmerican Energy Corporation, a
Delaware corporation (the "Company"), in favor of Firstar Bank of Minnesota, as
trustee (the "Indenture Trustee") for the Noteholders (hereafter defined) under
the Indenture described herein.
RECITALS
WHEREAS, the Company has entered into an Indenture dated as of
June 13, 1997 (as it may from time to time be amended or modified and in
effect, the "Indenture") with the Indenture Trustee; and
WHEREAS, pursuant to the Indenture, the Company has issued
$425,000,000 aggregate principal amount of 13% Senior Secured Notes due 2002
and $1,105,000,000 aggregate principal amount of 13% Senior Secured Discount
Notes due 2002 (the "Notes"); and
WHEREAS, contemporaneously with the issuance of the Notes, the
Company shall make loans to TransAmerican Refining Corporation, a Delaware
corporation ("TARC"), and to TransTexas Gas Corporation, a Delaware corporation
("TransTexas"), and such loans are evidenced by (i) that certain Loan Agreement
dated as of June 13, 1997 (the "TARC Intercompany Loan Agreement") executed by
TARC in favor of the Company, and (ii) that certain Loan Agreement dated as of
June 13, 1997 (the "TransTexas Intercompany Loan Agreement") executed by
TransTexas in favor of the Company; and
WHEREAS, TARC's obligations under the TARC Intercompany Loan
Agreement are further evidenced by that certain promissory note in the amount
of $920,000,000 dated as of June 13, 1997 (the "TARC Intercompany Note"), and
executed by TARC in favor of the Company, and TransTexas' obligations under the
TransTexas Intercompany Loan Agreement are further evidenced by that certain
promissory note in the amount of $450,000,000 dated as of June 13, 1997 (the
"TransTexas Intercompany Note" and, together with the TARC Intercompany Note,
the "Intercompany Notes"), and executed by TransTexas in favor of the Company;
and
WHEREAS, the obligations of TARC under the TARC Intercompany
Note and the TARC Intercompany Loan Agreement are secured by (i) that certain
Security and Pledge Agreement dated as of June 13, 1997 (the "TARC Security
Agreement") executed by TARC in favor of the Company and (ii) that certain Act
of Mortgage, Security Agreement and Financing Statement dated as of June 13,
1997 (the "TARC Mortgage" and, together with the TARC Intercompany Loan
Agreement, the TARC Intercompany Note and the TARC Security Agreement, the
"TARC Loan Documents"); and
WHEREAS, the obligations of TransTexas under the TransTexas
Intercompany Note and the TransTexas Intercompany Loan Agreement are secured by
(i) that certain Security and Pledge Agreement dated as of June 13, 1997 (the
"TransTexas Security Agreement") executed by TransTexas in favor of the
Company, (ii) that certain Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement dated as of June 13, 1997 (the
"TransTexas Alabama Mortgage"), (iii) that certain Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement dated as
of June 13, 1997 (the "TransTexas Texas Mortgage"), (iv) that certain Mortgage,
Deed of Trust, Assignment of Production, Security Agreement and Financing
Statement dated as of June 13, 1997 (the "TransTexas Mississippi Mortgage"),
(v) that certain Mortgage, Deed of Trust, Assignment
<PAGE> 3
of Production, Security Agreement and Financing Statement dated as of June 13,
1997 (the "TransTexas North Dakota Mortgage") and (vi) that certain Act of
Mortgage, Security Agreement and Financing Statement dated as of June 13, 1997
(the "TransTexas Louisiana Mortgage" and, together with the TransTexas
Intercompany Note, the TransTexas Intercompany Loan Agreement, the TransTexas
Security Agreement, the TransTexas Alabama Mortgage, the TransTexas Texas
Mortgage, the TransTexas Mississippi Mortgage and the TransTexas North Dakota
Mortgage, the "TransTexas Loan Documents"); and
WHEREAS, in order to secure the payment and performance in
full of the Indenture obligations of the Company, the parties hereto desire to
set forth their mutual understanding and certain agreements regarding the terms
and conditions of the grant of a security interest in the Company UCC
Collateral, the Assigned Collateral and the Pledged Collateral (as defined
below);
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Indenture Trustee hereby agree as follows:
Section 1. Definitions.
(a) As used in this Agreement, capitalized terms not
otherwise defined herein have the meanings set forth in the Indenture,
and the following terms shall have the respective meanings set forth
below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Assigned Collateral" shall have the meaning assigned to that
term in Section 2 of this Agreement.
"Collateral" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Default" and "Event of Default" shall have the meanings
assigned to those terms in Section 6(a) of this Agreement.
"Disbursement Account" means the account or accounts owned by
the Company and created by that certain Disbursement Agreement by and
among the Company, TARC, the disbursement agent named therein, or its
successor, and the construction supervisor named therein, as amended
pursuant to the terms thereof.
"GAAP" means generally accepted accounting principles of the
United States of America, consistently applied.
"Obligations" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Indebtedness" means the following indebtedness and
liabilities of the Company (and any extensions, renewals, refunding,
increases, substitutions, replacements, consolidations, modifications
or rearrangements of such indebtedness and liabilities, regardless of
whether the Company executes any extension agreement or renewal
instrument):
(i) all amounts advanced or expended by the
Indenture Trustee under the Indenture and/or under or in
connection with this Agreement, all reasonable costs and
2
<PAGE> 4
out-of-pocket expenses (excluding expenses representing
administrative overhead) at any time and from time to time
incurred by the Indenture Trustee in connection with the
administration and/or enforcement of this Agreement
(including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel employed by the Indenture
Trustee in connection therewith), and all indemnities at any
time and from time to time payable hereunder to the Indenture
Trustee, and
(ii) all indemnities which relate to the Notes at
any time and from time to time payable to the Indenture
Trustee or the holders of the Notes (the "Noteholders") (or
any of them) under or in connection with the Indenture or any
related documents, ratably according to the amount owing to
the Indenture Trustee and each Noteholder, without preference
or priority among the Indenture Trustee and the Noteholders,
and
(iii) all principal, premium and accrued interest
owing on the Notes, and
(iv) all other amounts payable by the Company
under the Indenture.
"Pledged Collateral" shall have the meaning assigned to that
term in Section 2 of this Agreement.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"Vehicles" means all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
(b) All terms used in this Agreement which are defined in
the UCC, other than those which are defined in the Indenture or
specifically defined in Section 1(a) above, shall have the same
meaning herein as in the UCC.
Section 2. Grant of Security Interest.
(a) The Company hereby grants to the Indenture Trustee
for the benefit of the Noteholders, to secure the payment and
performance in full of the Obligations, a security interest in and a
lien on and so pledges and assigns to the Indenture Trustee for the
benefit of the Noteholders all of the Company's right, title and
interest in, to and under any and all of the following described
property, assets and rights, in each case, wherever located, whether
now owned or hereafter acquired or arising, all accessions and
additions thereto, all substitutions and replacements therefor, and
all proceeds and products thereof and assigns all rights in and to all
collateral securing the following described property, assets and
rights; provided, however, that this grant shall not include any of
TARC's, TransTexas' or any other Subsidiary's right, title and
interest in such described property:
(i) all equipment, machinery, chattels, tools,
parts, machine tools, motor vehicles, furniture, fixtures and
supplies of every nature, including, without limitation,
Vehicles, drilling rigs, workover rigs, fracture stimulation
equipment, wellsite compressors, rolling stock and related
equipment and other assets accounted for as equipment 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
3
<PAGE> 5
contain information relating to the foregoing (any and all
such property being the "Equipment");
(ii) all inventory in all of its forms, including
without limitation, feedstocks, refined petroleum products,
acquired line pipe, casing, drill pipe and other supplies
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 (any and all such property being "Inventory");
(iii) all personal and fixture property of every
kind and nature including, without limitation, all furniture,
fixtures, raw materials, goods, contract rights, rights to the
payment of money (including, without limitation, all right
title and interest in and to the TARC Intercompany Loan
Agreement, the TARC Intercompany Note, the TransTexas
Intercompany Loan Agreement and the TransTexas Intercompany
Note), insurance refund claims and all other insurance claims
and proceeds, tort claims, chattel paper, documents,
instruments (including certificated securities), deposit
accounts and all general intangibles including, without
limitation, all uncertificated securities, tax refund claims,
license fees, patents, patent applications, trademarks,
trademark applications, trade names, copyrights, copyright
applications, rights to sue and recover for past infringement
of patents, trademarks and copyrights, computer programs,
computer software, engineering drawings, service marks,
customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which the Company
possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess,
use or have authority to possess or use property (whether
tangible or intangible) of the Company, and all recorded data
of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics (any and all such property being
the "Personal Property"); and
(iv) any and all "accounts" as such term is
defined in Article 9 of the UCC (excluding all intercompany
accounts), all products and proceeds thereof, and all books,
records, ledger cards, files, correspondence, and computer
files, tapes, disks or software that at any time evidence or
contain information relating to the foregoing (any and all
such property, the "Receivables" and together with the
Equipment, Inventory and Personal Property, the "Company UCC
Collateral").
(b) The Company also pledges to the Indenture Trustee for
the benefit of the Noteholders, and grants to the Indenture Trustee
for the benefit of the Noteholders a security interest in all of the
Company's right, title and interest in, to and under any and all of
the following described property, rights and interests, in each case,
wherever located, whether now owned or hereafter acquired or arising,
all accessions and additions thereto, all substitutions and
replacements therefor, and all proceeds and products thereof
(collectively, the "Pledged Collateral"):
(i) all of the issued and outstanding shares of
common stock identified on Schedule 2(b) attached hereto of
TARC, TransTexas and any other subsidiary of the Company
presently existing or hereafter created or acquired (the
"Pledged Subsidiaries") therein set forth;
4
<PAGE> 6
(ii) all other shares of common stock or other
equity securities now or hereafter owned or acquired by the
Company in any manner issued by the Pledged Subsidiaries, and
the certificates representing such securities, and any present
or future options, warrants or other rights to subscribe for
or purchase any property described in Schedule 2(b) or any
notes, bonds, debentures or other evidences of indebtedness
now or hereafter owned or acquired by the Company in any
manner that (A) are at any time convertible, exchangeable or
exercisable into capital stock or other equity securities of
the Pledged Subsidiaries or (B) have or at any time could by
their terms have voting rights with respect to any matter
affecting the Pledged Subsidiaries and all securities,
certificates and instruments representing or evidencing
ownership of any of the property described in Schedule 2(b)
hereof; provided, however, that in the event the Company
acquires any outstanding Common Stock Purchase Warrants of
TARC issued on February 23, 1995 (the "TARC Warrants")
pursuant to a tender offer by the Company for such TARC
Warrants, the Company shall promptly cancel such TARC Warrants
or contribute such TARC Warrants to TARC for prompt
cancellation, and in no event will such TARC Warrants be
included in the definition of "Pledged Collateral"; and
(iii) all proceeds and products of the foregoing
and distributions thereof or with respect thereto, including
without limitation dividends, distributions, cash, instruments
and other property or securities, now or hereafter at any time
or from time to time received or receivable or otherwise
distributed or distributable in respect of or in exchange for
any or all of the foregoing.
(c) The Company hereby also assigns to the Indenture
Trustee for the benefit of the Noteholders and grants to the Indenture
Trustee for the benefit of the Noteholders a security interest in,
pledge of and lien on, the Disbursement Account and all investments,
securities, financial assets credited thereto and security
entitlements with respect thereto and all certificates and
instruments, if any, from time to time representing or evidencing the
Disbursement Account or any property credited thereto, whether now
owned by the Company or existing or hereafter acquired, created or
arising including the proceeds thereof (the "Assigned Collateral" and,
together with the Company UCC Collateral and the Pledged Collateral,
the "Collateral").
Subject to any Permitted Liens, pursuant to the terms
hereof, the Company has endorsed, assigned and delivered to the
Indenture Trustee, or such other Person that the Indenture Trustee has
designated as its agent to hold for perfection purposes, all
negotiable or non-negotiable instruments (including certificated
securities) and chattel paper pledged by it hereunder, together with
instruments of transfer or assignment duly executed in blank as the
Indenture Trustee may have specified. In the event that the Company
shall, after the date of this Agreement, acquire any other negotiable
or non-negotiable instruments (including certificated securities) or
chattel paper to be pledged by it hereunder, the Company shall,
subject to Permitted Liens, forthwith endorse, assign and deliver the
same to the Indenture Trustee, or such other Person that the Indenture
Trustee has designated as its agent to hold for perfection purposes,
accompanied by such instruments of transfer or assignment duly
executed in blank as the Indenture Trustee may from time to time
specify. To the extent that any securities are uncertificated,
appropriate book-entry transfers reflecting the pledge of such
securities created hereby have been or, in the case of uncertificated
securities hereafter acquired by the Company, will at the time of such
acquisition be, duly made for the account of the Indenture Trustee or
one or more nominees of the Indenture Trustee with the issuer of such
securities or other appropriate book-entry facility or financial
intermediary, with the Indenture Trustee having at all times the
5
<PAGE> 7
right to obtain definitive certificates (in the Indenture Trustee's
name or in the name of one or more nominees of the Indenture Trustee)
where the issuer customarily or otherwise issues certificates, all to
be held as Collateral hereunder. The Company hereby acknowledges that
the Indenture Trustee may, in its discretion, appoint one or more
financial institutions to act as the Indenture Trustee's agent in
holding in custodial accounts instruments or other financial assets,
including securities, in which the Indenture Trustee is granted a
security interest hereunder, including, without limitation,
certificates of deposit and other instruments evidencing short term
obligations.
(d) The inclusion of proceeds in this Agreement does not
authorize the Company to sell, dispose of or otherwise use the
Collateral in any manner not specifically authorized hereby or under
the Indenture.
(e) This Agreement secures the prompt and complete (i)
payment of all obligations of the Company to the Indenture Trustee
under the Indenture and to the Holders under the Notes, whether such
obligations are now existing or hereafter arising, and all renewals,
extensions, amendments, supplements and rearrangements thereof and
(ii) payment and performance of all covenants and conditions by the
Company contained herein and in the Indenture and the Notes in each
case whether for principal, interest, prepayment premium, taxes,
costs, losses, compensation, reimbursements, fees, expenses or any
other amount payable to the Indenture Trustee under the terms of this
Agreement (all such obligations, covenants and conditions described in
the foregoing clauses (i) and (ii) being hereinafter collectively
referred to as the "Obligations").
(f) Notwithstanding anything contained herein to the
contrary, the stock of an Accounts Receivable Subsidiary shall not
constitute Collateral hereunder.
Section 3. Representations and Warranties. The Company represents and
warrants, as of the date hereof, to the Indenture Trustee and each Noteholder
as follows:
(a) The chief executive office and principal place of
business of the Company is located at 1300 N. Sam Houston Parkway
East, Suite 320, Houston, Harris County, Texas 77032. Any and all
Collateral not delivered to the Indenture Trustee or its designated
agent is and will continue to be located only in the State of Texas.
(b) The Company is the legal and beneficial owner of all
of the Collateral free and clear of any lien, security interest,
charge or encumbrance of any kind or nature, except for the lien and
security interest created hereby and for Permitted Liens, and has not
made any other pledge, assignment, mortgage, hypothecation or transfer
of the Collateral except as permitted hereunder or under the
Indenture. Except for the lien and security interest created hereby,
all of the Collateral is free from any material credit, deduction,
allowance, defense, dispute, setoff or counterclaim and there is no
material extension or indulgence with respect thereto. The Pledged
Collateral is not subject to any put, call, option or other right in
favor of any other person whatsoever.
(c) The Pledged Collateral is accurately described in
Schedule 2(b) hereto and has been duly authorized and validly issued
and non-assessable.
6
<PAGE> 8
(d) This Agreement has been duly executed and delivered
by the Company and creates a valid security interest in, and lien on,
the Collateral securing the payment of the Indebtedness. Upon the
delivery of physical certificates evidencing the Pledged Collateral to
the Indenture Trustee or its designated agent, delivery of the TARC
Intercompany Note and the TransTexas Intercompany Note and the making
of the filings and the taking of all other actions necessary to
perfect the security interests created hereby, including, without
limitation, those actions specified in Section 2(b) and Section 4, the
security interests created by this Agreement will be duly perfected
security interests subject to no equal or prior lien, security
interest or encumbrance of any kind or nature other than Permitted
Liens.
(e) The Company has the requisite corporate power and
authority to pledge the Collateral in the manner hereby done or
contemplated and to defend its title thereto against the lawful claims
of all persons whomsoever.
(f) Neither the execution and delivery of this Agreement
by the Company, the performance by the Company of its obligations
hereunder, nor the transactions herein contemplated will (i) violate
the Company's charter or bylaws, (ii) violate the terms of any
agreement, indenture, mortgage, deed of trust, equipment lease,
instrument or other document to which the Company is a party, (iii)
violate any law, order, rule or regulation applicable to the Company
of any court or any government, regulatory body or administrative
agency or other governmental body having jurisdiction over the Company
or its properties, or (iv) result in or require the creation or
imposition of any lien (other than the lien contemplated hereby), upon
or with respect to any of the property now owned or hereafter acquired
by the Company, which violation or conflict would have a material
adverse effect on the financial condition, business, assets or
liabilities of the Company or on the value of the Collateral or a
material adverse effect on the security interests hereunder.
(g) The Pledged Collateral includes the issued and
outstanding shares of Common Stock of the Pledged Subsidiaries as
described in Schedule 2(b) attached hereto, and as of the date of
execution hereof, there are no outstanding options, warrants or other
rights to subscribe for or purchase any property described in Section
2(b) or any notes, bonds, debentures or other evidences of
indebtedness that (i) are at any time convertible into capital stock
of the Pledged Subsidiaries or (ii) have or at any time could by their
terms have voting rights with respect to any matters affecting the
Pledged Subsidiaries.
(h) No consent or approval which has not been obtained
prior to the date hereof of any other person or entity and no
authorization, approval or other action (other than delivery of
physical certificates evidencing the Pledged Collateral) by, and no
notice to or filing with any governmental body (other than UCC
filings), regulatory authority or securities exchange, was or is
necessary as a condition to the validity of the pledge hereunder of
the Collateral, and such pledge is effective to vest in the Indenture
Trustee the rights of the Indenture Trustee in the Collateral as set
forth herein. There are no restrictions on the transferability of any
of the Collateral transferred or delivered by the Company hereunder
or, except for restrictions related to federal and state securities
laws governing the sale of "restricted stock" or "control stock," with
respect to the foreclosure, transfer or disposition thereof by the
Indenture Trustee.
Section 4.Covenants. During the term of this Agreement and until all
the Obligations with respect to the Indebtedness have been fully and finally
paid and discharged in full, the Company covenants and agrees with the
Indenture Trustee and each Noteholder that:
7
<PAGE> 9
(a) Except as permitted by the Indenture or in the
ordinary course of business, the Company will not make any compromise
or settlement with respect to the Collateral without notice to or
consent of the Indenture Trustee.
(b) The Company shall deliver to the Indenture Trustee or
its designated agent concurrently with the execution of this Agreement
or, to the extent acquired subsequent to the date of execution hereof,
including without limitation Pledged Collateral issued by a newly
created or acquired Subsidiary, immediately upon the Company's
acquisition thereof: (i) all certificates and instruments representing
the Pledged Collateral and a revised Schedule 2(b), and (ii) all
certificates and instruments representing each other item of
Collateral (including all certificates, instruments and notes
representing any such Company UCC Collateral, including without
limitation the Intercompany Notes). Any and all Pledged Collateral
delivered to the Indenture Trustee shall be accompanied by undated
duly executed powers in blank and by such other instruments of
transfer or documents as the Indenture Trustee may reasonably request.
The Indenture Trustee may hold the certificates representing the
Pledged Collateral delivered to it in its own name or in the name of
its nominee, all in form and substance satisfactory to the Indenture
Trustee.
(c) From time to time, the Company shall, at its own
expense, promptly give, execute, deliver, file and/or otherwise
formalize any such notice, statement, instrument, document, agreement
or other papers, and do all such other acts and things, as may be
necessary or desirable, or as the Indenture Trustee may reasonably
request, in order to create, evidence, preserve, perfect, validate or
continue any lien or security interest created pursuant to this
Agreement or to enable the Indenture Trustee to exercise or enforce
its rights hereunder with respect to such lien or security interest,
or otherwise further to effect the purposes of this Agreement.
Without limiting the generality of the foregoing, the Company shall,
at any time or from time to time upon the request of the Indenture
Trustee and at the Company's own expense, execute, acknowledge,
witness, deliver, file and/or record such financing and continuation
statements, notices, additional assignments and other documents or
instruments (all of which shall be in form and substance satisfactory
to the Indenture Trustee and its counsel) as the Indenture Trustee may
from time to time reasonably request for the perfection of the liens
and security interests created hereby.
(d) The Company shall promptly notify the Indenture
Trustee (i) of any material changes in any fact or circumstance
represented or warranted by the Company with respect to any material
portion of the Collateral, (ii) of any material impairment of the
Collateral and (iii) of any claim, action or proceeding affecting
title to all or any of the Collateral.
(e) Except for the liens and security interests created
by this Agreement and the Permitted Liens in the Collateral, the
Company shall at its own expense defend the Collateral against any and
all liens, claims, security interests and other encumbrances or
interests, howsoever arising and shall maintain and preserve the
security interest granted hereunder with respect to the Collateral as
long as this Agreement shall remain in full force and effect. The
Company shall not make any other pledge, assignment, mortgage,
hypothecation or transfer of the Collateral except as permitted
hereunder or under the Indenture.
(f) The Company shall at all times keep accurate and
complete records with respect to the Collateral, including, without
limitation, records of all payments made, credit granted and proceeds
received in connection therewith.
8
<PAGE> 10
(g) The Company shall not relocate its principal place of
business or chief executive office to a county or state other than
that specified in Section 3(a) of this Agreement unless the Company
gives 30 days' prior written notice to the Indenture Trustee, which
notice shall specify the county and state into which such relocation
is to be made. The Collateral, to the extent not delivered to the
Indenture Trustee pursuant to Section 2, will be kept at those
locations listed on the Perfection Certificate delivered to the
Indenture Trustee herewith in the form attached as Exhibit A hereto
and the Company will not remove the Collateral from such locations,
without providing at least 30 days' prior written notice to the
Indenture Trustee.
(h) The Company will keep the Collateral in good order
and repair, except in situations where not to do so would not be
material, and will not use the same in violation of law or any policy
of insurance thereon. The Indenture Trustee, or its designee, may
inspect the Collateral at any reasonable time, wherever located.
(i) The Indenture Trustee, or its representative, shall
at all times have full and free access during normal business hours to
all of the books, correspondence and records of the Company relating
to the Collateral (other than information that is privileged and
confidential) and the Indenture Trustee and its representatives may
examine the same, make abstracts therefrom and make photocopies
thereof, and the Company agrees to render to the Indenture Trustee, at
the Company's cost and expense, such clerical and other assistance as
may be reasonably requested by the Indenture Trustee with regard
thereto.
(j) The Company shall not permit any of the Pledged
Subsidiaries to issue to the Company any securities of the type
required to be pledged hereunder unless such securities are promptly
pledged and delivered hereunder to the Indenture Trustee in accordance
with Section 2(b).
(k) If, while this Agreement is in effect, any stock
dividend, stock split, reclassification, readjustment, reorganization,
merger, consolidation, exchange offer, tender offer or other change in
the capital structure, including the creation of any subscription or
other rights relating to the Pledged Collateral, is declared or made,
or proposed to be declared or made, by any of the Pledged Subsidiaries
or any other issuer of the Collateral, all substituted and additional
securities or interest issued with respect to the Collateral and
evidenced by certificates shall be endorsed in blank by the Company
promptly upon receipt thereof or otherwise appropriately transferred
to the Indenture Trustee or its designated agent in negotiable form,
and all certificates or instruments evidencing such securities shall
be delivered to the Indenture Trustee or its designated agent to be
held under the terms of this Agreement in the same manner as, and as a
part of, the Collateral. All Pledged Collateral shall be evidenced by
one or more certificates. Any securities that may be issued upon
exercise of any subscription or other rights relating to the Pledged
Collateral shall be endorsed in blank and delivered to the Indenture
Trustee or its designated agent with any necessary powers.
Section 5. Powers of the Secured Party.
(a) The Company hereby irrevocably designates and
appoints the Indenture Trustee as its attorney- in-fact, with full
power of substitution, for the purposes of carrying out the provisions
of this Agreement and taking any action and executing any instrument,
including,without limitation, any financing statement or continuation
statement, and taking any other action to maintain the validity,
perfection, priority and enforcement of the security interest
9
<PAGE> 11
intended to be created hereunder, that the Indenture Trustee may
reasonably deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest.
(b) Without limiting the generality of Section 5(a)
hereof, the Company hereby irrevocably authorizes and empowers the
Indenture Trustee for the ratable benefit of the Noteholders, upon the
occurrence and during the continuation of any Event of Default, at the
expense of the Company, either in the Indenture Trustee's own name or
in the name of the Company, at any time and from time to time:
(i) to ask, demand, receive, issue a receipt for,
give acquittance for, settle and compromise any and all monies
which may be or become due or payable or remain unpaid at any
time or times to the Company, and any and all other property
which may be or become deliverable at any time or times to the
Company, under or with respect to the Collateral;
(ii) to exercise any rights or remedies of the
Company under the TARC Loan Documents and the TransTexas Loan
Documents;
(iii) to endorse any drafts, checks, orders or
other instruments for the payment of money payable to the
Company on account of the Collateral (including any such
draft, check, order or instrument issued by any insurance
company payable jointly to the Company and the Indenture
Trustee); and
(iv) to settle, compromise, prosecute or defend
any action, claim or proceeding, or take any other action, all
either in its own name or in the name of the Company or
otherwise, which the Indenture Trustee may deem to be
necessary or advisable for the purpose of exercising and
enforcing its powers and rights under this Agreement or in
furtherance of the purposes hereof, including any action which
by the terms of this Agreement is to be taken by the Company.
(c) Nothing in this Agreement shall be construed as
requiring or obligating the Indenture Trustee to make any commitment
or to make any inquiry as to the nature or sufficiency of any payment
received by it, or to present or file any claim or notice, or to take
any other action with respect to any of the Collateral or any part
thereof or the amounts due or to become due in respect thereof or any
property covered thereby, or to collect or enforce the payment of any
amounts assigned to it or to which it may otherwise be entitled
hereunder at any time or times other than to account for amounts or
Collateral received.
(d) The Indenture Trustee shall be entitled at any time
to file this Agreement, or a carbon, photographic or any other
reproduction of this Agreement, as a financing statement, but the
failure of the Indenture Trustee to do so shall not impair the
validity or enforceability of this Agreement. The Indenture Trustee
shall have no duty to comply with any recording, filing or other legal
requirements necessary to establish or maintain the validity, priority
or enforceability of, or the Indenture Trustee's rights in or to, any
of the Collateral.
(e) In its discretion, the Indenture Trustee may
discharge taxes and other encumbrances at any time levied or placed on
any of the Collateral, make repairs thereto and pay any necessary
filing fees. The Company agrees to reimburse the Indenture Trustee on
demand
10
<PAGE> 12
for any and all reasonable expenditures so made with interest on
unpaid amounts at the maximum rate permitted by law. The Indenture
Trustee shall have no obligation to the Company to make any such
expenditures, nor shall the making thereof relieve the Company of any
default.
(f) Anything herein to the contrary notwithstanding, the
Company shall remain liable under each contract or agreement comprised
in the Collateral to be observed or performed by the Company
thereunder. The Indenture Trustee shall not have any obligation or
liability under any such contract or agreement by reason of or arising
out of this Agreement or the receipt by the Indenture Trustee of any
payment relating to any of the Collateral, nor shall the Indenture
Trustee be obligated in any manner to perform any of the obligations
of the Company under or pursuant to any such contract or agreement, to
make inquiry as to the nature or sufficiency of any payment received
by the Indenture Trustee in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce
any performance or to collect the payment of any amounts which may
have been assigned to the Indenture Trustee or to which the Indenture
Trustee may be entitled at any time or times other than to account for
amounts or Collateral received, and no action taken or omitted shall
give rise to any defense, counterclaim or right of action against the
Indenture Trustee, unless the Indenture Trustee's actions are taken or
omitted to be taken with gross negligence or bad faith or constitute
willful misconduct. The Indenture Trustee's sole duty with respect to
the custody, safe keeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the UCC or otherwise, shall
be to deal with such Collateral in the same manner as the Indenture
Trustee deals with similar property for its own account.
(g) If an Event of Default has occurred and is
continuing, the Indenture Trustee may at any time, at its option,
transfer to itself or any nominee any securities constituting the
Pledged Collateral, receive any income thereon and hold such income as
additional Collateral or apply it to the Indebtedness. Regardless of
whether any Indebtedness is due, the Indenture Trustee may demand, sue
for, collect, or make any settlement or compromise which it deems
desirable with respect to the Collateral. Regardless of the adequacy
of Collateral or any other security for the Indebtedness, any deposits
or other sums at any time credited by or due from the Indenture
Trustee to the Company may at any time be applied to or set off
against any of the Indebtedness.
(h) If an Event of Default shall have occurred and be
continuing, the Company shall, at the request of the Indenture
Trustee, notify obligors on chattel paper and general intangibles of
the Company and obligors on instruments for which the Company is an
obligee of the security interest of the Indenture Trustee in any
chattel paper, general intangible or instrument and that payment
thereof is to be made directly to the Indenture Trustee or to any
financial institution designated by the Indenture Trustee as the
Indenture Trustee's agent therefor, and the Indenture Trustee may
itself, if an Event of Default shall have occurred and be continuing,
without notice to or demand upon the Company, so notify said obligors.
After the making of such a request or the giving of any such
notification, the Company shall hold any proceeds of collection of
chattel paper, general intangibles and instruments received by the
Company as trustee for the Indenture Trustee without commingling the
same with other funds of the Company and shall turn the same over to
the Indenture Trustee in the identical form received, together with
any necessary endorsements or assignments. The Indenture Trustee
shall apply the proceeds of collection of chattel paper, general
intangibles and instruments received by the Indenture Trustee to the
Indebtedness, such proceeds to be immediately entered after final
payment in cash of the items giving rise to them.
11
<PAGE> 13
Section 6.Voting Rights, Dividends, Etc.
(a) Until an Event of Default shall have occurred and be
continuing:
(i) except as otherwise provided in this
Agreement, the Company shall be entitled to exercise any and
all voting or consensual rights and powers, including
subscription rights, in relation to the Pledged Collateral;
provided, however, that no vote shall be cast or consent,
waiver or ratification given or action taken which would
materially impair the securities or the value thereof or
violate any provision of this Agreement, the Indenture or any
other ancillary document;
(ii) except as otherwise provided in this
Agreement, the Company shall be entitled to receive and retain
any and all dividends, distributions or other payments in
respect of the Pledged Collateral and the Indenture Trustee,
upon receipt of any of the foregoing, shall promptly pay or
distribute the same to the Company, and, to the extent so
permitted, any distributions received by the Company and
transferred to other persons shall pass free and clear of the
lien and security interest hereof; and
(iii) the Indenture Trustee shall execute and
deliver to the Company or cause to be executed and delivered
to the Company, all such proxies, powers of attorney, dividend
orders and other instruments as the Company may reasonably
request for the purpose of enabling it to exercise the voting
or consensual rights and powers which the Company is entitled
to exercise pursuant to the foregoing Section 6(a)(i) or to
receive the dividends, distributions or other payments which
the Company is authorized to retain pursuant to the foregoing
Section 6(a)(ii).
(b) Upon the occurrence and during the continuance of an
Event of Default, all rights of the Company to exercise the voting or
consensual rights and powers which the Company would otherwise be
entitled to exercise pursuant to Section 6(a)(i) and to receive the
dividends, distributions and other payments which the Pledgor would
otherwise be authorized to receive and retain pursuant to Section
6(a)(ii) shall automatically cease, and all such rights shall
thereupon become vested in the Indenture Trustee, which shall then
have the sole and exclusive right and authority to exercise, in its
sole discretion, all such voting and consensual rights and powers and
to receive and retain as Collateral all such dividends, distributions
and other payments. Without limiting the foregoing, in such event the
Indenture Trustee may exercise all voting and corporate rights at any
meeting of any corporation issuing any such securities and any and all
rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any such securities as if it were
the absolute owner thereof, including, without limitation, the rights
to exchange at its discretion, any and all such securities upon the
merger, consolidation, reorganization, recapitalization or other
readjustment of any corporation issuing any such securities or upon
the exercise by any such issuer or the Indenture Trustee of any right,
privilege or option pertaining to any such securities, and, in
connection therewith, to deposit and deliver any and all securities
with any committee, depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may determine,
all without liability except to account for the property actually
received by it, but the Indenture Trustee shall have no duty to
exercise any of the aforesaid rights, privileges or options and the
Indenture Trustee shall not be responsible for any failure to do so or
delay in so doing.
Section 7. Default.
12
<PAGE> 14
(a) It shall constitute a Default or an Event of Default
under this Agreement if a "Default" or an "Event of Default" shall
occur under the Indenture.
(b) If an Event of Default shall have occurred and is
continuing and if the maturity of the Notes is accelerated under the
provisions of the Indenture, in addition to any other rights and
remedies that may be available to the Indenture Trustee under the UCC
or the Indenture or under Section 5(a) or 5(b) of this Agreement or
otherwise under this Agreement or at law, the Indenture Trustee, for
the ratable benefit of the Noteholders, shall also have the following
rights and powers:
(i) The Indenture Trustee may, without being
required to give any notice except as hereinafter provided,
sell the Collateral, or any part thereof, at public or private
sale, for cash, upon credit or for future delivery and at such
price or prices as the Indenture Trustee deems satisfactory,
and the Indenture Trustee and/or its collateral agent may be
the purchaser for the ratable benefit of the Noteholders of
any or all of the Collateral so sold at a public sale and
thereafter hold the same absolutely free from any right or
claim of whatsoever kind, and the Indebtedness or any portion
of the Indebtedness may be applied as a credit against the
purchase price.
(ii) Upon any such sale, the Indenture Trustee
shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at
any such sale shall hold the property sold absolutely free
from any claim or right of whatsoever kind by or on behalf of
the Company, including any equity or rights of redemption of
the Company, and the Company hereby specifically waives, to
the full extent permitted by applicable law, all rights of
redemption, stay or appraisal which it has or may have under
any rule or law or statute now existing or hereafter adopted.
(iii) The Indenture Trustee shall give the Company
ten (10) business days' written notice (which the Company
agrees is reasonable notification within the meaning of
Section 9.504 of the UCC) of its intention to make any such
public or private sale. Such notice, in case of public sale,
shall state the time and place fixed for such sale and, in
case of a private sale, shall state the date after which such
sale is to be made.
(iv) Any such public sale shall be held at such
time or times within ordinary business hours and at such
places as the Indenture Trustee may fix in the notices of such
sale. At any such sale the Collateral may be sold in one lot
as an entirety or in separate parcels, as the Indenture
Trustee may, in its sole discretion, determine.
(v) The Indenture Trustee shall not be obligated
to make any sale of the Collateral if it shall determine not
to do so, regardless of the fact that notice of sale of the
Collateral may have been given. The Indenture Trustee may,
without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and
such sale may, without further notice, be made at any time or
place to which the same shall be so adjourned.
(vi) In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Indenture Trustee until the
selling price is paid by the purchaser thereof, but the
Indenture Trustee shall not incur
13
<PAGE> 15
any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice.
(vii) The Indenture Trustee, instead of exercising
the power of sale herein conferred upon it, may proceed by a
suit or suits at law or in equity to exercise its remedies
regarding the Collateral and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
(viii) The Company agrees that if any Event of
Default shall have occurred and be continuing, then the
Indenture Trustee shall have the right to take possession of
the Collateral, and for that purpose the Indenture Trustee
may, so far as the Company can give authority therefor, enter
upon any premises on which the Collateral may be situated and
remove the same therefrom with or without notice or process of
law. The Company waives any and all rights that it may have
to a judicial hearing in advance of the enforcement of any of
the Indenture Trustee's rights hereunder, including, without
limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its
rights with respect thereto. To the extent that any of the
Obligations are to be paid or performed by a person other than
the Company, the Company waives and agrees not to assert any
rights or privileges which it may have under Section 9-112 of
the UCC.
(ix) If under mandatory requirements of applicable
law, the Indenture Trustee shall be required to make
disposition of the Collateral within a period of time that
does not permit the giving of notice to the Company as
hereinbefore provided, the Indenture Trustee need give the
Company only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of law.
(x) The Indenture Trustee may instruct the
obligor or obligors on any agreement, instrument or other
obligation constituting the Collateral, including the obligors
under the Intercompany Notes, to make any payment or render
any performance required by the terms of such agreement,
instrument or obligation directly to the Indenture Trustee or
its designee.
(c) The Indenture Trustee shall incur no liability as a
result of the sale of the Collateral, or any part thereof, at any
private sale other than for its own gross negligence, willful
misconduct or bad faith. The Company hereby waives, to the maximum
extent permitted by applicable law, any claims against the Indenture
Trustee and each Noteholder arising by reason of the fact that the
price at which the Collateral may have been sold at such private sale
was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the Indebtedness, even
if the Indenture Trustee accepts the first offer received and does not
offer such Collateral to more than one offeree.
(d) The Indenture Trustee shall not be obligated to
pursue or exhaust its rights and remedies against any particular
Collateral or other security for the Indebtedness before pursuing or
enforcing its rights and remedies against any other Collateral or
other security for the Indebtedness.
14
<PAGE> 16
(e) To the extent permitted by law, the Company hereby
waives (i) any rights to require the Indenture Trustee to proceed
first against any other Person, to exhaust its rights in the
Collateral or other security for the Indebtedness or to pursue any
other right that the Indenture Trustee might have, (ii) with respect
to the Notes, presentment and demand for payment, protest, notice of
protest and nonpayment, notice of dishonor, notice of the intention to
accelerate and notice of acceleration (except as otherwise set forth
in the Indenture), and (iii) all rights of marshalling in respect of
any and all of the Collateral.
(f) Without precluding any other methods of sale, the
Company acknowledges that the sale of the Collateral shall have been
made in a commercially reasonable manner if conducted in conformity
with reasonable commercial practices of banks disposing of similar
property. The Indenture Trustee shall not be liable for any
depreciation in the value of the Collateral.
(g) The Company agrees that its obligation to deliver the
Collateral is of the essence of this Agreement and that accordingly,
upon application to a court of equity having jurisdiction, the
Indenture Trustee shall be entitled to a decree requiring specific
performance by the Company of such obligation.
(h) Remedies of the Indenture Trustee are cumulative and
the exercise of any one or more of the remedies provided herein shall
not be construed as a waiver of any of the other remedies of the
Indenture Trustee.
(i) If an Event of Default shall have occurred and be
continuing, the proceeds of any sale of or other realization upon all
or any part of the Collateral and any other amounts held by the
Indenture Trustee under this Agreement shall be applied by the
Indenture Trustee as provided in the Indenture.
Any amounts remaining after such applications and the payment
in full of all Notes with respect to the Indebtedness shall be remitted to the
Company, its successors or assigns, or as a court of competent jurisdiction may
otherwise direct.
Section 8. Registration Rights.
(a) If the Indenture Trustee or the Noteholders shall
determine to exercise the right to sell any or all of the Pledged
Collateral pursuant to Section 7 hereof, and if in the opinion of
counsel for the Indenture Trustee or the Noteholders it is necessary
(or if in the opinion of the Indenture Trustee or the Noteholders it
is advisable) to have the Pledged Collateral, or that portion thereof
to be sold, registered under the provisions of the Securities Act of
1933, as amended (the "Securities Act"), the Company will cause each
issuing corporation to execute and deliver, and cause the directors
and officers of each thereof to execute and deliver, all at the
Company's expense, all such instruments and documents, and to do or
cause to be done all such other acts and things as may be necessary
or, in the opinion of the Indenture Trustee or the Noteholders,
advisable to register the Pledged Collateral, or that portion thereof
to be sold, under the provisions of the Securities Act and to use its
best efforts to cause the registration statement relating thereto to
become effective and to remain effective for a period of one year from
the date of the first public offering of the Pledged Collateral, or
that portion thereof to be sold, and to make all amendments or
supplements thereto and/or to the related prospectus which, in the
opinion of the Indenture Trustee or the Noteholders, are necessary or
advisable, all in conformity with the requirements of the Securities
Act and the rules and regulations of the Securities and
15
<PAGE> 17
Exchange Commission applicable thereto. The Company agrees to use its
best efforts to cause each such issuing corporation to comply with the
provisions of the securities or "Blue Sky" laws of any jurisdiction
which the Indenture Trustee or the Noteholder shall designate and to
cause each such issuing corporation to make available to its security
holders, as soon as practicable, an earnings statement (which need not
be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) The Company recognizes that the Indenture Trustee or
the Noteholders may be unable, or find it undesirable, to effect a
public sale of any or all the Pledged Collateral by reason of certain
prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, but may be compelled or desire to resort
to one or more private sales thereof to a restricted group of
purchasers who will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof in violation of the
Securities Act. The Company acknowledges and agrees that any such
private sale may result in prices and other terms less favorable to
the seller than if such sale were a public sale, but, notwithstanding
such circumstances, such private sale shall be deemed to have been
made in a commercially reasonable manner. The Indenture Trustee and
the Noteholders shall be under no obligation to delay a sale of any of
the Pledged Collateral for the period of time necessary to permit the
issuing corporation of such securities to register such securities for
public sale under the Securities Act, or under applicable state
securities laws, even if the issuing corporation would agree to do so.
(c) The Company further agrees to use commercially
reasonable efforts to do or cause to be done all such other acts and
things as may be necessary to make such sale or sales of any portion
or all of the Pledged Collateral valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having
jurisdiction over any such sale or sales, all at the Company's
expense. The Company further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to
the Noteholders, that the Indenture Trustee and the Noteholders have
no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this
Section 8 shall be specifically enforceable against the Company, and
the Company hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the
Indenture.
(d) In addition, the Company agrees to enter into, and to
cause TransTexas to enter into, a Registration Rights Agreement, by
and among the Company, TransTexas and the Indenture Trustee,
satisfactory in both form and substance to both the Company and the
Indenture Trustee, within 60 days of the date of this Agreement.
Section 9. General Provisions.
(a) Continuing Security Interest; Binding Effect. This
Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until
termination of the obligations of the Indenture Trustee under the
Indenture and the indefeasible payment in full thereafter of the
Obligations; (b) be binding upon the Company and its successors and
assigns; and (c) inure to the benefit of the Indenture Trustee for the
benefit of the Noteholders and their respective successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c), the Indenture Trustee may assign or otherwise
transfer any
16
<PAGE> 18
of its rights under this Agreement to any other Person, and such
Person shall thereupon become vested with all the benefits in respect
thereof granted herein or otherwise to the Indenture Trustee. Upon
the termination of the obligations of the Indenture Trustee under the
Indenture and the indefeasible payment in full thereafter of the
Obligations, the Company shall be entitled to the return, upon its
request and at its expense, of such of the Collateral as is in the
Indenture Trustee's possession and as shall not have been sold or
otherwise disposed of pursuant to the terms hereof.
(b) Security Interest Absolute. The lien and security
interest created hereunder and the Company's obligations hereunder and
the Indenture Trustee's rights hereunder shall not be released,
diminished, impaired or adversely affected by the occurrence of any
one or more of the following events:
(i) The taking or accepting of any other security
or assurance for any or all of the Indebtedness;
(ii) Any release, surrender, exchange,
subordination or loss of any security or assurance at any time
existing in connection with any or all of the Indebtedness;
(iii) The modification of, amendment to, or waiver
of compliance with any terms of the Indenture, the Notes, the
TARC Loan Documents or the TransTexas Loan Documents;
(iv) Any renewal, extension and/or rearrangement
of the payment of any or all of the Indebtedness or any
statement, indulgence, forbearance or compromise that may be
granted or given by the Indenture Trustee to the Company or
any other Person;
(v) any neglect, delay, omission, failure or
refusal of the Indenture Trustee to take or prosecute any
action in connection with any agreement, document or other
instrument evidencing, securing or assuring the payment of any
or all of the Indebtedness;
(vi) the illegality, invalidity or
unenforceability of all or any part of the Indenture, the
Notes, the TARC Loan Documents or the TransTexas Loan
Documents; or
(vii) any other circumstance (other than payment in
full of the Obligations) that might otherwise constitute a
defense available to, or a discharge of, the Company or any
party to any document in respect of the Obligations.
(c) Amendments. This Agreement or any term hereof may be
amended or changed only by an instrument in writing executed jointly
by the Company and the Indenture Trustee and in accordance with
Article IX of the Indenture.
(d) Remedies Cumulative. Each right, power and remedy
herein specifically granted to the Indenture Trustee or otherwise
available to it or now or hereafter existing in law or in equity shall
be cumulative and concurrent, and shall be in addition to every other
right, power and remedy herein specifically given or now or hereafter
existing at law, in equity, or otherwise (including, without
limitation, all rights, powers and remedies granted to a secured party
under
17
<PAGE> 19
the UCC), and each such right, power and remedy, whether specifically
granted herein or otherwise existing, may be exercised at any time and
from time to time as often and in such order as may be deemed
expedient by the Indenture Trustee in its sole and complete
discretion. The provisions of this Agreement may only be waived by an
instrument in writing signed by the Indenture Trustee, and no failure
on the part of the Indenture Trustee to exercise, and no delay in
exercising, and no course of dealing with respect to, any such right,
power or remedy, shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other
right. No notice to or demand on the Company hereunder shall, of
itself, entitle the Company to any other or further notice or demand
in the same or similar circumstances.
(e) Assignment. Neither this Agreement nor any interest
herein or in the Collateral, or any part thereof, may be assigned by
the Company without the prior written consent of the Indenture
Trustee, except as expressly permitted herein or in the Indenture or
in the Disbursement Agreement.
(f) Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the
provisions hereof.
(g) Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof
or affecting the validity of enforceability or such provision in any
other jurisdiction.
(h) Survival. All representations and warranties
contained herein, in the Indenture or made in writing by the Company
in connection herewith or therewith, shall survive the execution and
delivery of this Agreement, the Indenture and any documents executed
in connection herewith or therewith.
(i) Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original, but all of which when taken together shall
constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Indenture Trustee.
(j) Waiver. To the extent permitted by applicable law
the Company hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Indenture obligations
and this Agreement and any requirement that the Indenture Trustee
protect, secure, perfect or insure any security interest or any
property subject thereto or exhaust any right or take any action
against the Company or any other person or entity; provided however,
that the Indenture Trustee shall in any event take such care in the
handling of any Collateral in its possession as it takes with respect
to its own property of a similar nature in its possession.
(k) Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by facsimile or
registered or certified mail, postage prepaid, return receipt
requested, addressed as provided in Section 13.2 of the Indenture.
Any party hereto may by notice to the other party designate such
additional or different addresses as shall be furnished in writing by
such party. Any notice or communication to any party shall be deemed
to have been given or made as of the
18
<PAGE> 20
date so delivered, if personally delivered; when answered back, if
telexed; when receipt is acknowledged, if faxed; and five (5) calendar
days after mailing, if sent by registered or certified mail (except
that a notice of change of address shall not be deemed to have been
given until actually received by the addressee). The Company may give
notice to the Noteholders at the addresses set forth for them in the
register kept by the Registrar under the Indenture or may request that
the Indenture Trustee notify the Noteholders at such address.
(l) Conflicting Terms. In the event of any conflict or
inconsistency between the terms, covenants, conditions and provisions
set forth in this Agreement and the terms, covenants, conditions and
provisions set forth in the Indenture, the terms, covenants,
conditions and provisions of the Indenture shall prevail.
(m) Release. The Collateral, in whole or in part, may be
released in accordance with the Indenture.
(n) Conflicts. If any provision of the Indenture limits,
qualifies, or conflicts with any similar provision of this Agreement,
such provision of the Indenture shall control.
(o) 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 EXCEPT SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS 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 THE INDENTURE TRUSTEE 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.
19
<PAGE> 21
IN WITNESS WHEREOF, the Company and the Indenture Trustee have
executed this Agreement as of the date first above written.
TRANSAMERICAN ENERGY CORPORATION
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
FIRSTAR BANK OF MINNESOTA, N.A.,
as Indenture Trustee
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 22
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, Chief Financial Officer of TransAmerican
Energy Corporation, a Delaware corporation (the "Company"), hereby certify with
reference to the Security and Pledge Agreement dated as of June 13, 1997
between the Company and, as Indenture Trustee Firstar Bank of Minnesota, N.A.,
as (terms defined therein being used herein as therein defined), to the
Indenture Trustee as follows:
Section 1. Names.
(a) The exact corporate name of the Company, as it
appears in its certificate of incorporation is as follows:
TransAmerican Energy Corporation
(b) Set forth below is each other corporate name the
Company has had since its organization, together with the date of the
relevant change:
n/a
(c) The Company has not changed its identity or corporate
structure in any way within the past five years except:
n/a
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Company or any of its
divisions or other business units at any time during the past five
years:
The TEC Group, Inc.
Section 2. Current Locations.
(a) The chief executive office of the Company is located
at the following address:
Mailing Address County State
1300 N. Sam Houston Parkway East Harris Texas
Houston, 77032
(b) The following are all the places of business of the
Company not identified above:
Mailing Address County State
n/a
A-1
<PAGE> 23
Section 3. Prior Locations. Set forth below is the information
required by subparagraphs (a) and (b) of Section 2 with respect to each
location or place of business maintained by the Company at any time during the
past five years:
n/a
Section 4. UCC Filings. A duly signed financing statement on Form
UCC-1 in substantially the form of Schedule 4(a) hereto has been duly filed in
the UCC filing office in each jurisdiction identified in Section 2 hereof. The
Company will deliver a true copy of each such filing duly acknowledged by the
filing officer as soon as practicable after the date hereof.
Section 5. Schedule of Filings. Attached hereto as Schedule 5 is a
schedule setting forth filing information with respect to the filings described
in Section 4 above.
Section 6. Filings Fees. All filing fees and taxes payable in
connection with the filings described in Section 4 above have been paid.
A-2
<PAGE> 24
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands this ___ day of June, 1997 in the respective capacities indicated below
their signatures.
----------------------------
Name:
-----------------------
Title:
----------------------
A-3
<PAGE> 25
SCHEDULE 2(b)
PLEDGED COLLATERAL
<TABLE>
<CAPTION>
========================================================================================================================
Percentage
Stock Number of
Stock Class of Certificate Par of Outstanding
Issuer Stock No.(s) Value Shares Shares
- ------ -------- ----------- ----- ------- -----------
========================================================================================================================
<S> <C> <C> <C> <C> <C>
TransAmerican Refining Common Stock 4 $0.01 30,000,000 100%
Corporation
- ------------------------------------------------------------------------------------------------------------------------
TransTexas Gas Corporation Common Stock 0043 $0.01 1,940,147 2.62%
- ------------------------------------------------------------------------------------------------------------------------
TransTexas Gas Corporation Common Stock 0044 $0.01 38,059,853 51.43%
- ------------------------------------------------------------------------------------------------------------------------
TransTexas Gas Corporation Common Stock 0045 $0.01 10,450,000 14.12%
========================================================================================================================
</TABLE>
1
<PAGE> 26
SCHEDULE 4(a)
DESCRIPTION OF COLLATERAL
1. All of the Debtor's right, title and interest in, to and under
any and all of the following described property, assets and rights, in each
case, wherever located, whether now owned or hereafter acquired or arising, all
accessions and additions thereto, all substitutions and replacements therefor,
and all proceeds and products thereof and assigns all rights in and to all
collateral securing the following described property, assets and rights:
(a) all equipment, machinery, chattels, tools, parts,
machine tools, motor vehicles, furniture, fixtures and supplies of
every nature, including, without limitation, vehicles, drilling rigs,
workover rigs, fracture stimulation equipment, wellsite compressors,
rolling stock and related equipment and other assets accounted for as
equipment by the Debtor 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 (any and all such property being
the "Equipment");
(b) all inventory in all of its forms, including without
limitation, feedstocks, refined petroleum products, acquired line
pipe, casing, drill pipe and other supplies accounted for as inventory
by the Debtor on its financial statements (excluding any oil, natural
gas, condensate and natural gas liquids), all proceeds thereof, and
all documents of title, books, records, ledger cards, files,
correspondence, and computer files, tapes, disks and related data
processing software (any and all such property being "Inventory");
(c) all personal and fixture property of every kind and
nature including, without limitation, all furniture, fixtures, raw
materials, goods, contract rights, rights to the payment of money
(including, without limitation, all right title and interest in and to
(a) that certain Loan Agreement dated as of June 13, 1997 by and
between TransAmerican Refining Corporation ("TARC") and the Debtor;
(b) that certain promissory note in the amount of $920,000,000
executed by TARC in favor of the Debtor dated as of June 13, 1997; (c)
that certain Loan Agreement dated as of June 13, 1997 by and between
TransTexas Gas Corporation ("TransTexas") and the Debtor and (d) that
certain promissory note in the amount of $450,000,000 executed by
TransTexas in favor of the Debtor dated as of June 13, 1997),
insurance refund claims and all other insurance claims and proceeds,
tort claims, chattel paper, documents, instruments (including
certificated securities), deposit accounts and all general intangibles
including, without limitation, all uncertificated securities, tax
refund claims, license fees, patents, patent applications, trademarks,
trademark applications, trade names, copyrights, copyright
applications, rights to sue and recover for past infringement of
patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature
pursuant to which the Company possesses, uses or has authority to
possess or use property (whether tangible or intangible) of others or
others possess, use or have authority to possess or use property
(whether tangible or intangible) of the Debtor, and all recorded data
of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics (any and all such property being the
"Personal Property"); and
1
<PAGE> 27
(d) any and all "accounts" as such term is defined in
Article 9 of the Uniform Commercial Code as in effect in the State of
New York (excluding all intercompany accounts), all products and
proceeds thereof, and all books, records, ledger cards, files,
correspondence, and computer files, tapes, disks or software that at
any time evidence or contain information relating to the foregoing
(any and all such property, the "Receivables" and together with the
Equipment, Inventory and Personal Property, the "Company UCC
Collateral").
2. All of the following described property, rights and interests,
in each case, wherever located, whether now owned or hereafter acquired or
arising, all accessions and additions thereto, all substitutions and
replacements therefor, and all proceeds and products thereof (collectively, the
"Pledged Collateral"):
(a) all of the issued and outstanding shares of common
stock identified on Schedule 2(b) attached hereto of TARC, TransTexas
and any other subsidiary of the Company presently existing or
hereafter created or acquired (the "Pledged Subsidiaries") therein set
forth;
(b) all other shares of common stock or other equity
securities issued by the Pledged Subsidiaries now or hereafter owned
or acquired by the Company in any manner, and the certificates
representing such securities, and any present or future options,
warrants or other rights to subscribe for or purchase any property
described in Section (b)(i) or any notes, bonds, debentures or other
evidences of indebtedness that (A) are at any time convertible,
exchangeable or exercisable into capital stock or other equity
securities of the Pledged Subsidiaries or (B) have or at any time
could by their terms have voting rights with respect to any matter
affecting the Pledged Subsidiaries and all securities, certificates
and instruments representing or evidencing ownership of any of the
property described in Section (b) hereof; provided, however, that in
the event the Company acquires any outstanding Common Stock Purchase
Warrants of TARC issued on February 23, 1995 (the "TARC Warrants")
pursuant to a tender offer by the Company for such TARC Warrants, the
Company shall promptly cancel such TARC Warrants or contribute such
TARC Warrants to TARC for prompt cancellation, and in no event will
such TARC Warrants be included in the definition of "Pledged
Collateral"; and
(c) all proceeds and products of the foregoing and
distributions thereof or with respect thereto, including without
limitation dividends, distributions, cash, instruments and other
property or securities, now or hereafter at any time or from time to
time received or receivable or otherwise distributed or distributable
in respect of or in exchange for any or all of the foregoing.
3. The disbursement account (the "Disbursement Account")
maintained at Firstar Bank of Minnesota, N.A., more specifically described on
Schedule I attached hereto, owned by the Debtor and created by that certain
Disbursement Agreement by and among the Company, TARC, the disbursement agent
named therein and the construction supervisor named therein, as amended
pursuant to the terms thereof, and all investments, securities, financial
assets credited thereto and security entitlements with respect thereto, and all
certificates and instruments, if any, from time to time representing or
evidencing the Disbursement Account or any property credited thereto, whether
now owned by the Company or existing or hereafter acquired, created or arising
including the proceeds thereof (the "Assigned Collateral" and, together with
the Company UCC Collateral and the Pledged Collateral, the "Collateral").
Notwithstanding anything contained herein to the contrary, the stock of an
Accounts Receivable Subsidiary shall not constitute Collateral hereunder.
2
<PAGE> 28
SCHEDULE 5
SCHEDULE OF FILINGS
<TABLE>
<CAPTION>
Debtor Filing Officer File Number
Date(1)
<S> <C> <C>
</TABLE>
- ---------------
(1) Indicate lapse date, if other than fifth anniversary.
1
<PAGE> 1
EXHIBIT 4.4
TRANSAMERICAN ENERGY CORPORATION
$475,000,000 11 1/2% Senior Secured Notes due 2002
$1,130,000,000 13% Senior Secured Discount Notes due 2002
REGISTRATION RIGHTS AGREEMENT
June 5, 1997
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
TransAmerican Energy Corporation, a Delaware 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), (i) $475,000,000 aggregate principal amount of its 11 1/2% Senior
Secured Notes due 2002, Series A (the "Senior Secured Notes"), and (ii)
$1,130,000,000 aggregate principal amount of its 13% Senior Secured Discount
Notes due 2002, Series A (the "Senior Secured Discount Notes" and together with
the Senior Secured Notes, the "Notes"). As an inducement to the Purchaser to
enter into the Purchase Agreement, the Company, TransTexas Gas Corporation, a
Delaware corporation ("TransTexas"), and TransAmerican Refining Corporation, a
Texas corporation ("TARC"), agree 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 June 13, 1997.
"Company" has the meaning given to such term in the introductory
paragraph hereof.
"Companies" means the Company, TransTexas and TARC, collectively.
"Effectiveness Date" means the 180th day following the Closing Date.
<PAGE> 2
"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).
"Exchange Offer Registration Statement" has the meaning given to such
term in Section 2(a).
"Exchange Securities" means (i) with respect to the Senior Secured
Notes, 11 1/2% Senior Secured Notes due 2002, Series B, of the Company,
identical in all respects to the Senior Secured Notes, except for references to
series and restrictive legends and (ii) with respect to the Senior Secured
Discount Notes, 13% Senior Secured Discount Notes due 2002, Series B, of the
Company, identical in all respects to the Senior Secured Discount Notes, except
for references to series and restrictive legends.
"Filing Date" means the 120th 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 Firstar Bank of Minnesota, N.A., 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
2
<PAGE> 3
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 June 5,
1997 by and among the Companies and Jefferies.
"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.
"Senior Secured Discount Notes" has the meaning given to such term in
the introductory paragraph hereof.
"Senior Secured Notes" has the meaning given to such term in the
introductory paragraph hereof.
"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.
3
<PAGE> 4
"Subsequent Shelf Registration" has the meaning given to such term in
Section 3(b).
"TARC" has the meaning given to such term in the introductory
paragraph hereof.
"TIA" means the Trust Indenture Act of 1939, as amended.
"TransTexas" has the meaning given to such term in the introductory
paragraph hereof.
"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 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);
4
<PAGE> 5
(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 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
5
<PAGE> 6
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
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(i)(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).
6
<PAGE> 7
(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.
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
7
<PAGE> 8
(iii) if the Company has not accepted for exchange
Exchange Securities for all Notes validly tendered in
accordance with the terms of the Exchange Offer within 30 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 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. With respect to the Senior Secured Notes
(and with respect to the Senior Secured Discount Notes after June 15,
1999), 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. With
respect to the Senior Secured Discount Notes on or prior to June 15,
1999, the liquidated damages amount due shall be payable on each June
15 and December 15 to the Holder of record on the immediately
preceding June 1 or December 1, respectively.
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
8
<PAGE> 9
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 Companies 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 Companies, and cause the
officers, directors and employees of the Companies, 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.
9
<PAGE> 10
(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 Companies 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 any of the Companies contained in
any
10
<PAGE> 11
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 any of the Companies 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 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 none of the Companies shall 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
11
<PAGE> 12
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
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) Use its best efforts 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
12
<PAGE> 13
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 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.
13
<PAGE> 14
(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.
(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 Companies 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,
14
<PAGE> 15
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 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.
15
<PAGE> 16
8. Indemnification.
(a) Indemnification by the Companies. Each of the
Companies, jointly and severally, 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 none of the Companies shall 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). Each of the Companies 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.
Notwithstanding any provision hereof to the contrary, the liability of
each of TARC and TransTexas pursuant to this Section 8(a) shall be
limited to the amount of proceeds of the Offering (as defined in the
Purchase Agreement) received directly or indirectly by such
corporation, including without limitation pursuant to the transactions
contemplated hereby, by the Purchase Agreement or by the Offering
Circular (as defined in the Purchase Agreement).
(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,
16
<PAGE> 17
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 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
17
<PAGE> 18
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
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. Each of the Companies 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
18
<PAGE> 19
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 Companies 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 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 any of the
Companies of any of its respective 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. Each of the Companies 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.
19
<PAGE> 20
(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 any of the Companies, initially to such
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. EACH OF THE
COMPANIES 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
20
<PAGE> 21
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE
COMPANIES 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. EACH OF THE COMPANIES 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 ANY OF THE
COMPANIES 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.
21
<PAGE> 22
[Signature Page Follows]
22
<PAGE> 23
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
TRANSAMERICAN ENERGY CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
TRANSTEXAS GAS CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TRANSAMERICAN REFINING CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Accepted and Agreed to:
JEFFERIES & COMPANY, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 1
EXHIBIT 4.5
LOAN AGREEMENT
by and between
TRANSTEXAS GAS CORPORATION
and
TRANSAMERICAN ENERGY CORPORATION
Dated as of June 13, 1997
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . 1
Section 1.2 Rules of Construction . . . . . . . . . . . . . . . . 19
Section 1.3 Computation of Time Periods . . . . . . . . . . . . . 19
SECTION 2 THE LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.1 Commitment to Make Loan. . . . . . . . . . . . . . . 19
Section 2.2 Deposit of Loan Proceeds into Disbursement Account. . 19
Section 2.3 Interest. . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.4 Repayment of the Loan. . . . . . . . . . . . . . . . 20
SECTION 3 PREPAYMENTS AND OTHER PAYMENTS. . . . . . . . . . . . . . . . . . 20
Section 3.1 Mandatory Prepayments. . . . . . . . . . . . . . . . 20
Section 3.2 Permitted Prepayments. . . . . . . . . . . . . . . . 20
Section 3.3 Place of Payment or Prepayment. . . . . . . . . . . . 21
SECTION 4 APPLICATION OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 21
Section 4.1 Use of Proceeds. . . . . . . . . . . . . . . . . . . 21
SECTION 5 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 21
Section 5.1 Organization and Qualification. . . . . . . . . . . . 21
Section 5.2 Power and Authority. . . . . . . . . . . . . . . . . 21
Section 5.3 Enforceability. . . . . . . . . . . . . . . . . . . . 21
Section 5.4 Default. . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.5 Title to Assets. . . . . . . . . . . . . . . . . . . 22
Section 5.6 Payment of Taxes. . . . . . . . . . . . . . . . . . . 22
Section 5.7 Conflicting or Adverse Agreements or Restrictions. . 22
SECTION 6 CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . 22
Section 6.1 Conditions Precedent to the Loan. . . . . . . . . . . 22
SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER. . . . . . . . . . . . . . . . 23
Section 7.1 Payment of Securities. . . . . . . . . . . . . . . . 23
Section 7.2 Covenants Incorporated by Reference. . . . . . . . . 23
SECTION 8 EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . 23
Section 8.1 Events of Default . . . . . . . . . . . . . . . . . . 23
Section 8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.3 Remedies Cumulative. . . . . . . . . . . . . . . . . 26
SECTION 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.1 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . 26
Section 9.2 Reimbursement of Expenses. . . . . . . . . . . . . . 26
Section 9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 9.4 Governing Law. . . . . . . . . . . . . . . . . . . . 27
Section 9.5 Survival of Representations, Warranties and Covenants. 28
Section 9.6 Counterparts. . . . . . . . . . . . . . . . . . . . . 28
Section 9.7 Severability. . . . . . . . . . . . . . . . . . . . . 28
Section 9.8 Descriptive Headings. . . . . . . . . . . . . . . . . 28
Section 9.9 Limitation of Liability. . . . . . . . . . . . . . . 28
Section 9.10 Sale, Pledge or Assignment. . . . . . . . . . . . . . 28
Section 9.11 Release . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.12 Indenture Controls . . . . . . . . . . . . . . . . . 29
Section 9.13 Computation of Time Periods. . . . . . . . . . . . . 29
Section 9.14 Final Agreement. . . . . . . . . . . . . . . . . . . 29
</TABLE>
Exhibits and Schedules
Schedule 6.1(g) -- Insurance
Exhibit A -- Form of Promissory Note
ii
<PAGE> 4
LOAN AGREEMENT
This Loan Agreement dated as of June 13, 1997 (this "Agreement")
is entered into by and between TransTexas Gas Corporation, a Delaware
corporation (the "Borrower"), and TransAmerican Energy Corporation, a Delaware
corporation (the "Lender").
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower and the
Lender hereby agree as follows:
SECTION 1 DEFINITIONS.
Section 1.1 Certain Defined Terms. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the following meanings
or, if not defined below, shall have the meanings given to them in the
Indenture:
"Acceleration Notice" shall have the meaning ascribed to such term in
Section 8.2.
"Agreement" shall mean this Loan Agreement, as the same may be amended,
modified, supplemented, extended, restated, renewed, refunded, replaced,
increased in amount or refinanced, in each case from time to time and whether
in whole or in part.
"Asset Sale" shall mean any direct or indirect conveyance, sale,
transfer or other disposition (including through damage or destruction for
which Insurance Proceeds are paid or by condemnation), in one or a series of
related transactions, of any of the properties, businesses or assets of the
Borrower or any Subsidiary of the Borrower, whether owned on the Closing Date
or thereafter acquired; provided, however, that "Asset Sale" shall not include
(i) any disposition of property that is not Collateral, (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 other than the creation of a Permitted Lien in
connection with a Dollar-Denominated Production Payment that the Borrower or
any of its Subsidiaries does not elect to treat as Debt or in connection with a
Volumetric Production Payment, which in either case shall be treated as an
Asset Sale hereunder; provided, however, that a contribution of a Dollar
Denominated Production Payment to a Hedging Subsidiary shall not constitute an
Asset Sale or (iii) conveyances, sales, transfers or other dispositions in
connection with a Drilling Program.
"Attributable Debt" in respect of a Sale and Leaseback Transaction shall
mean, 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 Note) 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" shall mean Title II, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
1
<PAGE> 5
"Board of Directors" shall mean, 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.
"Business Day" shall mean any day except Saturday, Sunday and any day
which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Capital Expenditures" shall mean 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 the Borrower consistent with prior
accounting practices.
"Capital Expenditures Testing Quarter" shall mean any fiscal quarter
immediately following a Measurement Quarter in which the SEC PV10 of the
Borrower (based on the Borrower's then most recent Reserve Report) is less than
90% of the Net Debt of the Borrower, measured as of the last day of such
Measurement Quarter.
"Capital Stock" shall mean, 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" shall mean 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 Equivalents" shall mean (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 an 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 an 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 Indenture 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,
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 million 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.
2
<PAGE> 6
"Change of Control" shall mean (i) the liquidation or dissolution of, or
the adoption of a plan of liquidation by, the Lender, (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 50%) and his Subsidiaries or the Indenture Trustee, is
or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-
5 of the Exchange Act, whether or not applicable), directly or indirectly, of
more than 50% of the total voting power of the Lender's then outstanding Voting
Stock, or (iii) any event that results in the Lender or any of its Subsidiaries
having beneficial ownership of at least some of the Borrower's Capital Stock,
but less than 50%, on a fully diluted basis, of (x) the total voting power of
the Borrower's Voting Stock, or (y) the economic value of the outstanding
Capital Stock of the Borrower; unless, at the time of the occurrence of an
event specified in clause (ii) or (iii), the TEC Notes have an Investment Grade
Rating; provided, however, that if at any time within 120 days after such
occurrence, the TEC Notes cease having an Investment Grade Rating, such event
shall be a "Change of Control."
"Change of Control Payment Date" shall have the meaning ascribed to such
term in Section 3.1(a).
"Closing Date" shall mean June 13, 1997.
"Collateral" shall mean (x) the assets of the Borrower that are
mortgaged or pledged to the Borrower as security for the Note pursuant to the
terms of the TransTexas Security Documents and (y) the Guarantees by the
Subsidiaries of the Borrower of the Note.
"Consolidated EBITDA" of any Person for any period, unless otherwise
defined herein, shall mean (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 Charges" of any Person for any period shall mean
(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.
3
<PAGE> 7
"Continuing Operations" shall mean the operations of the TransTexas
Entities after giving effect to the sale by the Borrower of the stock of
TransTexas Transmission Corporation.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt" shall mean 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 the whole of the assets of such
Person or only to a portion thereof), (b) evidenced by bonds, notes, debentures
or similar instruments or letters of credit or representing the balance
deferred and unpaid of the purchase price of any property acquired by such
Person or services received by such Person (other than long-term service or
supply contracts which require minimum periodic payments), (c) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks or
Interest Swap Obligations, (d) for the payment of money relating to a
Capitalized Lease Obligation, (e) the Attributable Debt associated with any
Sale and Leaseback Transactions or (f) Dollar-Denominated Production Payments
that the Borrower or any of its Subsidiaries elect to treat as Debt (excluding
all other Permitted Production Payment Obligations); (ii) reimbursement
obligations of such Person with respect to letters of credit; (iii) all
liabilities of others of the kind described in the preceding clause (i) or (ii)
that such Person has guaranteed or that is otherwise its legal liability other
than for endorsements, without 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.
"Default" shall mean an event or condition, the occurrence of which is,
or with the passage of time or the giving of notice, or both, would be an Event
of Default.
"Default Rate" shall mean, at any time, a per annum rate equal to the
then existing interest rate plus one and one half percent.
"Disbursement Account" shall mean the account or accounts created by the
Disbursement Agreement and owned by the Borrower.
"Disbursement Agreement" shall mean that certain Disbursement Agreement
among the Borrower, the Lender and Firstar Bank of Minnesota, N.A.
"Disqualified Capital Stock" shall mean, 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
4
<PAGE> 8
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 1, 2002.
"Dollars" and "$" shall mean lawful currency of the United States of
America.
"Dollar-Denominated Production Payments" shall mean production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Drilling Program" shall mean any arrangement between the Borrower or
any Subsidiary of the Borrower and another Person pursuant to which (i) such
Person agrees (x) to drill, complete or perform operations to enhance recovery
from, a well or wells on mineral interests owned by the Borrower or such
Subsidiary or (y) to pay to the Borrower or such Subsidiary all or a portion of
the costs paid or incurred in connection with drilling, completing or
performing such other operations (or to reimburse the Borrower or such
Subsidiary for such costs within six months of the incurrence thereof) and (ii)
the Borrower or such Subsidiary agrees to convey or assign to such person an
interest in such well or wells in accordance with clause (l) of the definition
of "Permitted Liens."
"Eligible Institution" shall mean a domestic commercial banking
institution that has combined capital and surplus of not less than $500
million, that is rated "A" (or higher) according to Moody's or S&P at the time
as of which any investment or rollover therein is made.
"Equipment" shall mean and includes all of any Person's now owned or
hereafter acquired Vehicles, drilling rigs, workover rigs, fracture stimulation
equipment, well site compressors, rolling stock and related equipment and other
assets accounted for as equipment by such Person 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; provided, however that "Equipment" shall not include any
assets constituting part of a natural gas pipeline or the compression or
dehydration equipment used in the operation of any such pipeline.
"Equity Offering" of any Person shall mean any Public Equity Offering or
any private placement of any Capital Stock of such Person.
"Event of Default" shall have the meaning ascribed to such term in
Section 9.1.
"Exchange Act" shall have the meaning ascribed to such term in Section
5.13.
"Financing Statements" shall mean the financing statements dated as of
the Closing Date executed and delivered in connection with the TransTexas
Security Documents.
"Force Majeure" shall mean strikes, lockouts or other labor trouble,
fire or other casualty, governmental preemption in connection with a national
emergency, any rule, order or regulation of any governmental agency or any
department or subdivision thereof, or inability to secure materials or labor
because of any such emergency, rule, order, regulation, war, civil disturbance
or other emergency, cause or event beyond the reasonable control of the
Borrower or the Guarantors.
5
<PAGE> 9
"GAAP" shall mean 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
Borrower delivered pursuant to this Agreement.
"Governmental Authority" shall mean any (domestic or foreign) federal,
state, county, municipal, parish, provincial or other government, or any
department, commission, board, court, agency (including, without limitation,
the Environmental Protection Agency) or any other instrumentality of any of
them or any other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, government, including, without limitation, any arbitration
panel, any court or any commission.
"Guarantee" shall mean any guarantee of the obligations of the Borrower
under the Loan or by any Guarantor.
"Guarantor" shall mean each of the Borrower's Subsidiaries that becomes
a guarantor of the Borrower's obligations in compliance with this Agreement.
"Hedging Subsidiary" shall mean a Subsidiary of the Borrower engaged
solely in the business of facilitating Permitted Hedging Transactions with the
Borrower or any of its Subsidiaries.
"Highest Lawful Rate" shall mean the maximum non-usurious interest rate,
if any, permitted from time to time under applicable Laws to be contracted for,
taken, reserved, charged or received by Lender. If the Highest Lawful Rate
shall change after the Closing Date, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate, without notice
to Borrower; provided, that the Highest Lawful Rate shall decrease only to any
extent required by applicable Laws and shall increase only to the extent
permitted by applicable Laws.
"Hydrocarbons" shall mean oil, natural gas, condensate and natural gas
liquids.
"Incur" or "Incurrence" shall mean to, directly or indirectly, create,
incur, assume, guarantee, or otherwise become liable for, contingently or
otherwise, any Debt.
"Indenture" shall mean that certain Indenture dated as of the date
hereof between the Lender and the Indenture Trustee.
"Indenture Trustee" shall mean Firstar Bank of Minnesota, N.A., trustee
under the Indenture.
"Independent Director" shall mean an individual that is not and has not
been affiliated (other than as a director of TransAmerican or its past or
present subsidiaries) with, and is not and has not been a Related Person (other
than solely as a director of TransAmerican or one of its past or present
subsidiaries) with respect to John R. Stanley, TransAmerican or the Borrower or
its Subsidiaries.
"Insurance Proceeds" shall mean 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 Borrower or any Guarantor in connection with any assets thereof, together
with interest payable thereon and the right to collect and receive the same,
including,
6
<PAGE> 10
without limitation, proceeds of casualty insurance, title insurance, business
interruption insurance and any other insurance now or hereafter maintained with
respect to such assets.
"Interest Rate or Currency Agreement" of any Person shall mean 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.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement, dated as of the Closing Date, by and among the Lender, Borrower,
Firstar Bank of Minnesota, N.A., as trustee under the Senior TransTexas Notes,
Firstar Bank of Minnesota, N.A., as collateral agent, and the Indenture
Trustee.
"Inventory" shall mean and include all of the Borrower's now owned or
hereafter acquired casing, drill pipe and other supplies accounted for as
inventory by the Borrower or its financial statements (excluding any
Hydrocarbons), all proceeds thereof, and all documents of title, books,
records, ledger cards, files, correspondence, and computer files, tapes, disks
and related data processing software that at any time evidence or contain
information relating to the foregoing.
"Investment" by any Person in any other Person shall mean (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" shall mean, with respect to any Person or
issue of debt securities or preferred stock, a rating in one of the four
highest letter rating categories (without regard to "+" or "-" or other
modifiers) by any rating agency or if any such rating agency has ceased using
letter rating categories or the four highest of such letter rating categories
are not considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Laws" shall mean all constitutions, treaties, statutes, laws,
ordinances, regulations, rules, orders, writs, injunctions or decrees of the
United States of America, any state or commonwealth, any municipality, any
foreign country, any territory or possession or any tribunal, as in effect on
the Closing Date and as the same may hereafter be amended, issued, promulgated
or otherwise hereafter come into effect, from time to time.
"Lien" shall mean 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).
"Loan" shall have the meaning ascribed to such term in Section 2.1(a).
7
<PAGE> 11
"Loan Documents" shall mean this Agreement, the Note, the TransTexas
Security Documents, the Disbursement Agreement and all other agreements,
documents, financing statements, instruments and certificates now or hereafter
executed and delivered to Lender pursuant to any of the foregoing or the
transactions connected therewith, and all amendments, modifications,
supplements, restatements, renewals, refundings, replacements, extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.
"Loan Parties" shall mean, collectively, Borrower and each Guarantor and
"Loan Party" shall mean any of the foregoing.
"Lobo Sale" shall mean the sale by the Borrower of the Stock of
TransTexas Transmission Corporation, a previous Subsidiary of the Borrower that
owned substantially all of the Borrower's producing properties and related
pipeline transmission system in the Lower Wilcox Lobo Trend.
"Maturity Date" shall mean the earlier to occur of (a) the Stated
Maturity Date and (b) any earlier maturity date resulting from the
acceleration, in accordance with the terms hereof, of the outstanding principal
amount of the Advances.
"Measurement Quarter" shall mean any fiscal quarter ending on or after
April 30, 1998.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgages" shall mean (i) that certain Act of Mortgage, Security
Agreement and Financing Statement to be recorded in Louisiana, (ii) that
certain Mortgage, Deed of Trust, Assignment of Production, Security Agreement
and Financing Statement to be recorded in Alabama, (iii) that certain Mortgage,
Deed of Trust, Assignment of Production, Security Agreement and Financing
Statement to be recorded in Mississippi, (iv) that certain Mortgage, Deed of
Trust, Assignment of Production, Security Agreement and Financing Statement to
be recorded in North Dakota and (v) that certain Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement to be
recorded in Texas, each dated as of the Closing Date and executed by Borrower
for the benefit of the Lender, and any and all amendments, modifications,
supplements, restatements, replacements, renewals and extensions thereof, in
each case from time to time and whether in whole or in part.
"Net Cash Proceeds" shall mean an amount equal to the aggregate amount
of cash received by the Borrower and its Subsidiaries in respect of an Asset
Sale or a Non-Collateral Asset Sale, less the sum of (i) all reasonable out-of-
pocket fees, commissions, and other expenses incurred in connection with such
Asset Sale or Non-Collateral Asset Sale, as the case may be, including the
amount (estimated in good faith by the Borrower) of income, franchise, sales,
and other applicable taxes required to be paid, payable or accrued by the
Borrower or any Subsidiary of the Borrower (in each case as estimated in good
faith by the Borrower or such Subsidiary without giving effect to tax
attributes unrelated to such Asset Sale) in connection with such Asset Sale or
Non-Collateral Asset Sale, as the case may be, and (ii) the aggregate amount of
cash so received which is used to retire any then existing Debt of the Borrower
or its Subsidiary (other than the Note), as the case may be, which is required
by the terms of such Debt to be repaid in connection with such Asset Sale or
Non-Collateral Asset Sale, as the case may be.
8
<PAGE> 12
"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 Worth" of any Person shall mean, 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 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from 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.
"New TransTexas Property" shall have the meaning ascribed to such term
in the definition of Permitted Liens.
"Non-Collateral Asset Sale" shall mean any direct or indirect
conveyance, sale, transfer or other disposition (including through damage or
destruction for which Insurance Proceeds are paid or by condemnation), in one
or a series of related transactions, of any of the properties, businesses or
assets of the Borrower or any Subsidiary of the Borrower (other than
properties, businesses or assets of any of the TTXD Entities after the TTXD
Spin-off), whether owned on the Closing Date or thereafter acquired, which
properties, businesses or assets do not constitute Collateral.
"Note" shall mean the promissory note executed by Borrower and payable
to the order of Lender pursuant to Section 2, as such promissory note may be
amended, modified, supplemented, restated, renewed, extended or increased in
amount, in each case from time to time.
"Officers' Certificate" shall mean a certificate signed in the name of
Borrower by either its President, one of its Vice Presidents or its Treasurer
and its Secretary or one of its Assistant Secretaries.
"Permitted Hedging Transactions" shall mean non-speculative transactions
in futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged in by the TransTexas Entities as
part of their normal business operations as a risk-management strategy or hedge
against adverse changes in market conditions in the prices of natural gas,
feedstock or refined products; provided, that such transactions do not in the
case of the Borrower, on a monthly basis, relate to more than 90% of the
Borrower's average net natural gas production per month from the Continuing
Operations for the most recent 3-month period measured at the time of such
incurrence; provided, further, that at the time of such transaction (i) the
counter party to any such transaction is an Eligible Institution or a Person
that has an Investment Grade Rating or has an issue of debt securities or
preferred stock outstanding with an Investment Grade Rating or (ii) such
counter party's obligation pursuant to such transaction is unconditionally
guaranteed in full by, or secured by a letter of credit issued by, and 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" shall mean, when used with reference to the
Borrower or its Subsidiaries, (i) trade credit extended to persons in the
ordinary course of business; (ii) purchases of Cash Equivalents; (iii)
Investments by the Borrower or its wholly owned Subsidiaries in wholly owned
Subsidiaries of the
9
<PAGE> 13
Borrower (other than TTXD) that are engaged in Related TransTexas Businesses;
(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 Borrower in an aggregate amount, net of return on such
investment, not in excess of $25 million less the amount of any Unrestricted
Non-Recourse Debt outstanding of the Borrower or any of its Subsidiaries; (ix)
Investments and expenditures made in the ordinary course of business by the
Borrower or its Subsidiaries, and of a nature that is or shall have become
customary in, the oil and gas business as a means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil or gas through agreements, transactions, interests or
arrangements which permit a person to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives
customarily achieved through the conduct of the oil and gas business jointly
with third parties, including, without limitation, (a) ownership interests in
oil and gas properties or gathering systems and (b) Investments and
expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties (including Unrestricted Subsidiaries); provided, that in the case of
any joint venture engaged in processing, gathering, marketing or transporting
oil or gas (i) all Debt of such joint venture (other than a joint venture that
is an Unrestricted Subsidiary) that would not otherwise constitute Debt of one
of the TransTexas Entities shall be deemed Debt of the Borrower in proportion
to its direct or indirect ownership interest in such joint venture (other than
through an Unrestricted Subsidiary) and (ii) such joint venture shall be
reasonably calculated to enhance the value of the reserves of the TransTexas
Entities or marketability of production from such reserves; (x) a guaranty by
any Subsidiary of the Borrower permitted under the Indenture; (xi) deposits
permitted by the definition of Permitted Liens or any extension, renewal or
replacement of any of them; (xii) the TTXD Equity Investment (in addition to
any contribution by the Borrower pursuant to clause (xiii) below, (xiii) a
capital contribution by the Borrower to TTXD or to a joint venture, a
partnership, a limited liability company or a similar entity of the Borrower's
drilling and energy services business and pipeline services business and
related assets, (xiv) an acquisition by the Borrower of tank storage facilities
(or the company that owns such facilities) in the vicinity of the TARC
Refinery; (xv) guarantees by the Borrower of Debt of TTXD to the extent such
Debt relates to assets contributed to TTXD pursuant to clause (xiii) hereof;
(xvi) other Investments not in excess of $5 million at any time outstanding,
(xvii) loans made (x) to officers, directors and employees of the Borrower 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 anyone time, (xviii) a capital contribution by the Borrower of
any or all of its assets to a joint venture, a partnership, a limited liability
company or a similar entity or (xix) any deposit or escrow of funds in
connection with adjustments to the Lobo Sale purchase price.
"Permitted Liens" shall mean (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
10
<PAGE> 14
proceedings, if adequate reserves with respect thereto are maintained on the
books of any of the TransTexas Entities 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 any of the TransTexas
Entities in accordance with GAAP; (c) (i) pledges of assets or deposits of cash
or Cash Equivalents to secure the performance of bids, trade contracts (other
than borrowed money), leases, statutory obligations, surety bonds, performance
bonds, and other obligations of a like nature incurred in the ordinary course
of business (or to secure reimbursement obligations or letters of credit in
support of such bonds in an aggregate amount not in excess of 5% of the SEC
PV10 indicated on the Borrower's most recent Reserve Report at the time such
pledges or deposits are made or (ii) pledges of assets, the fair market value
of which is not in excess of $40 million in the aggregate pledged at any one
time, or deposits of cash or Cash Equivalents, in each case, to secure appeal
or supersedeas bonds (or to secure reimbursement obligations of letters of
credit in support of such bonds); (d) Liens encumbering customary initial
deposits and margin deposits securing Swap Obligations or Permitted Hedging
Transactions; (e) pledges of assets including, without limitation, the mortgage
of a production payment by a Hedging Subsidiary, to secure margin obligations,
settlement obligations, reimbursement obligations or letters of credit in
connection with Permitted Hedging Transactions; provided that at the time such
pledge is made (or, if such pledge secures future Permitted Hedging
Transactions, at the time any such Permitted Hedging Transaction is entered
into), the maximum aggregate exposure under such Permitted Hedging Transactions
does not exceed the greater of (i) $25 million or (ii) 10% of the SEC PV10
indicated on the Borrower's then most recent Reserve Report; (f) easements,
rights-of-way, zoning, similar restrictions and other similar encumbrances or
title defects incurred in the ordinary course of business which, in the
aggregate, are not material in amount and which do not, in any case, materially
detract from the value of the property subject thereto (as such property is
used by any of the TransTexas Entities) or materially interfere with the
ordinary conduct of the business of any of the TransTexas Entities; (g) Liens
arising by operation of law in connection with judgments, only to the extent,
for an amount and for a period not resulting in an Event of Default with
respect thereto; (h) Liens securing Debt or other obligations not in excess of
$3 million and Liens existing on the Closing Date; (i) 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; (j) Liens on Equipment, Receivables and
Inventory; (k) Liens granted in connection with the Presale of Gas, provided
that all of the proceeds from such Presale of Gas shall be applied to the
repurchase of the Note; (l) Liens created on acreage drilled or to be drilled
pursuant to Drilling Programs, on Hydrocarbons produced therefrom and on the
proceeds of such Hydrocarbons to secure the Borrower's obligations thereunder,
provided that (i) the number of wells included in such program commenced in any
fiscal year does not exceed 30 per fiscal year (plus the number of wells
included in programs commenced in prior years but not yet completed), (ii) such
obligations are limited to a percentage of production from such wells, (iii)
such Liens survive only until the Person to whom such Lien was granted has
received production with a value equal to the reimbursable costs, expenses and
fees related to property and services provided or paid for by such Person plus
an agreed-upon interest component, and (iv) such Liens secure obligations that
are nonrecourse to each of the Borrower and its Subsidiaries; (m) Liens on the
assets of any entity existing at the time such assets are acquired by any of
the TransTexas Entities, whether by merger, consolidation, purchase of assets
or otherwise so long as such Liens (A) are not created, incurred or assumed in
contemplation of such assets being acquired by any of the TransTexas Entities
and (B) do not extend to any other assets of any of the TransTexas Entities;
(n) any extension, renewal or replacement of the Liens
11
<PAGE> 15
created pursuant to any of the clauses (a) through (g), (i), (k) through (m) or
(q) through (t) of this definition; or (r) through (v); provided, that such
Liens would have otherwise been permitted under such clauses, and provided
further that the Liens permitted by this clause (n) do not secure any
additional Debt or encumber any additional property; (o) Liens securing (i)
Royalty Payment Obligations and (ii) Permitted Production Payment Obligations;
(p) Liens on the assets of one of the TransTexas Entities in favor of another
TransTexas Entity; (q) Liens that secure Unrestricted Non-Recourse Debt;
provided, however, that at the time of incurrence the aggregate fair market
value of the assets securing such Lien (exclusive of the stock of the
applicable Unrestricted Subsidiary) shall not exceed the amount of Unrestricted
Non-Recourse Debt of the Borrower; (r) Liens on the proceeds of any property
subject to a Permitted Lien or on deposit accounts containing any such
proceeds; (s) Liens on the proceeds of any property that is not Collateral; (t)
Liens (including extensions and renewals thereof) on real or personal property,
acquired after the Closing Date ("New TransTexas Property"); provided, however,
that (A) such Lien is created solely for the purpose of securing Debt Incurred
to finance the cost (including the cost of improvement or construction) of New
TransTexas 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 TransTexas
Property, (B) 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 (C) any such Lien shall not extend to or
cover any property or assets other than such item of New TransTexas Property
and any improvements on such New TransTexas Property; (u) Liens of the trustee
under the indenture and related collateral documents governing the terms of the
TransTexas Senior Notes and (v) Liens in favor of the Lender or its assignee
under the TransTexas Security Documents.
"Permitted Prepayment" shall have the meaning ascribed to such term in
Section 3.2
"Permitted Prepayment Fee" shall mean an amount equal to (a) five
percent (5%) of the outstanding principal amount of the Note to be prepaid for
Permitted Prepayments made on or prior to December 31, 1997, (b) eight percent
(8%) of the outstanding principal amount of the Note to be prepaid for
Permitted Prepayments during the period from January 1, 1998 through June 14,
2000, (c) five and three quarters percent (5.750%) of the outstanding principal
amount of the Note to be prepaid for Permitted Prepayments made from June 15,
2000 through June 14, 2001 and (d) no additional amount for Permitted
Prepayments made on or after June 15, 2001.
"Person" shall mean a corporation, individual, joint venture,
partnership, unincorporated organization, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality, or other
entity.
"Phase I" shall mean that phase of TARC's capital improvement program in
which the Delayed Coking Unit, the Hydrosulfurization Unit, the Naphtha
Pretreater, the No.2 Reformer, the Sulfur Recovery System and certain
supporting offsite facilities will be completed.
"Phase I Completion Date" shall mean the date on which Baker & O'Brien,
Inc., as construction supervisor, issues a written notice (the "Phase I
Completion Notice") to TARC certifying that (a) the process units and
supporting facilities included in the definition of "Phase I" have reached
mechanical completion, and (b) for a period of at least 15 consecutive days,
the TARC Refinery has sustained (i) the successful performance of the Delayed
Coking Unit, the Hydrodesulfurization Unit and the Sulfur Recovery System, (ii)
an average feedstock throughput level of at least 150,000 barrels per day, and
(iii)
12
<PAGE> 16
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 I Completion Notice" shall have the meaning ascribed to such term
in the definition of "Phase I Completion Date."
"Phase II" shall mean that phase of the TARC capital improvement program
in which the Fluid Catalytic Cracking Unit, FCC Flue Gas Scrubber, the
Alkylation Unit and certain additional offsite facilities will be completed.
"Phase II Completion Date" shall mean the date on which Baker & O'Brien,
Inc., as construction supervisor, issues a written notice (the "Phase II
Completion Notice") to TARC certifying that (a) the process units and
supporting facilities included in the definition of "Phase II" have reached
mechanical completion, and (b) for a period of at least 72 uninterrupted hours,
the TARC 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 as input a combined
Crude Unit feedstock slate with an average API Gravity of 22 degrees or less.
"Phase II Completion Notice" shall have the meaning ascribed to such
term in the definition of "Phase II Completion Date."
"Presale of Gas" shall mean any advance payment agreement or other
arrangement pursuant to which the Borrower or any Guarantor of the Note, having
received full payment of the purchase price for a specified quantity of
Hydrocarbons prior to the first scheduled date of delivery, is required to
deliver, in one or more installments subsequent to the date of such agreement
or arrangement, such quantity of Hydrocarbons to the purchaser of such
Hydrocarbons pursuant to and during the term of such agreement or arrangement;
provided, however, that the term "Presale of Gas" shall not include (i) any
such agreement or other arrangement covering deliveries of Hydrocarbons for a
period not exceeding three calendar months and pursuant to which the Borrower
has received full payment of the purchase price within 120 days of the last
scheduled delivery, (ii) a transaction to the extent and only to the extent
that it results in the creation of any Permitted Lien under clauses (l) or (o)
of the definition of "Permitted Liens," (iii) Permitted Hedging Transactions or
(iv) an Asset Sale involving Hydrocarbon reserves.
"Property" shall mean, with respect to any Person, all right, title and
interest of such Person in any kind of property or asset, whether real,
personal or mixed, owned or leased, tangible or intangible, and whether now
held or hereafter acquired, and in the case of Borrower shall include the
Premises.
"Public Equity Offering" shall mean 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.
"Qualified Capital Stock" shall mean any Capital Stock that is not
Disqualified Capital Stock.
13
<PAGE> 17
"Receivables" shall means and include, 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.
"Reference Period" shall mean, with regard to any Person, 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 Note or this
Agreement.
"Reimbursement and Credit Facility" shall mean the Reimbursement and
Credit Agreement dated January 25, 1996, pursuant to which a third party caused
a $20 million letter of credit to be issued to collateralize a supersedeas bond
on behalf of the Borrower, as amended from time to time in a manner not adverse
to the Lender.
"Related Person" shall mean (i) any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Borrower or any Subsidiary of the Borrower or any officer, director, or
employee of the Borrower or any Subsidiary of the Borrower 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).
"Related TransTexas Business" shall mean (i) the exploration for,
acquisition of, development of, production, transportation, gathering, and
processing (in connection with natural gas and natural gas liquids only) of,
crude oil, natural gas, condensate, and natural gas liquids; provided that the
Related TransTexas Business shall not include any refining or distilling of
Hydrocarbons other than processing and fractionating natural gas and natural
gas liquids, (ii) the drilling and energy services business and pipeline
services business or (iii) owning and operating a Hedging Subsidiary.
"Reserve Amount" shall have the meaning ascribed to such term in Section
2.2(a).
"Reserve Report" shall mean a report prepared by independent petroleum
engineers with respect to Hydrocarbon reserves in accordance with guidelines
published by the SEC.
"Restricted Investment" shall mean any direct or indirect Investment by
the Borrower or any Subsidiary of the Borrower other than a Permitted
Investment.
"Restricted Payment" shall mean, 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,
14
<PAGE> 18
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 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 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 Borrower from any of its
Subsidiaries, (iii) any defeasance, redemption, repurchase, or other
acquisition or retirement for value, in whole or in part, of any 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 Transfer Agreement, the TransTexas Drilling Agreement, the Services
Agreement, the Office Leases or the Tax Allocation Agreement, or (v) any
dividend, distribution or other payment to the Borrower by any of its
Subsidiaries, (vi) any Permitted Prepayment, (ix) any redemption, defeasance,
repurchase or other retirement for value of the Senior TransTexas Notes by the
Borrower, including any premium paid thereon; (x) an Investment by the Borrower
in, or distribution by the Borrower on, its Capital Stock pursuant to share
repurchases or dividends on its Capital Stock in an aggregate amount not to
exceed $400 million; (xi) 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 Section 4.11(1)(g)
and 4.11(3)(j) of the Indenture; (xii) the distribution by the Borrower of
shares of Capital Stock of TTXD in connection with the TTXD Spin-off; (xiii)
the purchase by the Borrower of shares of Capital Stock of TARC, TTXD or itself
in connection with its employee benefit plan, including without limitation any
employee stock ownership plan or any employee stock option plan in an aggregate
amount not to exceed 7% of the aggregate market value of the voting stock held
by non-affiliates of the issuer measured from the date of the first such
purchase; and (xiv) any repayment or retirement for value by the Borrower of
any loan from the Lender incurred pursuant to Sections 4.11(1)(q), 4.11(1)(r),
4.11(3)(u) or 4.11(3)(v) of the Indenture.
"Royalty Payment Obligations" shall mean (i) royalties, overriding
royalties, revenue interests, net revenue interests, net profit interests, and
reversionary interests, (ii) the interests of others in pooling or unitization
agreements, production sales contracts and operating agreements, (iii) Liens
arising under, in connection with or related to farm-out, farm-in, joint
operating, pooling, unitization or area of mutual interest agreements or other
similar or customary arrangements, agreements or interests, and (iv) similar
burdens on the property of the Borrower or any Subsidiary of the Borrower; each
as incurred in the ordinary course of business and to the extent such burdens
are limited in recourse to (x) the properties subject to such interests or
agreements, (y) the Hydrocarbons produced from such properties, and (z) the
proceeds of such Hydrocarbons.
"S&P" shall mean Standard and Poor's Corporation, Inc.
"Sale and Leaseback Transaction" shall mean an arrangement relating to
property owned on the Closing Date or thereafter acquired whereby the Borrower
or a Subsidiary of the Borrower transfers such property to a Person and leases
it back from such Person.
"SEC" shall mean the Securities and Exchange Commission.
"Senior Obligations" shall have the meaning ascribed to such term in the
Intercreditor Agreement.
15
<PAGE> 19
"Senior TransTexas Notes" shall mean the 11 1/2% Senior Secured Notes
due 2002 issued by the Borrower .
"Stated Maturity Date" shall mean June 1, 2002.
"Subordinated Debt" shall mean Debt that (i) requires no payment of
principal prior to or on the date on which all principal of and interest on the
Note is paid in full and (ii) is subordinate and junior in right of payment to
the Note in the event of a liquidation.
"Subsidiary" with respect to any Person, shall mean (i) a corporation
with respect to which such Person or such Person and its Subsidiaries own,
directly or indirectly, at least fifty percent of whose Capital Stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by such Person and one or more
Subsidiaries of such Person or by one or more Subsidiaries of such Person, or
(ii) a partnership in which such Person or a subsidiary of such Person is, at
the time, a general partner of 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 Person; provided, however, that "Subsidiary" shall not
include (i) any Unrestricted Subsidiary of such Person, except for purposes of
Section 4.10 of the Indenture.
"Swap Obligation" of any person shall mean 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" shall mean TransAmerican Refining Corporation, a Texas
corporation.
"TARC Loan" shall mean the loan from the Lender to TARC pursuant to that
certain Loan Agreement between the Lender and TARC dated as of the date hereof.
"TARC Refinery" shall mean the petroleum refinery owned by TARC located
approximately 20 miles from New Orleans, Louisiana.
"TEC Notes" shall mean those certain 11 1/2% Senior Secured Notes due
2002 in the aggregate principal amount of $475,000,000 and 13% Senior Secured
Discount Notes due 2002 in the aggregate principal amount of $1,130,000,000
issued by the Lender.
"Termination Fee" shall mean a fee to be paid in the event of a
mandatory prepayment pursuant to Section 3.1 in the amount of one percent (1%)
of the amount of such prepayment.
"TransAmerican" shall mean TransAmerican Natural Gas Corporation, a
Texas corporation.
16
<PAGE> 20
"TransTexas Entities" shall mean the Borrower and each of its
Subsidiaries.
"TransTexas Dividend/Share Repurchase Program" shall mean the dividend
and share repurchase program of the Borrower.
"TransTexas Guarantor Mortgage" shall mean each mortgage, deed of trust,
assignment, security agreement and financing statement by each Guarantor of the
Note to the trustee named therein for the benefit of the Lender.
"TransTexas Guarantor Security Agreement" shall mean any and each
Security and Pledge Agreement by each Guarantor of the Note in favor of the
Lender.
"TransTexas Interest Increase Quarter" shall mean any fiscal quarter
immediately following a Capital Expenditure Testing Quarter, in which Capital
Expenditure Testing Quarter the Capital Expenditures of TransTexas exceeded the
Consolidated EBITDA of TransTexas for the fiscal quarter immediately preceding
such Capital Expenditure Testing Quarter.
"TransTexas Security and Pledge Agreement" shall mean that certain
Security and Pledge Agreement by the Borrower in favor of the Lender.
"TransTexas Security Documents" shall mean the Disbursement Agreement,
the TransTexas Mortgages, the TransTexas Security Agreement, any Guaranty,
TransTexas Guarantor Mortgage, TransTexas Guarantor Security Agreement and each
other agreement relating to the pledge of assets to secure the Notes and any
guarantee of the obligations of the Borrower under the Note by any Guarantor
that may be entered into after the date of the Note, pursuant to the terms of
the Note.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial or other court or governmental or administrative department,
commission, board, bureau, district, authority, agency or instrumentality or
any arbitration authority.
"TTXD" shall mean TransTexas Drilling Services, Inc., a Delaware
corporation, or a newly formed corporation that is initially a wholly-owned
Subsidiary of the Borrower formed for the purpose of receiving the certain
investments described herein under clauses (xii) and (xiii) of the definition
of "Permitted Investments."
"TTXD Entities" shall mean TTXD and each of its Subsidiaries.
"TTXD Equity Investment" shall mean an equity Investment by the Borrower
in TTXD in an aggregate amount not in excess of $75 million.
"TTXD Spin-off" shall mean (i) the transfer of the drilling and
integrated services business and pipeline services business and related assets
from the Borrower to TTXD and (ii) the (x) dividend of shares of common stock
of the Borrower to holders of the Borrower's common stock or (y) any other
transaction that would result, in the case of (x) or (y), in the Borrower's
being the beneficial owner of less than 50% of the common stock of TTXD.
17
<PAGE> 21
"Unrestricted Non-Recourse Debt" shall mean (i) Debt 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
clauses (i) and (ii) of this definition, together with all Permitted
Investments (net of any return on such Investment) in Unrestricted Subsidiaries
of such Person, does not exceed $25 million plus in the case of either (i) or
(ii), Restricted Payments permitted to be made pursuant to clauses (i) or (ii),
as applicable, of Section 4.3 of the Indenture.
"Unrestricted Subsidiary" of any Person shall mean 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
Closing 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 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. Any such designation by the Board of
Directors of such Person shall be evidenced to the Indenture Trustee by
delivering to the Indenture 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 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 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" shall mean, 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 Borrower or any Subsidiary of the
Borrower) 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
(other than the Borrower or any Subsidiary of the Borrower 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.
"Vehicles" shall mean all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
18
<PAGE> 22
"Volumetric Production Payments" shall mean production payment
obligations recorded as a deferred revenue in accordance with GAAP, together
with all undertakings and obligations in connection therewith.
"Voting Stock" shall mean Capital Stock of a Person having generally the
right to vote in the election of directors of such Person.
Section 1.2 Rules of Construction. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified herein, the term "or" has the inclusive
meaning represented by the term "and/or" and the term "including" is not
limiting. All references as to "Sections", "Schedules" and "Exhibits" shall be
to Sections, Schedules and Exhibits, respectively, of this Agreement unless
otherwise specifically provided.
Section 1.3 Computation of Time Periods. In the computation of
periods of time from a specified date to a later specified date, unless
otherwise specified herein the words "commencing on" mean "commencing on and
including", the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding".
SECTION 2 THE LOAN.
Section 2.1 Commitment to Make Loan.
(a) Lender, upon the terms and conditions set forth herein and
relying upon the representations and warranties set forth herein, agrees
to make a loan (the "Loan") to Borrower on the Closing Date in an amount
equal to $450,000,000.
(b) Borrower shall execute and deliver to Lender to evidence
the Loan made by Lender a promissory note (the "Note"), which shall be
(i) dated the Closing Date; (ii) in the aggregate principal amount of
$450,000,000; and (iii) in substantially the form attached hereto as
Exhibit A and made a part hereof, with the blanks appropriately filled.
Section 2.2 Deposit of Loan Proceeds into Disbursement Account.
(a) The Lender shall deliver to the Borrower, on the Closing
Date, an amount equal to $50,716,000. The Lender shall deposit the
remaining amount of the Loan, $399,284,000 (the "Reserve Amount") into
the Disbursement Account.
(b) Funds in the Disbursement Account shall be disbursed
according to the terms and conditions of the Disbursement Agreement.
Section 2.3 Interest.
(a) Borrower shall pay interest on the unpaid principal amount
of the Loan at a rate per annum equal to the lesser of (i) ten and
seven-eighths of one percent (10.875%) and (ii) the Highest Lawful Rate
from the Closing Date until such principal amount shall be paid in full,
at
19
<PAGE> 23
the times and according to the terms and conditions set forth in the
Note; provided, however, that during any TransTexas Interest Increase
Quarter, the unpaid principal amount of the Loan shall bear interest at
a rate per annum equal to the lesser of (i) twelve and seven-eighths of
one percent (12.875%) and (ii) the Highest Lawful Rate; provided,
further, that any amount of principal which is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until such amount is
paid in full, payable on demand at a rate per annum equal at all times
to the lesser of (i) the Default Rate and (ii) the Highest Lawful Rate.
(b) Interest on the Note will accrue from the most recent date
to which interest has been paid, or, if no interest has been paid, from
the Closing Date. Interest on the Note will be computed on the basis of
a 360-day year consisting of twelve 30-day months.
Section 2.4 Repayment of the Loan. Borrower shall repay the
outstanding principal amount of the Loan as follows:
(a) Interest shall begin to accrue on June 13, 1997, and
interest shall thereafter be due and payable semiannually on June 15 and
December 15 of each year, commencing December 15, 1997.
(b) The unpaid principal amount of the Note outstanding, plus
all accrued and unpaid interest, shall be due and payable on the Stated
Maturity Date.
SECTION 3 PREPAYMENTS AND OTHER PAYMENTS.
Section 3.1 Mandatory Prepayments.
(a) Change of Control. In the event that a Change of Control
occurs, the Lender will have the right, at the Lender's option, subject
to the terms and conditions of this Agreement and the Indenture, to
require the Borrower to repay the outstanding principal amount of the
Loan in an amount equal to the Borrower's pro rata share of the Change
of Control Purchase Price, as defined in the Indenture, to be paid by
the Lender pursuant to Section 11.1 of the Indenture (such pro rata
share to be calculated using the ratio of the outstanding principal
amount of the Loan to the sum of (i) the outstanding principal amount of
the Loan plus (ii) the Accreted Value of the outstanding principal
amount of the TARC Loan, plus any and all accrued and unpaid interest,
together with the Termination Fee, on a date that is no later than 59
Business Days after the occurrence of such Change of Control (the date
on which the repayment is effected being referred to herein as the
"Change of Control Payment Date").
(b) The Borrower shall notify the Lender and the Indenture
Trustee within five Business Days after each date upon which the
Borrower knows, or reasonably should know, of the occurrence of a Change
of Control.
Section 3.2 Permitted Prepayments. The Borrower may at any time make
a prepayment of all or a portion of the principal amount of the Note then
outstanding (a "Permitted Prepayment") at a prepayment price equal to the
portion of the outstanding principal amount of the Note to be prepaid plus
20
<PAGE> 24
the Permitted Prepayment Fee, together with accrued and unpaid interest, if
any, to and including the date of such Permitted Prepayment.
Section 3.3 Place of Payment or Prepayment. All payments and
prepayments made in accordance with the provisions of this Agreement or any
other Loan Document in respect of principal, interest, fees, costs or expenses
shall be made on the date when due in Dollars, without deduction, set-off or
counterclaim, to an account of the Lender located in New York, New York, or
such other place as designated by the Lender.
SECTION 4 APPLICATION OF PROCEEDS.
Section 4.1 Use of Proceeds. Borrower agrees that the proceeds of the
Loan shall be used to purchase for cash the TransTexas Senior Notes, production
repayments and purchase price adjustments relating to the Lobo Sale and the
TransTexas Dividend/Share Repurchase Program, with any remaining balance
available to the Borrower for working capital and other general purposes not
otherwise prohibited by the Loan Documents.
SECTION 5 REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
Section 5.1 Organization and Qualification. The Borrower (a) is duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (b) has the corporate power to own its Properties and to carry on its
business as now conducted; and (c) is duly qualified to do business and is in
good standing in every jurisdiction in which the failure to qualify would
reasonably be expected to have a material adverse effect. Borrower has no
Subsidiaries other than those listed on Schedule 5.1(a). All of the issued and
outstanding Capital Stock of Borrower have been authorized, validly issued, and
are fully paid and nonassessable and free of any Lien whatsoever.
Section 5.2 Power and Authority. Each Loan Party has all necessary
corporate and other power and authority to enter into and perform its
obligations under the Loan Documents to which it is a party. The execution,
delivery and performance by each Loan Party of the Loan Documents to which it
is a party have been duly authorized by all necessary corporate proceedings on
its part.
Section 5.3 Enforceability. The Loan Documents to which each Loan
Party is a party have been duly executed and delivered by such Loan Party and
constitute valid and legally binding obligations of such Persons enforceable
against such Persons in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally.
Section 5.4 Default. Borrower is not in default under the provisions
of any agreement, document or instrument to which it is a party or by which it
or any of its properties is bound or in violation of any order, writ,
injunction or decree of any Tribunal or in default under, or in violation of,
any order, regulation or demand of any Governmental Authority, which default or
violation would,
21
<PAGE> 25
individually or in the aggregate, materially and adversely affect the business,
financial condition, Properties, prospects or operations of the Borrower.
Section 5.5 Title to Assets. Borrower has good and marketable title
to its Properties, subject to no Liens except Permitted Liens.
Section 5.6 Payment of Taxes. The Borrower and each of its
Subsidiaries have filed all Federal, state and local tax returns that are or
were required to be filed or have obtained extensions thereof and have paid all
taxes shown on such returns and all assessments received by them, respectively,
to the extent that the same have become due except for such assessments that
the Borrower or such Subsidiary disputes in good faith and has adequately
reserved therefor.
Section 5.7 Conflicting or Adverse Agreements or Restrictions. The
execution and delivery by each Loan Party of the Loan Documents to which it is
a party and its compliance with and performance of the terms and provisions
thereof (a) is not contrary to the provisions of the Articles of Incorporation
or Bylaws of such Person, (b) does not violate any Law, regulation, writ,
injunction, order or decree of any Tribunal, (c) does not conflict with, result
in a breach of or cause a default under any agreement, document or instrument
to which such Person is a party or by which it or any of its Properties is
bound or to which it or any of its Properties is subject and (d) does not
result in the creation of any Lien upon or security interest in any of the
Property of such Person except for Permitted Liens.
SECTION 6 CONDITIONS OF LENDING.
Section 6.1 Conditions Precedent to the Loan. The obligation of
Lender to make the Loan on the Closing Date is subject to the conditions
precedent that Lender shall have received on or before the Closing Date all of
the following, each dated (unless otherwise indicated) the Closing Date and
each in form and substance satisfactory to Lender and in such number of
counterparts as may be requested by Lender:
(a) this Agreement, the Note, the Disbursement Agreement, the
TransTexas Security Documents and the Financing Statements, each duly
executed and delivered by the parties thereto;
(b) the Intercreditor Agreement;
(c) unless waived by Lender, loss payable endorsements with
respect to all property insurance maintained by Borrower as of the
Closing Date, all as described on Schedule 6.1(g) attached hereto and
made a part hereof;
(d) copies of UCC-11s, or equivalent reports, listing all
effective financing statements which name Borrower (under its present
name, any trade names and any previous names) as debtor and which are
filed, together with copies of all such financing statements;
(e) duly executed releases or assignments of Liens and UCC-3
financing statements in recordable form, and in form and substance
satisfactory to Lender, covering such Collateral as may be necessary to
reflect that the Liens granted to Lender are first and prior Liens,
except for Permitted Liens;
22
<PAGE> 26
(f) an insurance broker's certificate relating to each
insurance policy maintained by Borrower as of the Closing Date together
with a copy of each such insurance policy or certificates or evidence of
coverage under such policy, evidence of the payment of the premiums
therefor, all in form and substance satisfactory to Lender; and
SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER.
So long as Borrower may borrow hereunder and until payment in full of
the obligations and all other amounts payable to Lender under the Loan
Documents:
Section 7.1 Payment of Securities. The Borrower shall pay the
principal of and interest on the Note on the dates and in the manner provided
in the Note. An installment of principal of or interest on the Note shall be
considered paid on the date it is due if the Lender or Indenture Trustee holds
on or before 10:00 a.m. New York City time on the date, U.S. legal tender
deposited and designated for and sufficient to pay the installment. The
Borrower shall pay interest on overdue principal and on overdue installments of
interest at the rate specified in the Note compounded semi-annually, to the
extent permitted by law.
Section 7.2 Covenants Incorporated by Reference. The Borrower shall,
and shall cause each of its Subsidiaries to, comply with each covenant
applicable to such Borrower described in the Indenture as if made by the
Borrower as of the date hereof.
SECTION 8 EVENTS OF DEFAULT AND REMEDIES.
Section 8.1 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 the 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 the
Note when and as the same becomes due and payable at maturity, redemption, by
acceleration, or otherwise, including default in the payment on Change of
Control Payment Date in accordance with Section 3.1;
(c) default in the observance or performance of, or breach of, any
covenant (including covenants incorporated by reference pursuant to Section
7.2), agreement or warranty of the Borrower or any of its Subsidiaries
contained in the Note or this Agreement or any of the Security Documents (other
than a default in the performance of any covenant, agreement or warranty which
is specifically dealt with elsewhere in this Section 8.1), and continuance of
such default or breach for the period and after the notice, if any, specified
below;
23
<PAGE> 27
(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under (i) the
Reimbursement and Credit Facility or (ii) any mortgage, indenture or instrument
under which there is outstanding any Debt of the Borrower or any of its
Subsidiaries with an aggregate principal amount in excess of $25 million, or
failure to pay such Debt at its stated maturity, provided that a waiver of such
default by the requisite parties to such Reimbursement and Credit Agreement,
mortgage, indenture or instrument 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 Borrower or any of its Subsidiaries as
bankrupt or insolvent, or ordering relief against the Borrower 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 Borrower 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 Borrower, 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 Borrower 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 Borrower or any Subsidiary, which, in the aggregate,
equal or exceed $25 million at any one time shall be entered against the
Borrower or any of its Subsidiaries by a court of competent jurisdiction and
not be stayed, bonded or discharged for a period (during which execution shall
not be effectively stayed) of 60 days (or, in the case of any such final
judgment which provides for payment over time, which shall so remain unstayed,
unbonded or undischarged beyond any applicable payment date provided therein);
(h) any of the TransTexas Security Documents shall for any reason
cease to be in full force and effect (except where no material adverse effect
to the Lender would result), or shall cease to give the Lender the Liens,
rights, powers and privileges purported to be created thereby including but not
limited to, a perfected security interest in, and Lien on, the Collateral in
accordance with the terms thereof, except where the failure to have such Lien,
rights, powers and privileges shall not have a material adverse effect on the
Lender; or
(i) Independent Directors not constituting a majority of the Board of
Directors of the Borrower for a period of 90 days in the aggregate in any
twelve-month period.
24
<PAGE> 28
A Default under clause (c) above (other than in the case of any Defaults
incorporated herein by reference and described in Sections 4.3, 4.11, 4.14 or
5.1 of the Indenture, which Defaults shall be Events of Default without the
notice specified in this paragraph or Section 4.7(c) of the Indenture and upon
the passage of 10 days) is not an Event of Default until the Lender notifies
the Borrower of the Default, and the Borrower 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."
Section 8.2 Remedies.
(a) If an Event of Default occurs and is continuing (other
than an Event of Default specified in Section 8.1(e) or (f) above,
relating to the Borrower or it Subsidiaries), then in every such case,
unless the principal of the Note shall have already become due and
payable, either the Indenture Trustee or the Lender, by notice in
writing to the Borrower (and to the Indenture Trustee if given by the
Lender) (an "Acceleration Notice"), may declare all principal of the
Note and accrued and unpaid interest thereon or, as appropriate, any
prepayment under 3.1(a) to be due and payable immediately. If an Event
of Default specified in Section 8.1(e) or (f) above occurs relating to
the Borrower or its Subsidiaries, all principal and accrued and unpaid
interest thereon will be immediately due and payable on the Note without
any declaration or other act on the part of the Indenture Trustee or the
Lender. The Indenture Trustee generally is authorized to rescind such
acceleration if all existing Events of Default, other than the non-
payment of the principal and interest on the Note which has become due
solely by such acceleration, have been cured or waived.
(b) In addition to and cumulative of any rights or remedies
expressly provided for in this Section 8, if any one or more Events of
Default shall have occurred, Lender (i) may proceed to protect and
enforce its rights hereunder and under any other Loan Document by any
appropriate proceedings and the Liens evidenced by the TransTexas
Security Documents shall be subject to foreclosure in any manner
provided for therein or provided for by law as Lender may elect and (ii)
may apply any cash collateral securing all or any part of the
Obligations to the payment of the obligations. Lender may also proceed
either by the specific performance of any covenant or agreement
contained in this Agreement or the other Loan Documents or by enforcing
the payment of the Note or by enforcing any other legal or equitable
right provided under this Agreement or the other Loan Documents or
otherwise existing under any law in favor of the Lender. Lender shall
not, however, be under any obligation to marshall any assets in favor of
Borrower or against or in payment of any or all obligations under any
Loan Document.
(c) Upon the occurrence of any Event of Default, Lender shall
have the right, immediately and without notice, to take possession of
and exercise possessory rights with regard to any Property securing
payment of amounts due hereunder or under any other Loan Document.
(d) If Lender shall exercise its option to take over
management of the Premises pursuant to Section 8.2(b), Lender shall be
authorized to employ one or more independent managers to manage the
Premises, and Lender shall have no liability or responsibility absent
gross negligence or willful misconduct to Borrower or any other Person
with respect to its management of the Premises so long as Lender
exercises good faith in the selection and retention of such independent
manager or managers. All reasonable costs and expenses incurred by
Lender
25
<PAGE> 29
in managing the Premises shall, as paid, constitute indebtedness of
Borrower to Lender payable on demand, bearing interest at the Default
Rate from the date paid. All such demand indebtedness shall constitute
part of the indebtedness secured by the Collateral.
Section 8.3 Remedies Cumulative. No remedy, right or power conferred
upon Lender is intended to be exclusive of any other remedy, right or power
given hereunder or now or hereafter existing at law, in equity or otherwise,
and all such remedies, rights and powers shall be cumulative.
SECTION 9 MISCELLANEOUS.
Section 9.1 Waivers, Etc. No failure or delay on the part of Lender
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No course of dealing between Borrower and Lender shall operate
as a waiver of any right of Lender. No modification or waiver of any provision
of this Agreement, the Note or any other Loan Document nor consent to any
departure by Borrower therefrom shall in any event be effective unless the same
shall be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.
Section 9.2 Reimbursement of Expenses. The Borrower agrees to pay or
cause to be paid (i) all costs, expenses, fees and taxes incident to and in
connection with: the preparation, printing and distribution (including, without
limitation, word processing and duplication costs) and delivery of, and
performance under, each of the Loan Documents, (ii) all fees, disbursements and
expenses of the counsel and accountants of the Lender in connection with the
preparation, negotiation and execution of Loan Documents.
Section 9.3 Notices. Any notices or other communications to the
Borrower, the Lender or the Indenture Trustee required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to the Company:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77060
Attention: Ed Donahue
Vice President
26
<PAGE> 30
if to the Lender:
TransAmerican Energy Corporation
1300 North Sam Houston Parkway East
Suite 200
Houston, Texas 77060
Attention: Ed Donahue
Vice President
if to the Indenture Trustee:
Firstar Bank of Minnesota, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie
The Borrower, the Lender or the Indenture 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
Borrower, the Lender or the Indenture 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).
Section 9.4 Governing Law. THIS AGREEMENT AND THE NOTE 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. INSOFAR AS THIS AGREEMENT
RELATES TO THE MORTGAGES OR THE CREATION, PERFECTION OR FORECLOSURE OF LIENS
AND THE ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE COLLATERAL UNDER THE
TRANSTEXAS SECURITY DOCUMENTS, IT SHALL BE GOVERNED BY THE LAWS OF THE
JURISDICTION SPECIFIED IN SUCH DOCUMENTS. THE BORROWER 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 THE NOTE, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN ANY OTHER
27
<PAGE> 31
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER IN ANY OTHER JURISDICTION.
Section 9.5 Survival of Representations, Warranties and Covenants.
All representations, warranties and covenants contained herein and in any other
Loan Document or made in writing by Borrower in connection herewith shall
survive the execution and delivery of this Agreement and the Note, and will
bind and inure to the benefit of the respective successors and assigns of the
parties hereto, whether so expressed or not, provided that the undertaking of
Lender to make the Loan to Borrower shall not inure to the benefit of any
successor or assign of Borrower. No investigation at any time made by or on
behalf of Lender shall diminish Lender's right to rely thereon. All statements
contained in any certificate or other written instrument delivered by Borrower
or by any Person authorized by Borrower under or pursuant to this Agreement or
in connection with the transactions contemplated hereby shall constitute
representations and warranties hereunder as of the time made by Borrower.
Section 9.6 Counterparts. This Agreement may be executed in several
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
Section 9.7 Severability. In the event any one or more of the
provisions in this Agreement or in the Note 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 9.8 Descriptive Headings. The section headings in this
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatsoever in construing the terms and
provisions of this Agreement.
Section 9.9 Limitation of Liability. No claim may be made by Borrower
or any other Person against Lender or the directors, officers, employees,
attorneys or agents of Lender or the Indenture Trustee for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection herewith, and
Borrower hereby waives, releases and agrees not to sue upon any claim for any
such damages, whether or not accrued and whether or not known or suspected to
exist in its favor.
Section 9.10 Sale, Pledge or Assignment. Lender may assign any of its
rights (including, without limitation, rights to payment of principal and/or
interest under the Note) under this Agreement and the other Loan Documents to
the Indenture Trustee without further notice to or consent of Borrower, and the
Borrower hereby agrees to such assignment. The Borrower hereby acknowledges
and consents to the collateral assignment by the Lender of this Agreement and
the Lender's interest in the Collateral to the Indenture Trustee. The Borrower
also agrees that, in the case of an Event of Default, the Indenture Trustee may
exercise any rights and remedies of the Lender under this Agreement, and any
reference to the "Lender" hereunder shall also include the Indenture Trustee.
28
<PAGE> 32
Section 9.11 Release. The Collateral, in whole or in part, may be
released in accordance with the Indenture. Each of the Lender and the Borrower
hereby acknowledge and consent to the release of Collateral by the Indenture
Trustee, as the Lender's agent, pursuant to the terms of the Indenture.
Section 9.12 Indenture Controls. If there are any conflicts or
inconsistencies among this Agreement and any of the other Loan Documents, the
provisions of the Indenture shall prevail and control.
Section 9.13 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
unless otherwise specified herein, the word "from" means "from and including"
and the words "to" and "until" each shall mean "to but excluding."
Section 9.14 Final Agreement. THIS WRITTEN AGREEMENT, TOGETHER WITH
THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
29
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto, by their respective officers
thereunto duly authorized, have duly executed and delivered this Agreement as
of the date first above written.
TRANSTEXAS GAS CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
TRANSAMERICAN ENERGY CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
30
<PAGE> 34
Exhibit A
[FORM OF PROMISSORY NOTE]
TRANSTEXAS GAS CORPORATION
$450,000,000.00
TransTexas Gas Corporation, a Delaware corporation (hereinafter called
the "Company," which term includes any successor corporation, for value
received, hereby promises to pay to TransAmerican Energy Corporation, a
Delaware corporation (the "Lender"), or registered assigns, the principal sum
of Four Hundred Fifty Million Dollars, on June 1, 2002.
Interest Payment Dates: June 15 and December 15, commencing December
15, 1997
Record Dates: June 1 and December 1
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.
This is the Note referred to in that certain Loan Agreement between the
Company and the Lender, dated as of June 13, 1997 (the "Loan Agreement").
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated:
TRANSTEXAS GAS CORPORATION
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
A-1
<PAGE> 35
(BACK OF NOTE)
TRANSTEXAS GAS CORPORATION
1. Interest.
TransTexas Gas Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at a rate of
10.875 % per annum; provided, however, that during any TransTexas Interest
Increase Quarter, the Company promises to pay interest on the principal amount
of this Note at a rate of 12.875% 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 the Default Rate.
The Company will pay interest semi-annually on June 15 and December 15
of each year (each, an "Interest Payment Date"), commencing December 15, 1997.
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 to TransAmerican Energy
Corporation, a Delaware corporation (the "Lender") in accordance with the Loan
Agreement, defined below.
3. Loan Agreement.
The Company issued the Note under a Loan Agreement, dated as of June 13,
1997 (the "Loan Agreement"), among the Company and the Lender. Capitalized
terms herein are used as defined in the Loan Agreement unless otherwise defined
herein. The terms of the Note include those stated in the Loan Agreement. The
Note is limited in aggregate principal amount to $450,000,000.
A-2
<PAGE> 1
EXHIBIT 4.6
LOAN AGREEMENT
by and between
TRANSAMERICAN REFINING CORPORATION
and
TRANSAMERICAN ENERGY CORPORATION
Dated as of June 13, 1997
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 1.3 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2 THE LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.1 Commitment to Make Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.2 Deposit of Loan Proceeds into Disbursement Account. . . . . . . . . . . . . . . . . . . . . 17
Section 2.3 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.4 Repayment of the Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3 PREPAYMENTS AND OTHER PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.1 Mandatory Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.2 Permitted Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.3 Place of Payment or Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4 APPLICATION OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.1 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.1 Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2 Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.4 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.5 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.6 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.7 Conflicting or Adverse Agreements or Restrictions. . . . . . . . . . . . . . . . . . . . . 20
SECTION 6 CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.1 Conditions Precedent to the Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.1 Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.2 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.3 Covenants Incorporated by Reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8 EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.3 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.1 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.2 Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 9.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.5 Survival of Representations, Warranties and Covenants. . . . . . . . . . . . . . . . . . . 26
Section 9.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.8 Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.9 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.10 Sale, Pledge or Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.11 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.12 Indenture Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.13 Computation of Time Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.14 Final Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
Schedules and Exhibits:
Schedule 6.1(f) -- Insurance
Exhibit A -- Form of Promissory Note
ii
<PAGE> 4
LOAN AGREEMENT
This Loan Agreement dated as of June 13, 1997 (this
"Agreement") is entered into by and between TransAmerican Refining Corporation,
a Texas corporation (the "Borrower"), and TransAmerican Energy Corporation, a
Delaware corporation (the "Lender").
In consideration of the premises, mutual covenants and
agreements hereinafter contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower and
the Lender hereby agree as follows:
SECTION 1 DEFINITIONS.
Section 1.1 Certain Defined Terms. Capitalized terms used in
this Agreement and not otherwise defined herein shall have the following
meanings or, if not defined below, shall have the meanings given to them in the
Indenture:
"Acceleration Notice" shall have the meaning ascribed to such term in
Section 8.2.
"Accreted Value" shall mean, with respect to each $1,000 principal
amount of the Note, as of any Semi-Annual Accretion Date set forth below as the
Accreted Value thereof set forth below and as of any other date as the Accreted
Value set forth below for the immediately preceding Semi-Annual Accretion Date
plus the Proportionate Amount to such date:
<TABLE>
<CAPTION>
Accreted Value
(per $1,000
Semi-Annual Accretion Date principal amount)
-------------------------- -----------------
<S> <C>
December 15, 1997 $ 793.832
June 15, 1998 $ 857.338
December 15, 1998 $ 925.925
June 15, 1999 and thereafter $ 1,000.000
</TABLE>
The Accreted Value prior to the first Semi-Annual Accretion Date will
be the sum of $734.401 plus the Proportionate Amount.
"Agreement" shall mean this Loan Agreement, as the same may be
amended, modified, supplemented, extended, restated, renewed, refunded,
replaced, increased in amount or refinanced, in each case from time to time and
whether in whole or in part.
"Asset Sale" shall mean any direct or indirect conveyance, sale,
transfer or other disposition (including through damage or destruction for
which Insurance Proceeds are paid or by condemnation), in one or a series of
related transactions, of any of the properties, businesses or assets of the
Borrower or any Subsidiary of the Borrower, whether owned on the Closing Date
or thereafter acquired; provided, however, that "Asset Sale" shall not include
(i) any disposition of property that is not Collateral 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
shall mean, at the time of determination, the present value (discounted at the
rate of interest implicit in such transaction, determined
1
<PAGE> 5
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 Note)
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" shall mean Title II, U.S. Code or any similar
Federal, state or foreign law for the relief of debtor.
"Board of Directors" shall mean, 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.
"Budget" shall have the meaning ascribed to such term in the
Disbursement Agreement.
"Business Day" shall mean any day except Saturday, Sunday and any day
which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Capital Improvement Program" shall mean the expansion and improvement
program of the Borrower in connection with the reactivation and modification of
the Refinery.
"Capital Stock" shall mean, 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" shall mean 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 Equivalents" shall mean (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 an 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 an 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 Indenture 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,
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 million in the aggregate at any one time,
2
<PAGE> 6
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" shall mean certain real property currently owned by
the Borrower as more specifically defined in the TARC Mortgage, together with
all personal property of the Borrower now or hereinafter located on such real
property buy 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" shall mean (i) the liquidation or dissolution of,
or the adoption of a plan of liquidation by, the Lender, (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 50%) and his Subsidiaries or the Indenture
Trustee, is or becomes the "beneficial owner" (as that term is used in Rules
13d-3 and 13d-5 of the Exchange Act, whether or not applicable), directly or
indirectly, of more than 50% of the total voting power of the Lender's then
outstanding Voting Stock, or (iii) any event that results in the Lender or any
of its Subsidiaries having beneficial ownership of at least some of the
Borrower's or TransTexas' Capital Stock, respectively, but less than 50%, on a
fully diluted basis, of (x) the total voting power of the Borrower's or
TransTexas' then outstanding Voting Stock, or (y) the economic value of the
outstanding Capital Stock of the Borrower or TransTexas, respectively; unless,
at the time of the occurrence of an event specified in clause (ii) or (iii),
the TEC Notes have an Investment Grade Rating; provided, however, that if at
any time within 120 days after such occurrence, the TEC Notes cease having an
Investment Grade Rating, such event shall be a "Change of Control."
"Change of Control Payment Date" shall have the meaning ascribed to
such term in Section 3.1(a).
"Closing Date" shall mean June 13, 1997.
"Collateral" shall mean the assets of the Borrower that are mortgaged
or pledged to the Borrower as security for the Note in accordance with the TARC
Security Documents.
"Consolidated EBITDA" of any Person for any period, unless otherwise
defined herein, shall mean (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 Charges" of any Person for any period shall mean
(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
3
<PAGE> 7
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.
"Construction Supervisor" shall mean 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" shall mean 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 the whole of the assets of such
Person or only to a portion thereof), (b) evidenced by bonds, notes, debentures
or similar instruments or letters of credit or representing the balance
deferred and unpaid of the purchase price of any property acquired by such
Person or services received by such Person (other than long-term service or
supply contracts which require minimum periodic payments), (c) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks or
Interest Swap Obligations, (d) for the payment of money relating to a
Capitalized Lease Obligation or (e) the Attributable Debt associated with any
Sale and Leaseback Transactions; (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 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.
"Default" shall mean an event or condition, the occurrence of which
is, or with the passage of time or the giving of notice, or both, would be an
Event of Default.
"Default Rate" shall mean, at any time, a per annum rate equal to the
then existing interest rate plus one and one-half percent (1 1/2%).
"Delayed Coking Unit" shall mean the delayed coking unit being
constructed as part of the Capital Improvement Program.
4
<PAGE> 8
"Disbursement Account" shall mean the account or accounts created by
the Disbursement Agreement and owned by the Borrower.
"Disbursement Agreement" shall mean that certain Disbursement
Agreement, among the Borrower, the Lender, the disbursement agent named therein
and the Construction Supervisor, as amended pursuant to the terms thereof.
"Disqualified Capital Stock" shall mean, 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 1, 2002.
"Dollars" and "$" shall mean lawful currency of the United States of
America.
"Eligible Institution" shall mean a domestic commercial banking
institution that has combined capital and surplus of not less than $500
million, that is rated "A" (or higher) according to Moody's or S&P at the time
as of which any investment or rollover therein is made.
"Equipment" shall mean and includes all of any Person's 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; provided, however that "Equipment" shall not include any
assets constituting part of the Refinery or used in the Borrower's processing
or storage operations.
"Equity Offering" of any Person shall mean any Public Equity Offering
or any private placement of any Capital Stock of such Person.
"Event of Default" shall have the meaning ascribed to such term in
Section 9.1.
"Exchange Act" shall have the meaning ascribed to such term in Section
5.13.
"Financing Statements" shall mean the financing statements dated as of
the Closing Date executed and delivered in connection with the TARC Security
Documents.
"Force Majeure" shall mean strikes, lockouts or other labor trouble,
fire or other casualty, governmental preemption in connection with a national
emergency, any rule, order or regulation of any governmental agency or any
department or subdivision thereof, or inability to secure materials or labor
because of any such emergency, rule, order, regulation, war, civil disturbance
or other emergency, cause or event beyond the reasonable control of the
Borrower.
"GAAP" shall mean 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
Borrower delivered pursuant to this Agreement.
5
<PAGE> 9
"Governmental Authority" shall mean any (domestic or foreign) federal,
state, county, municipal, parish, provincial or other government, or any
department, commission, board, court, agency (including, without limitation,
the Environmental Protection Agency) or any other instrumentality of any of
them or any other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, government, including, without limitation, any arbitration
panel, any court or any commission.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
rate, if any, permitted from time to time under applicable Laws to be
contracted for, taken, reserved, charged or received by Lender. If the Highest
Lawful Rate shall change after the Closing Date, the Highest Lawful Rate shall
be automatically increased or decreased, as the case may be, from time to time
as of the effective time of each change in the Highest Lawful Rate, without
notice to Borrower; provided, that the Highest Lawful Rate shall decrease only
to any extent required by applicable Laws and shall increase only to the extent
permitted by applicable Laws.
"Incur" or "Incurrence" shall mean to, directly or indirectly, create,
incur, assume, guarantee, or otherwise become liable for, contingently or
otherwise, any Debt.
"Indenture" shall mean that certain Indenture dated as of the date
hereof between the Lender and the Indenture Trustee.
"Indenture Trustee" shall mean Firstar Bank of Minnesota, N.A.,
trustee under the Indenture.
"Independent Director" shall mean an individual that is not and has
not been affiliated (other than as a director of TransAmerican or its past or
present subsidiaries) with, and is not and has not been a Related Person (other
than solely as a director of TransAmerican or one of its past or present
Subsidiaries) with respect to John R. Stanley, TransAmerican or the Borrower or
its Subsidiaries.
"Insurance Proceeds" shall mean 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 Borrower 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.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement, dated as of the Closing Date, by and among the Lender, Borrower,
First Union National Bank, as trustee under that certain Indenture by and
between the Borrower and First Union National Bank dated as of February 23,
1995 and the Indenture Trustee.
"Interest Rate or Currency Agreement" of any Person shall mean 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" shall mean and include feedstocks, refined products,
chemicals and catalysts, other supplies and storeroom items and similar items
accounted for as inventory by the Borrower on its financial statements, all
proceeds thereof, and all documents of title, books, records, ledger cards,
files,
6
<PAGE> 10
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 shall mean (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" shall mean, with respect to any Person or
issue of debt securities or preferred stock, a rating in one of the four
highest letter rating categories (without regard to "+" or "-" or other
modifiers) by any rating agency or if any such rating agency has ceased using
letter rating categories or the four highest of such letter rating categories
are not considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Laws" shall mean all constitutions, treaties, statutes, laws,
ordinances, regulations, rules, orders, writs, injunctions or decrees of the
United States of America, any state or commonwealth, any municipality, any
foreign country, any territory or possession or any tribunal, as in effect on
the Closing Date and as the same may hereafter be amended, issued, promulgated
or otherwise hereafter come into effect, from time to time.
"Lien" shall mean 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).
"Loan" shall have the meaning ascribed to such term in Section 2.1(a).
"Loan Documents" shall mean this Agreement, the Note, the TARC
Security Documents, the Disbursement Agreement and all other agreements,
documents, financing statements, instruments and certificates now or hereafter
executed and delivered to Lender pursuant to any of the foregoing or the
transactions connected therewith, and all amendments, modifications,
supplements, restatements, renewals, refundings, replacements, extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.
"Maturity Date" shall mean the earlier to occur of (a) the Stated
Maturity Date and (b) any earlier maturity date resulting from the
acceleration, in accordance with the terms hereof, of the outstanding principal
amount of the Loan.
"Mechanical Completion" shall mean 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, as defined in the Disbursement Agreement, so
that the Capital Improvement
7
<PAGE> 11
Program, Phase I, Phase II or such unit or component, as the case may be, can
be operated for its intended purpose.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" shall mean that certain Act of Mortgage, Security Agreement
and Financing Statement, dated as of the Closing Date, executed by Borrower for
the benefit of the Lender, and any and all amendments, modifications,
supplements, restatements, replacements, renewals and extensions thereof, in
each case from time to time and whether in whole or in part.
"Mortgaged Property" shall have the meaning set forth in Section
6.1(e).
"Net Cash Proceeds" shall mean an amount equal to the aggregate amount
of cash received by the Borrower and its Subsidiaries in respect of an Asset
Sale or a Non-Collateral Asset Sale, less the sum of (i) all reasonable out-of-
pocket fees, commissions, and other expenses incurred in connection with such
Asset Sale or Non-Collateral Asset Sale, as the case may be, including the
amount (estimated in good faith by the Borrower) of income, franchise, sales,
and other applicable taxes required to be paid, payable or accrued by the
Borrower or any Subsidiary of the Borrower (in each case as estimated in good
faith by the Borrower or such Subsidiary without giving effect to tax
attributes unrelated to such Asset Sale) in connection with such Asset Sale or
Non-Collateral Asset Sale, as the case may be, and (ii) the aggregate amount of
cash so received which is used to retire any then existing Debt of the Borrower
or its Subsidiary (other than the Note), as the case may be, which is required
by the terms of such Debt to be repaid in connection with such Asset Sale or
Non-Collateral Asset Sale, as the case may be.
"Net Worth" of any Person shall mean, 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 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from 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.
"New TARC Property" shall have the meaning ascribed to such term in
the definition of Permitted Liens.
"Non-Collateral Asset Sale" shall mean any direct or indirect
conveyance, sale, transfer or other disposition (including through damage or
destruction for which Insurance Proceeds are paid or by condemnation), in one
or a series of related transactions, of any of the properties, businesses or
assets of the Borrower or any Subsidiary of the Borrower, whether owned on the
Closing Date or thereafter acquired, which properties, businesses or assets do
not constitute Collateral.
"Note" shall mean the promissory note executed by Borrower and payable
to the order of Lender pursuant to Section 2, as such promissory note may be
amended, modified, supplemented, restated, renewed, extended or increased in
amount, in each case from time to time.
"Officers' Certificate" shall mean a certificate signed in the name of
Borrower by either its President, one of its Vice Presidents or its Treasurer
and its Secretary or one of its Assistant Secretaries.
8
<PAGE> 12
"Permitted Hedging Transactions" shall mean 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 market conditions in the natural gas industry
as prices of feedstock and 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, and 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" shall mean, when used with reference to the
Borrower or its Subsidiaries, (i) trade credit extended to persons in the
ordinary course of business; (ii) purchases of Cash Equivalents; (iii)
Investments by the Borrower or its wholly owned Subsidiaries in wholly owned
Subsidiaries of the Borrower that are engaged in Related TARC Businesses; (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 Borrower of the assets constituting the CATOFIN(R) Unit
owned by the Borrower as of the date hereof; (ix) a guaranty by any Subsidiary
of the Borrower permitted under the Indenture; (x) deposits permitted by the
definition of Permitted Liens or any extension, renewal or replacement of any
of them; (xi) any acquisition by the Borrower of tank storage facilities (or
the company that owns such facilities) in the vicinity of the Refinery; (xii)
Investments in Accounts Receivables Notes by the Borrower in an Accounts
Receivable Subsidiary in amounts not to exceed the greater of $20 million or
20% of the Borrowing Base at any one time; (xiii) Investments by the Borrower
in an Accounts Receivable Subsidiary or in a reincorporation subsidiary, in
each case in connection with the initial capitalization thereof, and not to
exceed $1,000; (xiv) Investments by the Borrower or a wholly owned Subsidiary
solely for the purpose of facilitating a repurchase of the TARC Warrants in
connection with a short form merger; (xv) other Investments not in excess of $5
million at any time outstanding and (xvi) loans made (x) to officers, directors
and employees of the Borrower 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 anyone time.
"Permitted Liens" shall mean (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, 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 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
9
<PAGE> 13
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, 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; (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 existing on
the Closing Date 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 (A) are
not created, incurred or assumed in contemplation of such assets being acquired
by any of the TARC Entities and (B) 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 (A) 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 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 TARC Property, (B) 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, (C) 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
(D) such Lien does not extend to assets or property which are part of the fixed
refinery assets that 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 sixty (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 Unrestricted
Non-Recourse Debt of the Borrower; (r) Liens on the proceeds of any property
subject to a Permitted 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 Commission Bond Financing; provided,
that such liens do not extend to property other than Port Facility Assets; (u)
any extension, renewal or replacement of the Liens created pursuant to any of
the clauses (a) through (g) or (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 the 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 the Lender
10
<PAGE> 14
or its assignee under the TARC Security Documents and (y) Liens on tank storage
facilities in the vicinity of the Refinery acquired after the date hereof.
"Permitted Prepayment" shall have the meaning ascribed to such term
in Section 3.2.
"Permitted Prepayment Fee" shall mean an amount equal to (a) five
percent (5%) of the Accreted Value of the outstanding principal amount of the
Note to be prepaid for Permitted Prepayments made on or prior to December 31,
1997, (b) eight percent (8%) of the Accreted Value of the outstanding principal
amount of the Note to be prepaid for Permitted Prepayments during the period
from January 1, 1998 through June 14, 2000, (c) five and three quarters
percent (5.750%) of the Accreted Value of the outstanding principal amount of
the Note to be prepaid for Permitted Prepayments made from June 15, 2000
through June 14, 2001 and (d) no additional amount for Permitted Prepayments
made on or after June 15, 2001.
"Person" shall mean a corporation, individual, joint venture,
partnership, unincorporated organization, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality, or other
entity.
"Phase I" shall mean that phase of the Capital Improvement Program in
which the Delayed Coking Unit, the Hydrosulfurization Unit, the Naphtha
Pretreater, the No.2 Reformer, the Sulfur Recovery System and certain
supporting offsite facilities will be completed according to the Plans.
"Phase I Completion Date" shall mean the date on which the
Construction Supervisor issues a written notice (the "Phase I Completion
Notice") to the Borrower 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, as defined in
the Disbursement Agreement and (b) for a period of at least 15 consecutive
days, the Refinery has sustained (i) the successful performance of the Delayed
Coking Unit, the Hydrodesulfurization 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 I Completion Notice" shall have the meaning ascribed to such
term in the definition of "Phase I Completion Date."
"Phase II" shall mean that phase of the Capital Improvement Program in
which the Flue Catalytic Cracking Unit, FCC Flue Gas Scrubber, the Alkylation
Unit and certain additional offsite facilities will be completed according to
the Plans and Specifications.
"Phase II Completion Date" shall mean the date on which the
Construction Supervisor issues a written notice (the "Phase II Completion
Notice") to the Borrower 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, as defined
in the Disbursement Agreement and (b) for a period of at least 72 uninterrupted
hours, the 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
11
<PAGE> 15
of at least 70%, when using as input a combined Crude Unit feedstock slate with
an average API Gravity of 22 degrees or less.
"Phase II Completion Notice" shall have the meaning ascribed to such
term in the definition of "Phase II Completion Date."
"Plans" shall mean (a) the plans and specifications prepared by or on
behalf of the Borrower as used in the Disbursement Agreement, which described
and show the proposed expansion and modification of the Refinery and (b) a
budget prepared by or on behalf of the Borrower as used in the Disbursement
Agreement.
"Port Commission Bond Financing" shall mean a financing transaction
involving the following elements: (a) the transfer of the Borrower's interest
in all or some of the following assets that are under construction in or near
the Refinery: (i) the Prospect Road tank farm; (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 South Louisiana Port
Commission (the "Tax-Exempt Issuer") or its affiliate and a leaseback of the
Port Facility Assets to the Borrower or one of its Subsidiaries; (b) the
issuance of tax-exempt bonds by the Tax-Exempt Issuer, and the loan of proceeds
from such bonds to the Borrower or one of its Subsidiaries for the purpose of
financing completion of the Port Facility Assets.
"Port Facility Assets" shall have the meaning ascribed to such term in
the definition of Port Commission Bond Financing.
"Premises" shall mean the Mortgaged Property, the Refinery and all
fixtures, equipment, leases, rentals, accounts, general intangibles and
personal property of any kind or character now or hereafter related to,
situated on or used or acquired for use on or in connection with the Mortgaged
Property or in any improvements now or hereafter constructed thereon, and all
related parts, accessions and accessories thereto and all replacements or
substitutions therefor, as well as all other improvements, benefits and
appurtenances now or hereafter placed thereon or accruing thereto.
"Project Disbursement" shall have the meaning ascribed to such term in
the Disbursement Agreement.
"Property" shall mean, with respect to any Person, all right, title
and interest of such Person in any kind of property or asset, whether real,
personal or mixed, owned or leased, tangible or intangible, and whether now
held or hereafter acquired, and in the case of Borrower shall include the
Premises.
"Proportionate Amount" shall mean, as of any date, an amount equal to
the product of (i) the Accreted Value for the immediately following Semi-Annual
Accretion Date less the Accreted Value for the immediately preceding
Semi-Annual Accretion Date (or, with respect to the period before the first
Semi-Annual Accretion Date, less $734.401) multiplied by (ii) a fraction, the
numerator of which is the actual number of days elapsed from the immediately
preceding Semi-Annual Accretion Date (or, with respect to the period before the
first Semi-Annual Accretion Date, the Closing Date) to the date for which the
Proportionate Amount is being determined and the denominator of which is the
actual number of days from the date of the immediately preceding Semi-Annual
Accretion Date to and including the immediately following Semi- Annual
Accretion Date or the actual number of days from the Closing Date to the first
Semi-Annual Accretion Date, as the case may be.
12
<PAGE> 16
"Public Equity Offering" shall mean 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.
"Qualified Capital Stock" shall mean any Capital Stock that is not
Disqualified Capital Stock.
"Receivables" shall means and include, 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.
"Refinery" shall have the meaning ascribed to such term in Section
4.1.
"Related Person" shall mean (i) any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Borrower or any Subsidiary of the Borrower or any officer, director, or
employee of the Borrower or any Subsidiary of the Borrower 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).
"Related TARC Business" shall mean 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, (ii) owning and
operating an Accounts Receivable Subsidiary and (iii) 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.
"Required Phase I Completion Date" shall mean March 31, 1999.
"Reserve Amount" shall have the meaning ascribed to such term in
Section 2.2(a).
"Restricted Investment" shall mean any direct or indirect Investment
by the Borrower or any Subsidiary of the Borrower other than a Permitted
Investment.
"Restricted Payment" shall mean, 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 Subordinated Debt, directly or indirectly, of such Person or a
Subsidiary of such Person prior to the
13
<PAGE> 17
scheduled maturity or prior to any scheduled repayment of principal in respect
of such 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 Borrower from any of its
Subsidiaries, (iii) any defeasance, redemption, repurchase, or other
acquisition or retirement for value, in whole or in part, of any 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 Transfer Agreement, the Services Agreement, the Office Leases or the
Tax Allocation Agreement, or (v) any dividend, distribution or other payment to
the Borrower by any of its Subsidiaries, (vi) any Permitted Prepayment, (vii)
any redemption, repurchase or other retirement for value of the TARC Warrants
by the Lender or the Borrower, including any premium paid thereon, (viii) any
redemption, defeasance, repurchase or other retirement for value of the Senior
TARC Mortgage Notes by the Borrower, including any premium paid thereon, (ix)
any redemption, defeasance, repurchase or other retirement for value of the
Senior TARC Discount Notes by the Lender or the Borrower, including any premium
paid thereon, (x) 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 Section 4.11(2)(q) or
Section 4.11(4)(j) of the Indenture, (xi) the purchasing by the Borrower of
shares of the Capital Stock of TransTexas or itself in connection with its
employee benefit plan, including without limitation any employee stock
ownership plan or any employee stock option plan in an aggregate amount not to
exceed 7% of the aggregate market value of the voting stock held by
non-affiliates of the issuer measured from the date of the first such purchase,
and (xii) any repayment or retirement for value by the Borrower of any loan
from the Lender incurred pursuant to Sections 4.11(2)(o), 4.11(2)(p),
4.11(4)(s) or 4.11(4)(t) of the Indenture.
"S&P" shall mean Standard and Poor's Corporation, Inc.
"Sale and Leaseback Transaction" shall mean an arrangement relating to
property owned on the Closing Date or thereafter acquired whereby the Borrower
or a Subsidiary of the Borrower transfers such property to a Person and leases
it back from such Person.
"SEC" shall mean the Securities and Exchange Commission.
"Senior Loan Documents" shall mean the Senior TARC Discount Notes and
the Senior TARC Mortgage Notes.
"Senior Obligations" shall have the meaning ascribed to such term in
the Intercreditor Agreement.
"Stated Maturity Date" shall mean June 1, 2002.
"Subordinated Debt" shall mean Debt that (i) requires no payment of
principal prior to or on the date on which all principal of and interest on the
Note is paid in full and (ii) is subordinate and junior in right of payment to
the Note in the event of a liquidation.
"Subsidiary" with respect to any Person, shall mean (i) a corporation
with respect to which such Person or such Person and its Subsidiaries own,
directly or indirectly, at least fifty percent of whose Capital Stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by such Person and one or more
Subsidiaries of such Person or by
14
<PAGE> 18
one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a subsidiary of such Person is, at the time, a general partner of
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 Person;
provided, however, that "Subsidiary" shall not include (i) any Unrestricted
Subsidiary of such Person, except for purposes of Section 4.10 of the Indenture
or (ii) an Accounts Receivable Subsidiary.
"Swap Obligation" of any person shall mean 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 Discount Notes" shall mean the Guaranteed First Mortgage
Discount Notes due 2002 issued by the Borrower and guaranteed by the Lender.
"TARC Entities" shall mean the Borrower and each of its Subsidiaries.
"TARC Mortgage Notes" shall mean the Guaranteed First Mortgage Notes
due 2002 issued by the Borrower and guaranteed by the Lender.
"TARC Security Agreement" shall mean that certain Security and Pledge
Agreement by the Borrower in favor of the Lender.
"TARC Security Documents" shall mean the Disbursement Agreement, the
TARC Mortgage, the TARC Security Agreement and each other agreement relating to
the pledge of assets to secure the Notes and any guarantee of the obligations
of the Borrower under the Note by any guarantor that may be entered into after
the date of the Note, pursuant to the terms of the Note.
"TARC Supplemental Indenture" shall mean that certain Supplemental
Indenture between the Borrower and the First Union National Bank, relating to
the Senior TARC Discount Notes.
"TEC Notes" shall mean those certain 11 1/2% Senior Secured Notes due
2002 in the aggregate principal amount of $475,000,000 and 13% Senior Secured
Discount Notes due 2002 in the aggregate principal amount of $1,130,000,000
issued by the Lender.
"Termination Fee" shall mean a fee to be paid in the event of a
mandatory prepayment pursuant to Section 3.1 in the amount of one percent (1%)
of the amount of such prepayment.
"TransAmerican" shall mean TransAmerican Natural Gas Corporation, a
Texas corporation.
"TransTexas" shall mean TransTexas Gas Corporation, a Texas
corporation.
15
<PAGE> 19
"TransTexas Loan" shall mean the loan from the Lender to TransTexas
pursuant to that certain Loan Agreement between the Lender and TransTexas,
dated as of the date hereof.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial or other court or governmental or administrative department,
commission, board, bureau, district, authority, agency or instrumentality or
any arbitration authority.
"Unrestricted Non-Recourse Debt" shall mean (i) Debt 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 this 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
clauses (i) and (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 Consolidated EBITDA since the Phase II
Completion Date plus in the case of either (i) or (ii), Restricted Payments
permitted to be made pursuant to clauses (i) or (ii), as applicable, of Section
4.3 of the Indenture.
"Unrestricted Subsidiary" of any Person shall mean 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
Closing 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 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. Any such designation by the Board of
Directors of such Person shall be evidenced to the Indenture Trustee by
delivering to the Indenture 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 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 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" shall mean, 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 Borrower or any Subsidiary of the
Borrower) of
16
<PAGE> 20
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 (other than the
Borrower or any Subsidiary of the Borrower 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.
"Vehicles" shall mean all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
"Voting Stock" shall mean Capital Stock of a Person having generally
the right to vote in the election of directors of such Person.
Section 1.2 Rules of Construction. The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified herein, the term "or" has the inclusive
meaning represented by the term "and/or" and the term "including" is not
limiting. All references as to "Sections", "Schedules" and "Exhibits" shall be
to Sections, Schedules and Exhibits, respectively, of this Agreement unless
otherwise specifically provided.
Section 1.3 Computation of Time Periods. In the computation of
periods of time from a specified date to a later specified date, unless
otherwise specified herein the words "commencing on" mean "commencing on and
including", the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding".
SECTION 2 THE LOAN.
Section 2.1 Commitment to Make Loan.
(a) Lender, upon the terms and conditions set forth
herein and relying upon the representations and warranties set forth
herein, agrees to make a loan (the "Loan") to Borrower on the Closing
Date in an amount equal to $675,648,920.
(b) Borrower shall execute and deliver to Lender to
evidence the Loan made by Lender a promissory note (the "Note"), which
shall be (i) dated the Closing Date; (ii) in the fully accreted
principal amount of $920,000,000; and (iii) in substantially the form
attached hereto as Exhibit A and made a part hereof, with the blanks
appropriately filled.
Section 2.2 Deposit of Loan Proceeds into Disbursement Account.
(a) The Lender shall deliver to the Borrower, on the
Closing Date, an amount equal to $540,548,664.08. The Lender shall
deposit the remaining amount of the Loan, $135,100,255.92 (the
"Reserve Amount") into the Disbursement Account.
(b) Funds in the Disbursement Account shall be disbursed
according to the terms and conditions of the Disbursement Agreement.
17
<PAGE> 21
Section 2.3 Interest.
(a) The Note will accrete principal at sixteen percent
(16%) per annum commencing as of the Closing Date until June 15, 1999.
Interest will begin to accrue commencing June 15, 1999 and will be
payable semi- annually in arrears on June 15 and December 15 of each
year commencing on December 15, 1999.
(b) Borrower shall pay interest on the unpaid principal
amount of the Loan at a rate per annum equal to the lesser of (i)
sixteen percent (16%) and (ii) the Highest Lawful Rate from the
Closing Date until such principal amount shall be paid in full, at the
times and according to the terms and conditions set forth in the Note;
provided, however, that, in the event that the cost to complete Phase
I is in excess of $245 million, interest will begin to so accrue
commencing June 15, 1999 at a rate per annum equal to the lesser of
(i) sixteen and one quarter of one percent (16.25%) and (ii) the
Highest Lawful Rate; provided, further, that any amount of principal
which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the date on which
such amount is due until such amount is paid in full, payable on
demand at a rate per annum equal at all times to the lesser of (i) the
Default Rate and (ii) the Highest Lawful Rate.
(c) Interest on the Note will accrue from the most recent
date to which interest has been paid, or, if no interest has been
paid, from June 15, 1999. Interest on the Note will be computed on
the basis of a 360- day year consisting of twelve 30-day months.
Section 2.4 Repayment of the Loan. Borrower shall repay the
outstanding principal amount of the Loan, plus all accrued and unpaid interest
on the Stated Maturity Date.
SECTION 3 PREPAYMENTS AND OTHER PAYMENTS.
Section 3.1 Mandatory Prepayments.
(a) Change of Control. In the event that a Change of
Control occurs, the Lender will have the right, at the Lender's
option, subject to the terms and conditions of this Agreement and the
Indenture, to require the Borrower to repay the Accreted Value of the
outstanding principal amount of the Loan in an amount equal to the
Borrower's pro rata share of the Change of Control Purchase Price, as
defined in the Indenture, to be paid by the Lender pursuant to Section
11.1 of the Indenture (such pro rata share to be calculated using the
ratio of the outstanding principal amount of the Loan to the sum of
(i) the Accreted Value of the outstanding principal amount of the Loan
plus (ii) the outstanding principal amount of the TransTexas Loan),
plus any and all accrued and unpaid interest, together with the
Termination Fee, on a date that is no later than 59 Business Days
after the occurrence of such Change of Control (the date on which the
repayment is effected being referred to herein as the "Change of
Control Payment Date").
(b) The Borrower shall notify the Lender and the
Indenture Trustee within five Business Days after each date upon which
the Borrower knows, or reasonably should know, of the occurrence of a
Change of Control.
Section 3.2 Permitted Prepayments. The Borrower may at any time
make a prepayment of all or a portion of the principal amount of the Note then
outstanding (a "Permitted Prepayment") at a
18
<PAGE> 22
prepayment price equal to the Accreted Value of the portion of the outstanding
principal amount of the Note to be prepaid plus the Permitted Prepayment Fee,
together with accrued and unpaid interest, if any, to and including the date of
such Permitted Prepayment.
Section 3.3 Place of Payment or Prepayment. All payments and
prepayments made in accordance with the provisions of this Agreement or any
other Loan Document in respect of principal, interest, fees, costs or expenses
shall be made on the date when due in Dollars, without deduction, set-off or
counterclaim, to an account of the Lender located in New York, New York, or
such other place as designated by the Lender.
SECTION 4 APPLICATION OF PROCEEDS.
Section 4.1 Use of Proceeds. Borrower agrees that the proceeds
of the Loan shall be used for the purposes described more specifically in the
Offering Circular dated June 5, 1997 relating to the issuance of the TEC Notes,
including without limitation (a) to finance a two-phase construction and
expansion program designed to reactivate its petroleum refinery located
approximately twenty miles from New Orleans, Louisiana (the "Refinery") and (b)
to purchase for cash the TARC Discount Notes and the TARC Mortgage Notes, with
any remaining balance available to the Borrower for working capital and other
general purposes not otherwise prohibited by the Loan Documents. Borrower
agrees to place $135,100,255.92 million of the proceeds of the Loan in the
Disbursement Account, which funds will be restricted pursuant to the
Disbursement Agreement.
SECTION 5 REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
Section 5.1 Organization and Qualification. The Borrower (a) is
duly organized, validly existing and in good standing under the laws of the
State of Texas; (b) has the corporate power to own its Properties and to carry
on its business as now conducted; and (c) is duly qualified to do business and
is in good standing in Louisiana and in every jurisdiction in which the failure
to be qualified would reasonably be expected to have a material adverse effect.
Borrower has no Subsidiaries and is not a party to any joint venture or
partnership. All of the issued and outstanding Capital Stock of Borrower have
been authorized, validly issued, and are fully paid and nonassessable and free
of any Lien whatsoever.
Section 5.2 Power and Authority. The Borrower has all necessary
corporate and other power and authority to enter into and perform its
obligations under the Loan Documents to which it is a party. The execution,
delivery and performance by the Borrower of the Loan Documents to which it is a
party have been duly authorized by all necessary corporate proceedings on its
part.
Section 5.3 Enforceability. The Loan Documents have been duly
executed and delivered by the Borrower and constitute valid and legally binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally.
Section 5.4 Default. The Borrower is not in default under the
provisions of any agreement, document or instrument to which it is a party or
by which it or any of its properties is bound or in violation of any order,
writ, injunction or decree of any Tribunal or in default under, or in violation
of,
19
<PAGE> 23
any order, regulation or demand of any Governmental Authority, which default or
violation would, individually or in the aggregate, materially and adversely
affect the business, financial condition, Properties, prospects or operations
of the Borrower.
Section 5.5 Title to Assets. Borrower has good and marketable
title to its Properties (including the Premises), subject to no Liens except
Permitted Liens.
Section 5.6 Payment of Taxes. The Borrower and each of its
Subsidiaries have filed all Federal, state and local tax returns that are or
were required to be filed or have obtained extensions thereof and have paid all
taxes shown on such returns and all assessments received by them, respectively,
to the extent that the same have become due except for such assessments that
the Borrower or such Subsidiary disputes in good faith and has adequately
reserved therefor.
Section 5.7 Conflicting or Adverse Agreements or Restrictions.
The execution and delivery by the Borrower of the Loan Documents and its
compliance with and performance of the terms and provisions thereof (a) is not
contrary to the provisions of the Articles of Incorporation or Bylaws of the
Borrower, (b) does not violate any Law, regulation, writ, injunction, order or
decree of any Tribunal, (c) does not conflict with, result in a breach of or
cause a default under any agreement, document or instrument to which the
Borrower is a party or by which it or any of its Properties is bound or to
which it or any of its Properties is subject and (d) does not result in the
creation of any Lien upon or security interest in any of the Property of the
Borrower except for Permitted Liens.
SECTION 6 CONDITIONS OF LENDING.
Section 6.1 Conditions Precedent to the Loan. The obligation of
Lender to make the Loan on the Closing Date is subject to the conditions
precedent that Lender shall have received on or before the Closing Date all of
the following, each dated (unless otherwise indicated) the Closing Date and
each in form and substance satisfactory to Lender and in such number of
counterparts as may be requested by Lender:
(a) this Agreement, the Note, the Disbursement Agreement,
the TARC Security Documents and the Financing Statements, each duly
executed and delivered by the parties thereto;
(b) the fully executed and delivered Intercreditor
Agreement;
(c) a commitment for mortgagee policy of title insurance
(the "Title Commitment") issued by First American Title Insurance
Company (the "Title Company") in favor of Lender and Indenture Trustee
in form and substance satisfactory to Lender and in an amount
satisfactory to Lender, committing to insure that the Mortgage creates
valid, first and prior Liens in the fee estate covered thereby
(collectively, the "Mortgaged Property"), except for Permitted Liens;
(d) unless waived by Lender, loss payable endorsements
with respect to all property insurance maintained by Borrower as of
the Closing Date, all as described on Schedule 6.1(f) attached hereto
and made a part hereof;
(e) copies of UCC-11s, or equivalent reports, listing all
effective financing statements which name Borrower (under its present
name, any trade names and any previous names) as debtor and which are
filed, together with copies of all such financing statements;
20
<PAGE> 24
(f) duly executed releases or assignments of Liens and
UCC-3 financing statements in recordable form, and in form and
substance satisfactory to Lender, covering such Collateral as may be
necessary to reflect that the Liens granted to Lender are first and
prior Liens, except for Permitted Liens;
(g) an insurance broker's certificate relating to each
insurance policy maintained by Borrower as of the Closing Date
together with a copy of each such insurance policy or certificates or
evidence of coverage under such policy, evidence of the payment of the
premiums therefor, all in form and substance satisfactory to Lender;
(h) the initial Budget, in form and substance
satisfactory to Lender; and
(i) certified copies of the fully executed and delivered
Senior Loan Documents, as amended by the TARC Supplemental Indenture
which shall be in form and substance satisfactory to Lender.
SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER.
So long as Borrower may borrow hereunder and until payment in full of
the obligations and all other amounts payable to Lender under the Loan
Documents:
Section 7.1 Payment of Securities. The Borrower shall pay the
principal of and interest on the Note on the dates and in the manner provided
in the Note. An installment of principal of or interest on the Note shall be
considered paid on the date it is due if the Lender or Indenture Trustee holds
on or before 10:00 a.m. New York City time on the date, U.S. legal tender
deposited and designated for and sufficient to pay the installment. The
Borrower shall pay interest on overdue principal and on overdue installments of
interest at the rate specified in the Note compounded semi-annually, to the
extent permitted by law.
Section 7.2 Construction. The Borrower shall use its best
efforts to expand and modify the Refinery pursuant to the Capital Improvement
Program with diligence and continuity in a good and workmanlike manner except
during the existence of delays caused by Force Majeure. The Borrower shall use
its best efforts to prevent and to minimize any delays caused by Force Majeure.
Section 7.3 Covenants Incorporated by Reference. The Borrower
shall, and shall cause each of its Subsidiaries to, comply with each covenant
applicable to the Borrower or its Subsidiaries, as described in the Indenture
as if made by the Borrower as of the date hereof.
SECTION 8 EVENTS OF DEFAULT AND REMEDIES.
Section 8.1 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 the Note as and
when the same becomes due and payable, and the continuance of such default for
a period of 30 days;
21
<PAGE> 25
(b) default in the payment of all or any part of the principal of
the Note when and as the same becomes due and payable at maturity, redemption,
by acceleration, or otherwise, including default in the payment on Change of
Control Payment Date in accordance with Section 3.1;
(c) default in the observance or performance of, or breach of, any
covenant (including covenants incorporated by reference pursuant to Section
7.2), agreement or warranty of the Borrower or any of its Subsidiaries
contained in the Note or this Agreement or any of the Security Documents (other
than a default in the performance of any covenant, agreement or warranty which
is specifically dealt with elsewhere in this Section 8.1), and continuance of
such default or breach for the period and after the notice, if any, specified
below;
(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under any mortgage,
indenture or instrument under which there is outstanding any Debt of the
Borrower or any of its Subsidiaries with an aggregate principal amount in
excess of $25 million, or failure to pay such Debt at its stated maturity,
provided that a waiver of such default by the requisite lenders under such
mortgage, indenture or instrument 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 Borrower or any of its
Subsidiaries as bankrupt or insolvent, or ordering relief against the Borrower
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 Borrower 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 Borrower, 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 Borrower 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 Borrower or any Subsidiary, which, in the aggregate,
equal or exceed $25 million at any one time shall be entered against the
Borrower 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);
22
<PAGE> 26
(h) any of the TARC Security Documents shall for any reason cease
to be in full force and effect (except where no material adverse effect to the
Lenders would result), or shall cease to give the Lenders the Liens, rights,
powers and privileges purported to be created thereby including but not limited
to, a perfected security interest in, and Lien on, the Collateral in accordance
with the terms thereof, except where the failure to have such Lien, rights,
powers and privileges shall not have a material adverse effect on the Lender;
(i) if Phase I of the Capital Improvement Program is not completed
by the Required Phase I Completion Date; or
(j) if the Phase II Completion Date has not occurred by January
31, 2000.
A Default under clause (c) above (other than in the case of any
Defaults incorporated herein by reference and described in Sections 4.3, 4.11,
4.14 or 5.1 of the Indenture, which Defaults shall be Events of Default without
the notice specified in this paragraph or Section 4.7(c) of the Indenture and
upon the passage of 10 days) is not an Event of Default until the Lender
notifies the Borrower of the Default, and the Borrower 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."
Section 8.2 Remedies.
(a) If an Event of Default occurs and is continuing
(other than an Event of Default specified in Section 8.1(e) or (f)
above, relating to the Borrower or it Subsidiaries), then in every
such case, unless the principal of the Note shall have already become
due and payable, either the Indenture Trustee or the Lender, by notice
in writing to the Borrower (and to the Indenture Trustee if given by
the Lender) (an "Acceleration Notice"), may declare all principal of
the Note and accrued and unpaid interest thereon or, as appropriate,
any prepayment under 3.1(a) to be due and payable immediately. If an
Event of Default specified in Section 8.1(e) or (f) above occurs
relating to the Borrower or its Subsidiaries, all principal and
accrued and unpaid interest thereon will be immediately due and
payable on the Note without any declaration or other act on the part
of the Indenture Trustee or the Lender. The Indenture Trustee
generally is authorized to rescind such acceleration if all existing
Events of Default, other than the non-payment of the principal and
interest on the Note which has become due solely by such acceleration,
have been cured or waived.
(b) In addition to and cumulative of any rights or
remedies expressly provided for in this Section 8, if any one or more
Events of Default shall have occurred, Lender (i) may proceed to
protect and enforce its rights hereunder and under any other Loan
Document by any appropriate proceedings and the Liens evidenced by the
TARC Security Documents shall be subject to foreclosure in any manner
provided for therein or provided for by law as Lender may elect and
(ii) may apply any cash collateral securing all or any part of the
Obligations to the payment of the obligations. Lender may also
proceed either by the specific performance of any covenant or
agreement contained in this Agreement or the other Loan Documents or
by enforcing the payment of the Note or by enforcing any other legal
or equitable right provided under this Agreement or the other Loan
Documents or otherwise existing under any law in favor of the Lender.
Lender shall not, however, be under any obligation to marshall any
assets in favor of Borrower or against or in payment of any or all
obligations under any Loan Document.
23
<PAGE> 27
(c) Upon the occurrence of any Event of Default, Lender
shall have the right, immediately and without notice, to take
possession of and exercise possessory rights with regard to any
Property securing payment of amounts due hereunder or under any other
Loan Document.
(d) If Lender shall exercise its option to take over
management of the Premises pursuant to Section 8.2(b), Lender shall be
authorized to employ one or more independent managers to manage the
Premises, and Lender shall have no liability or responsibility absent
gross negligence or willful misconduct to Borrower or any other Person
with respect to its management of the Premises so long as Lender
exercises good faith in the selection and retention of such
independent manager or managers. All reasonable costs and expenses
incurred by Lender in managing the Premises shall, as paid, constitute
indebtedness of Borrower to Lender payable on demand, bearing interest
at the Default Rate from the date paid. All such demand indebtedness
shall constitute part of the indebtedness secured by the Collateral.
Section 8.3 Remedies Cumulative. No remedy, right or power
conferred upon Lender is intended to be exclusive of any other remedy, right or
power given hereunder or now or hereafter existing at law, in equity or
otherwise, and all such remedies, rights and powers shall be cumulative.
SECTION 9 MISCELLANEOUS.
Section 9.1 Waivers, Etc. No failure or delay on the part of
Lender in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No course of dealing between Borrower and Lender shall operate
as a waiver of any right of Lender. No modification or waiver of any provision
of this Agreement, the Note or any other Loan Document nor consent to any
departure by Borrower therefrom shall in any event be effective unless the same
shall be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.
Section 9.2 Reimbursement of Expenses. The Borrower agrees
to pay or cause to be paid (i) all costs, expenses, fees and taxes incident to
and in connection with: the preparation, printing and distribution (including,
without limitation, word processing and duplication costs) and delivery of, and
performance under, each of the Loan Documents, (ii) all fees, disbursements and
expenses of the counsel and accountants of the Lender in connection with the
preparation, negotiation and execution of Loan Documents.
Section 9.3 Notices. Any notices or other communications to the
Borrower, the Lender or the Indenture 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:
24
<PAGE> 28
if to the Company:
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East
Suite 320
Houston, Texas 77060
Attention: Ed Donahue
Vice President
if to the Lender:
TransAmerican Energy Corporation
1300 North Sam Houston Parkway East
Suite 200
Houston, Texas 77060
Attention: Ed Donahue
Vice President
if to the Indenture Trustee:
Firstar Bank of Minnesota, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie
The Borrower, the Lender or the Indenture 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
Borrower, the Lender or the Indenture 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).
Section 9.4 Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED 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. INSOFAR AS THIS AGREEMENT RELATES TO
THE TARC MORTGAGE OR THE CREATION, PERFECTION OR FORECLOSURE OF LIENS AND THE
ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE COLLATERAL UNDER THE TARC
SECURITY DOCUMENTS, IT SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION
SPECIFIED IN SUCH DOCUMENTS. THE BORROWER 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
25
<PAGE> 29
THIS AGREEMENT AND THE NOTE, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. THE BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION.
Section 9.5 Survival of Representations, Warranties and
Covenants. All representations, warranties and covenants contained herein and
in any other Loan Document or made in writing by Borrower in connection
herewith shall survive the execution and delivery of this Agreement and the
Note, and will bind and inure to the benefit of the respective successors and
assigns of the parties hereto, whether so expressed or not, provided that the
undertaking of Lender to make the Loan to Borrower shall not inure to the
benefit of any successor or assign of Borrower. No investigation at any time
made by or on behalf of Lender shall diminish Lender's right to rely thereon.
All statements contained in any certificate or other written instrument
delivered by Borrower or by any Person authorized by Borrower under or pursuant
to this Agreement or in connection with the transactions contemplated hereby
shall constitute representations and warranties hereunder as of the time made
by Borrower.
Section 9.6 Counterparts. This Agreement may be executed in
several counterparts, and by the parties hereto on separate counterparts, and
each counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
Section 9.7 Severability. In the event any one or more of the
provisions in this Agreement or in the Note 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 9.8 Descriptive Headings. The section headings in this
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatsoever in construing the terms and
provisions of this Agreement.
Section 9.9 Limitation of Liability. No claim may be made by
Borrower or any other Person against Lender, the Indenture Trustee or the
directors, officers, employees, attorneys or agents of Lender or the Indenture
Trustee for any special, indirect, consequential or punitive damages in respect
of any claim for breach of contract arising out of or related to the
transactions contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, and Borrower hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
Section 9.10 Sale, Pledge or Assignment. Lender may assign any of
its rights (including, without limitation, rights to payment of principal
and/or interest under the Note) under this Agreement
26
<PAGE> 30
and the other Loan Documents to the Indenture Trustee without further notice to
or consent of Borrower, and the Borrower hereby agrees to such assignment. The
Borrower hereby acknowledges and consents to the collateral assignment by the
Lender of this Agreement and the Lender's interest in the Collateral to the
Indenture Trustee. The Borrower also agrees that, in the case of an Event of
Default, the Indenture Trustee may exercise any rights and remedies of the
Lender under this Agreement, and any reference to the "Lender" hereunder shall
also include the Indenture Trustee.
Section 9.11 Release. The Collateral, in whole or in part, may be
released in accordance with the Indenture. Each of the Lender and the Borrower
hereby acknowledge and consent to the release of Collateral by the Indenture
Trustee, as the Lender's agent, pursuant to the terms of the Indenture.
Section 9.12 Indenture Controls. If there are any conflicts or
inconsistencies among this Agreement and any of the other Loan Documents, the
provisions of the Indenture shall prevail and control.
Section 9.13 Computation of Time Periods. In this Agreement, in
the computation of periods of time from a specified date to a later specified
date, unless otherwise specified herein, the word "from" means "from and
including" and the words "to" and "until" shall each mean "to but excluding."
Section 9.14 Final Agreement. THIS WRITTEN AGREEMENT, TOGETHER
WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto, by their respective officers
thereunto duly authorized, have duly executed and delivered this Agreement as
of the date first above written.
TRANSAMERICAN REFINING CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
TRANSAMERICAN ENERGY CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
28
<PAGE> 32
Exhibit A
[FORM OF PROMISSORY NOTE]
TRANSAMERICAN REFINING CORPORATION
$920,000,000
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 TransAmerican Energy Corporation, a Delaware corporation (the "Lender"), or
registered assigns, the principal sum of Nine Hundred Twenty Million Dollars,
on June 1, 2002.
Interest Payment Dates: June 15 and December 15, commencing December
15, 1999
Record Dates: June 1 and December 1
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.
This is the Note referred to in that certain Loan Agreement between
the Company and the Lender, dated as of June 13, 1997 (the "Loan Agreement").
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-1
<PAGE> 33
(BACK OF NOTE)
TRANSAMERICAN REFINING CORPORATION
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; provided, however, that in the event that the cost to
complete Phase I is in excess of $245 million, the Company promises to pay
interest on the principal amount of the Note at a rate of 16.25% 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 the Default Rate.
The Company will pay interest semi-annually on June 15 and December
15 of each year (each, an "Interest Payment Date"), commencing December 15,
1999. Interest on the Note will accrue commencing on June 15, 1999 from the
most recent date to which interest has been paid or, if no interest has been
paid, from June 15, 1997. Interest on the Note will be computed on the basis
of a 360-day year consisting of twelve 30-day months.
The Note will have the Accreted Value set forth below as of the dates
indicated:
<TABLE>
<CAPTION>
Accreted Value
(per $1,000
principal
Semi-Annual Accretion Date amount)
- -------------------------- ---------------
<S> <C>
December 15, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 793.832
June 15, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 857.338
December 15, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925.925
June 15, 1999 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000.000
</TABLE>
2. Method of Payment.
The Company shall pay interest on the Note to TransAmerican Energy
Corporation, a Delaware corporation (the "Lender"), in accordance with the Loan
Agreement, defined below.
3. Loan Agreement.
The Company issued the Note under a Loan Agreement, dated as of June
13, 1997 (the "Loan Agreement"), among the Company and the Lender. Capitalized
terms herein are used as defined in the Loan Agreement unless otherwise defined
herein. The terms of the Note include those stated in the Loan Agreement. The
Note is limited in aggregate principal amount to $920,000,000.
A-2
<PAGE> 1
EXHIBIT 4.7
TRANSTEXAS GAS CORPORATION
SECURITY AND PLEDGE AGREEMENT
by
TRANSTEXAS GAS CORPORATION
in favor of
TRANSAMERICAN ENERGY CORPORATION
Dated as of June 13, 1997
<PAGE> 2
TRANSTEXAS GAS CORPORATION
SECURITY AND PLEDGE AGREEMENT
This Security and Pledge Agreement (this "Agreement") is made
and entered into as of June 13, 1997 by TransTexas Gas Corporation, a Delaware
corporation (the "Company"), in favor of TransAmerican Energy Corporation (the
"Lender").
RECITALS
WHEREAS, the Company has entered into that certain Loan
Agreement dated as of June 13, 1997 (the "TransTexas Intercompany Loan
Agreement") executed by the Company in favor of the Lender; and
WHEREAS, the Company's obligations under the TransTexas
Intercompany Loan Agreement are further evidenced by that certain promissory
note in the amount of $450,000,000 dated as of June 13, 1997 (the "TransTexas
Intercompany Note"), and executed by the Company in favor of the Lender; and
WHEREAS, the obligations of the Company under the TransTexas
Intercompany Note and the TransTexas Intercompany Loan Agreement are secured by
(i) that certain Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement dated as of June 13, 1997 (the "TransTexas
Alabama Mortgage"), (ii) that certain Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement dated as of June 13,
1997 (the "TransTexas Texas Mortgage"), (iii) that certain Mortgage, Deed of
Trust, Assignment of Production, Security Agreement and Financing Statement
dated as of June 13, 1997 (the "TransTexas Mississippi Mortgage"), (iv) that
certain Mortgage, Deed of Trust, Assignment of Production, Security Agreement
and Financing Statement dated as of June 13, 1997 (the "TransTexas North Dakota
Mortgage") and (v) that certain Act of Mortgage, Security Agreement and
Financing Statement dated as of June 13, 1997 (the "TransTexas Louisiana
Mortgage" and, together with the TransTexas Intercompany Loan Agreement, the
TransTexas Intercompany Note, the TransTexas Alabama Mortgage, the TransTexas
Texas Mortgage, the TransTexas Mississippi Mortgage and the TransTexas North
Dakota Mortgage, the "TransTexas Loan Documents"); and
WHEREAS, in order to secure the payment and performance in
full of the obligations of the Company under the TransTexas Intercompany Loan
Agreement, the parties hereto desire to set forth their mutual understanding
and certain agreements regarding the terms and conditions of the grant of a
security interest in the Company UCC Collateral, the Assigned Collateral and
the Pledged Collateral (as defined below);
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Lender hereby agree as follows:
Section 1. Definitions.
(a) As used in this Agreement, capitalized terms not
otherwise defined herein have the meanings set forth in the TransTexas
Intercompany Loan Agreement, and the following terms shall have the
respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined):
<PAGE> 3
"Assigned Collateral" shall have the meaning assigned to that
term in Section 2 of this Agreement.
"Collateral" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Default" and "Event of Default" shall have the meanings
assigned to those terms in Section 6(a) of this Agreement.
"Disbursement Account" means the account or accounts owned by
the Company and created by that certain Disbursement Agreement by and
among the Company, the Lender, the disbursement agent named therein,
or its successor, and the construction supervisor named therein, as
amended pursuant to the terms thereof.
"Equipment" shall mean and include all now owned or hereafter
acquired Vehicles, drilling rigs, workover rigs, fracture stimulation
equipment, well site compressors, rolling stock and related equipment
and other assets accounted for as equipment 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; provided,
however, that "Equipment" shall not include any assets constituting
part of a natural gas pipeline or the compression or dehydration
equipment used in the operation of any such pipeline.
"GAAP" means generally accepted accounting principles of the
United States of America, consistently applied.
"Obligations" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Indebtedness" means the following indebtedness and
liabilities of the Company (and any extensions, renewals, refunding,
increases, substitutions, replacements, consolidations, modifications
or rearrangements of such indebtedness and liabilities, regardless of
whether the Company executes any extension agreement or renewal
instrument):
(i) all amounts advanced or expended by the
Lender under the TransTexas Intercompany Loan Agreement and/or
under or in connection with this Agreement, all reasonable
costs and out-of-pocket expenses (excluding expenses
representing administrative overhead) at any time and from
time to time incurred by the Lender in connection with the
administration and/or enforcement of this Agreement
(including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel employed by the Lender in
connection therewith), and all indemnities at any time and
from time to time payable hereunder to the Lender, and
(ii) all principal, premium and accrued interest
owing on the TransTexas Intercompany Note, and
(iii) all other amounts payable by the Company
under the TransTexas Intercompany Loan Agreement.
2
<PAGE> 4
"Inventory" shall mean and include now owned or hereafter
acquired drill casing, drill pipe and other supplies accounted for as
inventory by the Company on its financial statements (excluding
Hydrocarbons), all proceeds thereof, and all documents of title,
books, records, ledger cards, files, correspondence, and computer
files, tapes, disks and related data processing software that at any
time evidence or contain information relating to the foregoing.
"Pledged Collateral" shall have the meaning assigned to that
term in Section 2 of this Agreement.
"Receivables" shall mean and include, any and all 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.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"Vehicles" means all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
(b) All terms used in this Agreement which are defined in
the UCC, other than those which are defined in the Indenture or
specifically defined in Section 1(a) above, shall have the same
meaning herein as in the UCC.
Section 2. Grant of Security Interest.
(a) The Company hereby grants to the Lender, to secure
the payment and performance in full of the Obligations, a security
interest in and a lien on and so pledges and assigns to the Lender all
of the Company's right, title and interest in, to and under any and
all of the following described property, assets and rights, in each
case, wherever located, whether now owned or hereafter acquired or
arising, all accessions and additions thereto, all substitutions and
replacements therefor, and all proceeds and products thereof and
assigns all rights in and to all collateral securing the following
described property, assets and rights:
(i) all personal and fixture property of every
kind and nature including, without limitation, all furniture,
fixtures, raw materials, goods, contract rights, rights to the
payment of money, insurance refund claims and all other
insurance claims and proceeds, tort claims, chattel paper,
documents, instruments (including certificated securities),
deposit accounts and all general intangibles including,
without limitation, all uncertificated securities, tax refund
claims, license fees, patents, patent applications,
trademarks, trademark applications, trade names, copyrights,
copyright applications, rights to sue and recover for past
infringement of patents, trademarks and copyrights, computer
programs, computer software, engineering drawings, service
marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which the Company
possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess,
use or have authority to possess or use property (whether
tangible or intangible) of the Company, and all recorded data
of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics (any and all such property being
3
<PAGE> 5
the "Company UCC Collateral"); provided, however, that nothing
herein shall be construed to include within and hereby is
expressly excluded from, the Company UCC Collateral, any now
owned or hereafter acquired Equipment, Inventory or
Receivables.
(b) The Company also pledges to the Lender, and grants to
the Lender a security interest in all of the Company's right, title
and interest in, to and under any and all of the following described
property, rights and interests, in each case, wherever located,
whether now owned or hereafter acquired or arising, all accessions and
additions thereto, all substitutions and replacements therefor, and
all proceeds and products thereof (collectively, the "Pledged
Collateral"):
(i) all of the issued and outstanding shares of
common stock identified on Schedule 2(b) attached hereto of
any subsidiary of the Company presently existing or hereafter
created or acquired (the "Pledged Subsidiaries") therein set
forth;
(ii) all other shares of common stock or other
equity securities now or hereafter acquired by the Company in
any manner issued by the Pledged Subsidiaries, and the
certificates representing such securities, and any present or
future options, warrants or other rights to subscribe for or
purchase any property described in Schedule 2(b)(i) or any
notes, bonds, debentures or other evidences of indebtedness
now or hereafter owned or acquired by the Company in any
manner that (A) are at any time convertible, exchangeable or
exercisable into capital stock or other equity securities of
the Pledged Subsidiaries or (B) have or at any time could by
their terms have voting rights with respect to any matter
affecting the Pledged Subsidiaries and all securities,
certificates and instruments representing or evidencing
ownership of any of the property described in Schedule 2(b)
hereof; and
(iii) all proceeds and products of the foregoing
and distributions thereof or with respect thereto, including
without limitation dividends, distributions, cash, instruments
and other property or securities, now or hereafter at any time
or from time to time received or receivable or otherwise
distributed or distributable in respect of or in exchange for
any or all of the foregoing.
(c) The Company hereby also assigns to the Lender and
grants to the Lender a security interest in, pledge of and lien on,
the Disbursement Account and all investments, securities, financial
assets credited thereto and security entitlements with respect thereto
and all certificates and instruments, if any, from time to time
representing or evidencing the Disbursement Account or any property
credited thereto, whether now owned by the Company or existing or
hereafter acquired, created or arising including the proceeds thereof
(the "Assigned Collateral" and, together with the Company UCC
Collateral and the Pledged Collateral, the "Collateral").
Subject to any Permitted Liens, pursuant to the terms
hereof, the Company has endorsed, assigned and delivered to the Lender
or such other Person that the Lender has designated as its agent to
hold for perfection purposes all negotiable or non-negotiable
instruments (including certificated securities) and chattel paper
pledged by it hereunder, together with instruments of transfer or
assignment duly executed in blank as the Lender may have specified.
In the event that the Company shall, after the date of this Agreement,
acquire any other negotiable or non-negotiable instruments (including
certificated securities) or chattel paper to be
4
<PAGE> 6
pledged by it hereunder, the Company shall, subject to Permitted
Liens, forthwith endorse, assign and deliver the same to the Lender,
accompanied by such instruments of transfer or assignment duly
executed in blank as the Lender may from time to time specify. To the
extent that any securities are uncertificated, appropriate book- entry
transfers reflecting the pledge of such securities created hereby have
been or, in the case of uncertificated securities hereafter acquired
by the Company, will at the time of such acquisition be, duly made for
the account of the Lender or one or more nominees of the Lender with
the issuer of such securities or other appropriate book-entry facility
or financial intermediary, with the Lender having at all times the
right to obtain definitive certificates (in the Lender's name or in
the name of one or more nominees of the Lender) where the issuer
customarily or otherwise issues certificates, all to be held as
Collateral hereunder. The Company hereby acknowledges that the Lender
may, in its discretion, appoint one or more financial institutions to
act as the Lender's agent in holding in custodial accounts instruments
or other financial assets, including securities, in which the Lender
is granted a security interest hereunder, including, without
limitation, certificates of deposit and other instruments evidencing
short term obligations.
(d) The inclusion of proceeds in this Agreement does not
authorize the Company to sell, dispose of or otherwise use the
Collateral in any manner not specifically authorized hereby or under
the Indenture.
(e) This Agreement secures the prompt and complete (i)
payment of all obligations of the Company to the Lender under the
TransTexas Intercompany Note, whether such obligations are now
existing or hereafter arising, and all renewals, extensions,
amendments, supplements and rearrangements thereof and (ii) payment
and performance of all covenants and conditions by the Company
contained herein and in the TransTexas Intercompany Loan Agreement in
each case whether for principal, interest, prepayment premium, taxes,
costs, losses, compensation, reimbursements, fees, expenses or any
other amount payable to the Lender under the terms of this Agreement
(all such obligations, covenants and conditions described in the
foregoing clauses (i) and (ii) being hereinafter collectively referred
to as the "Obligations").
(f) Notwithstanding anything contained herein to the
contrary, the stock of any Unrestricted Subsidiary shall not
constitute Collateral hereunder.
Section 3. Representations and Warranties. The Company represents and
warrants, as of the date hereof, to the Lender as follows:
(a) The chief executive office and principal place of
business of the Company is located at 1300 N. Sam Houston Parkway
East, Suite 320, Houston, Harris County, Texas 77032. Any and all
Collateral not delivered to the Lender or its designated agent is and
will continue to be located only in the States of Texas, Louisiana,
Alabama, Mississippi and North Dakota.
(b) The Company is the legal and beneficial owner of all
of the Collateral free and clear of any lien, security interest,
charge or encumbrance of any kind or nature, except for the lien and
security interest created hereby and for Permitted Liens, and has not
made any other pledge, assignment, mortgage, hypothecation or transfer
of the Collateral except as permitted hereunder or under the
TransTexas Intercompany Loan Agreement. Except for the lien and
security interest created hereby, all of the Collateral is free from
any material credit, deduction, allowance, defense, dispute, setoff or
counterclaim and there is no material extension or
5
<PAGE> 7
indulgence with respect thereto. The Pledged Collateral is not
subject to any put, call, option or other right in favor of any other
person whatsoever.
(c) The Pledged Collateral is accurately described in
Schedule 2(b) hereto and has been duly authorized and validly issued
and non-assessable.
(d) This Agreement has been duly executed and delivered
by the Company and creates a valid security interest in, and lien on,
the Collateral securing the payment of the Indebtedness. Upon the
delivery of physical certificates evidencing the Pledged Collateral to
the Lender or its designated agent and the making of the filings and
the taking of all other actions necessary to perfect the security
interests created hereby, including, without limitation, those actions
specified in Section 2(b) and Section 4, the security interests
created by this Agreement will be duly perfected security interests
subject to no equal or prior lien, security interest or encumbrance of
any kind or nature other than Permitted Liens.
(e) The Company has the requisite corporate power and
authority to pledge the Collateral in the manner hereby done or
contemplated and to defend its title thereto against the lawful claims
of all persons whomsoever.
(f) Neither the execution and delivery of this Agreement
by the Company, the performance by the Company of its obligations
hereunder, nor the transactions herein contemplated will (i) violate
the Company's charter or bylaws, (ii) violate the terms of any
agreement, indenture, mortgage, deed of trust, equipment lease,
instrument or other document to which the Company is a party, (iii)
violate any law, order, rule or regulation applicable to the Company
of any court or any government, regulatory body or administrative
agency or other governmental body having jurisdiction over the Company
or its properties, or (iv) result in or require the creation or
imposition of any lien (other than the lien contemplated hereby), upon
or with respect to any of the property now owned or hereafter acquired
by the Company, which violation or conflict would have a material
adverse effect on the financial condition, business, assets or
liabilities of the Company or on the value of the Collateral or a
material adverse effect on the security interests hereunder.
(g) The Pledged Collateral includes the issued and
outstanding shares of Common Stock of the Pledged Subsidiaries as
described in Schedule 2(b) attached hereto, and as of the date of
execution hereof, there are no outstanding options, warrants or other
rights to subscribe for or purchase any property described in Schedule
2(b) or any notes, bonds, debentures or other evidences of
indebtedness that (i) are at any time convertible into capital stock
of the Pledged Subsidiaries or (ii) have or at any time could by their
terms have voting rights with respect to any matters affecting the
Pledged Subsidiaries.
(h) No consent or approval which has not been obtained
prior to the date hereof of any other person or entity and no
authorization, approval or other action (other than delivery of
physical certificates evidencing the Pledged Collateral) by, and no
notice to or filing with any governmental body (other than UCC
filings), regulatory authority or securities exchange, was or is
necessary as a condition to the validity of the pledge hereunder of
the Collateral, and such pledge is effective to vest in the Lender
the rights of the Lender in the Collateral as set forth herein. There
are no restrictions on the transferability of any of the Collateral
transferred or delivered by the Company hereunder or, except for
restrictions related to federal and state
6
<PAGE> 8
securities laws governing the sale of "restricted stock" or "control
stock," with respect to the foreclosure, transfer or disposition
thereof by the Lender.
Section 4.Covenants. During the term of this Agreement and until all
the Obligations with respect to the Indebtedness have been fully and finally
paid and discharged in full, the Company covenants and agrees with the Lender
that:
(a) Except as permitted by the TransTexas Intercompany
Loan Agreement or in the ordinary course of business, the Company will
not make any compromise or settlement with respect to the Collateral
without notice to or consent of the Lender.
(b) The Company shall deliver to the Lender or its
designated agent concurrently with the execution of this Agreement or,
to the extent acquired subsequent to the date of execution hereof,
including without limitation Pledged Collateral issued by a newly
created or acquired Subsidiary, immediately upon the Company's
acquisition thereof: (i) all certificates and instruments
representing the Pledged Collateral and a revised Schedule 2(b), and
(ii) all certificates and instruments representing each other item of
Collateral (including all certificates, instruments and notes
representing any such Company UCC Collateral). Any and all Pledged
Collateral delivered to the Lender or its designated agent shall be
accompanied by undated duly executed powers in blank and by such other
instruments of transfer or documents as the Lender may reasonably
request. The Lender may hold the certificates representing the
Pledged Collateral delivered to it in its own name or in the name of
its nominee, all in form and substance satisfactory to the Lender.
(c) From time to time, the Company shall, at its own
expense, promptly give, execute, deliver, file and/or otherwise
formalize any such notice, statement, instrument, document, agreement
or other papers, and do all such other acts and things, as may be
necessary or desirable, or as the Lender may reasonably request, in
order to create, evidence, preserve, perfect, validate or continue any
lien or security interest created pursuant to this Agreement or to
enable the Lender to exercise or enforce its rights hereunder with
respect to such lien or security interest, or otherwise further to
effect the purposes of this Agreement. Without limiting the
generality of the foregoing, the Company shall, at any time or from
time to time upon the request of the Lender and at the Company's own
expense, execute, acknowledge, witness, deliver, file and/or record
such financing and continuation statements, notices, additional
assignments and other documents or instruments (all of which shall be
in form and substance satisfactory to the Lender and its counsel) as
the Lender may from time to time reasonably request for the perfection
of the liens and security interests created hereby.
(d) The Company shall promptly notify the Lender (i) of
any material changes in any fact or circumstance represented or
warranted by the Company with respect to any material portion of the
Collateral, (ii) of any material impairment of the Collateral and
(iii) of any claim, action or proceeding affecting title to all or any
of the Collateral.
(e) Except for the liens and security interests created
by this Agreement and the Permitted Liens in the Collateral, the
Company shall at its own expense defend the Collateral against any and
all liens, claims, security interests and other encumbrances or
interests, howsoever arising and shall maintain and preserve the
security interest granted hereunder with respect to the Collateral as
long as this Agreement shall remain in full force and effect. The
Company shall not make any other pledge, assignement, mortgage,
hypothecation or transfer of
7
<PAGE> 9
the Collateral except as permitted hereunder or under the TransTexas
Intercompany Loan Agreement.
(f) The Company shall at all times keep accurate and
complete records with respect to the Collateral, including, without
limitation, records of all payments made, credit granted and proceeds
received in connection therewith.
(g) The Company shall not relocate its principal place of
business or chief executive office to a county or state other than
that specified in Section 3(a) of this Agreement unless the Company
gives 30 days' prior written notice to the Lender, which notice shall
specify the county and state into which such relocation is to be made.
The Collateral, to the extent not delivered to the Lender pursuant to
Section 2, will be kept at those locations listed on the Perfection
Certificate delivered to the Lender herewith in the form attached as
Exhibit A hereto and the Company will not remove the Collateral from
such locations, without providing at least 30 days' prior written
notice to the Lender.
(h) The Company will keep the Collateral in good order
and repair, except in situations where not to do so would not be
material, and will not use the same in violation of law or any policy
of insurance thereon. The Lender, or its designee, may inspect the
Collateral at any reasonable time, wherever located.
(i) The Lender, or its representative, shall at all times
have full and free access during normal business hours to all of the
books, correspondence and records of the Company relating to the
Collateral (other than information that is privileged and
confidential) and the Lender and its representatives may examine the
same, make abstracts therefrom and make photocopies thereof, and the
Company agrees to render to the Lender, at the Company's cost and
expense, such clerical and other assistance as may be reasonably
requested by the Lender with regard thereto.
(j) The Company shall not permit any of the Pledged
Subsidiaries to issue to the Company any securities of the type
required to be pledged hereunder unless such securities are promptly
pledged and delivered hereunder to the Lender or its designated agent
in accordance with Section 2(b).
(k) If, while this Agreement is in effect, any stock
dividend, stock split, reclassification, readjustment, reorganization,
merger, consolidation, exchange offer, tender offer or other change in
the capital structure, including the creation of any subscription or
other rights relating to the Pledged Collateral, is declared or made,
or proposed to be declared or made, by any of the Pledged Subsidiaries
or any other issuer of the Collateral, all substituted and additional
securities or interest issued with respect to the Collateral and
evidenced by certificates shall be endorsed in blank by the Company
promptly upon receipt thereof or otherwise appropriately transferred
to the Lender in negotiable form, and all certificates or instruments
evidencing such securities shall be delivered to the Lender to be held
under the terms of this Agreement in the same manner as, and as a part
of, the Collateral. All Pledged Collateral shall be evidenced by one
or more certificates. Any securities that may be issued upon exercise
of any subscription or other rights relating to the Pledged Collateral
shall be endorsed in blank and delivered to the Lender with any
necessary powers.
8
<PAGE> 10
Section 5. Powers of the Secured Party.
(a) The Company hereby irrevocably designates and
appoints the Lender as its attorney-in-fact, with full power of
substitution, for the purposes of carrying out the provisions of this
Agreement and taking any action and executing any instrument,
including,without limitation, any financing statement or continuation
statement, and taking any other action to maintain the validity,
perfection, priority and enforcement of the security interest intended
to be created hereunder, that the Lender may reasonably deem necessary
or advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
(b) Without limiting the generality of Section 5(a)
hereof, the Company hereby irrevocably authorizes and empowers the
Lender, upon the occurrence and during the continuation of any Event
of Default, at the expense of the Company, either in the Lender's own
name or in the name of the Company, at any time and from time to time:
(i) to ask, demand, receive, issue a receipt for,
give acquittance for, settle and compromise any and all monies
which may be or become due or payable or remain unpaid at any
time or times to the Company, and any and all other property
which may be or become deliverable at any time or times to the
Company, under or with respect to the Collateral;
(ii) to endorse any drafts, checks, orders or
other instruments for the payment of money payable to the
Company on account of the Collateral (including any such
draft, check, order or instrument issued by any insurance
company payable jointly to the Company and the Lender); and
(iii) to settle, compromise, prosecute or defend
any action, claim or proceeding, or take any other action, all
either in its own name or in the name of the Company or
otherwise, which the Lender may deem to be necessary or
advisable for the purpose of exercising and enforcing its
powers and rights under this Agreement or in furtherance of
the purposes hereof, including any action which by the terms
of this Agreement is to be taken by the Company.
(c) Nothing in this Agreement shall be construed as
requiring or obligating the Lender to make any commitment or to make
any inquiry as to the nature or sufficiency of any payment received by
it, or to present or file any claim or notice, or to take any other
action with respect to any of the Collateral or any part thereof or
the amounts due or to become due in respect thereof or any property
covered thereby, or to collect or enforce the payment of any amounts
assigned to it or to which it may otherwise be entitled hereunder at
any time or times other than to account for amounts or Collateral
received.
(d) The Lender shall be entitled at any time to file this
Agreement, or a carbon, photographic or any other reproduction of this
Agreement, as a financing statement, but the failure of the Lender to
do so shall not impair the validity or enforceability of this
Agreement. The Lender shall have no duty to comply with any
recording, filing or other legal requirements necessary to establish
or maintain the validity, priority or enforceability of, or the
Lender's rights in or to, any of the Collateral.
9
<PAGE> 11
(e) In its discretion, the Lender may discharge taxes and
other encumbrances at any time levied or placed on any of the
Collateral, make repairs thereto and pay any necessary filing fees.
The Company agrees to reimburse the Lender on demand for any and all
reasonable expenditures so made with interest on unpaid amounts at the
maximum rate permitted by law. The Lender shall have no obligation to
the Company to make any such expenditures, nor shall the making
thereof relieve the Company of any default.
(f) Anything herein to the contrary notwithstanding, the
Company shall remain liable under each contract or agreement comprised
in the Collateral to be observed or performed by the Company
thereunder. The Lender shall not have any obligation or liability
under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Lender of any payment relating to
any of the Collateral, nor shall the Lender be obligated in any manner
to perform any of the obligations of the Company under or pursuant to
any such contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by the Lender in respect of the
Collateral or as to the sufficiency of any performance by any party
under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to the Lender or to which
the Lender may be entitled at any time or times other than to account
for amounts or Collateral received, and no action taken or omitted
shall give rise to any defense, counterclaim or right of action
against the Lender, unless the Lender's actions are taken or omitted
to be taken with gross negligence or bad faith or constitute willful
misconduct. The Lender's sole duty with respect to the custody, safe
keeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the UCC or otherwise, shall be to deal with
such Collateral in the same manner as the Lender deals with similar
property for its own account.
(g) If an Event of Default has occurred and is
continuing, the Lender may at any time, at its option, transfer to
itself or any nominee any securities constituting the Pledged
Collateral, receive any income thereon and hold such income as
additional Collateral or apply it to the Indebtedness. Regardless of
whether any Indebtedness is due, the Lender may demand, sue for,
collect, or make any settlement or compromise which it deems desirable
with respect to the Collateral. Regardless of the adequacy of
Collateral or any other security for the Indebtedness, any deposits or
other sums at any time credited by or due from the Lender to the
Company may at any time be applied to or set off against any of the
Indebtedness.
(h) If an Event of Default shall have occurred and be
continuing, the Company shall, at the request of the Lender, notify
obligors on chattel paper and general intangibles of the Company and
obligors on instruments for which the Company is an obligee of the
security interest of the Lender in any chattel paper, general
intangible or instrument and that payment thereof is to be made
directly to the Lender or to any financial institution designated by
the Lender as the Lender's agent therefor, and the Lender may itself,
if an Event of Default shall have occurred and be continuing, without
notice to or demand upon the Company, so notify said obligors. After
the making of such a request or the giving of any such notification,
the Company shall hold any proceeds of collection of chattel paper,
general intangibles and instruments received by the Company as trustee
for the Lender without commingling the same with other funds of the
Company and shall turn the same over to the Lender in the identical
form received, together with any necessary endorsements or
assignments. The Lender shall apply the proceeds of collection of
chattel paper, general intangibles and instruments received by the
Lender to the Indebtedness, such proceeds to be immediately entered
after final payment in cash of the items giving rise to them.
10
<PAGE> 12
Section 6.Voting Rights, Dividends, Etc.
(a) Until an Event of Default shall have occurred and be
continuing:
(i) except as otherwise provided in this
Agreement, the Company shall be entitled to exercise any and
all voting or consensual rights and powers, including
subscription rights, in relation to the Pledged Collateral;
provided, however, that no vote shall be cast or consent,
waiver or ratification given or action taken which would
materially impair the securities or the value thereof or
violate any provision of this Agreement, the Indenture or any
other ancillary document;
(ii) except as otherwise provided in this
Agreement, the Company shall be entitled to receive and retain
any and all dividends, distributions or other payments in
respect of the Pledged Collateral and the Lender, upon receipt
of any of the foregoing, shall promptly pay or distribute the
same to the Company, and, to the extent so permitted, any
distributions received by the Company and transferred to other
persons shall pass free and clear of the lien and security
interest hereof; and
(iii) the Lender shall execute and deliver to the
Company or cause to be executed and delivered to the Company,
all such proxies, powers of attorney, dividend orders and
other instruments as the Company may reasonably request for
the purpose of enabling it to exercise the voting or
consensual rights and powers which the Company is entitled to
exercise pursuant to the foregoing Section 6(a)(i) or to
receive the dividends, distributions or other payments which
the Company is authorized to retain pursuant to the foregoing
Section 6(a)(ii).
(b) Upon the occurrence and during the continuance of an
Event of Default, all rights of the Company to exercise the voting or
consensual rights and powers which the Company would otherwise be
entitled to exercise pursuant to Section 6(a)(i) and to receive the
dividends, distributions and other payments which the Pledgor would
otherwise be authorized to receive and retain pursuant to Section
6(a)(ii) shall automatically cease, and all such rights shall
thereupon become vested in the Lender, which shall then have the sole
and exclusive right and authority to exercise, in its sole discretion,
all such voting and consensual rights and powers and to receive and
retain as Collateral all such dividends, distributions and other
payments. Without limiting the foregoing, in such event the Lender
may exercise all voting and corporate rights at any meeting of any
corporation issuing any such securities and any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any such securities as if it were the absolute
owner thereof, including, without limitation, the rights to exchange
at its discretion, any and all such securities upon the merger,
consolidation, reorganization, recapitalization or other readjustment
of any corporation issuing any such securities or upon the exercise by
any such issuer or the Lender of any right, privilege or option
pertaining to any such securities, and, in connection therewith, to
deposit and deliver any and all securities with any committee,
depository, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without liability
except to account for the property actually received by it, but the
Lender shall have no duty to exercise any of the aforesaid rights,
privileges or options and the Lender shall not be responsible for any
failure to do so or delay in so doing.
11
<PAGE> 13
Section 7. Default.
(a) It shall constitute a Default or an Event of Default
under this Agreement if a "Default" or an "Event of Default" shall
occur under the Indenture.
(b) If an Event of Default shall have occurred and is
continuing and if the maturity of the TransTexas Intercompany Note is
accelerated under the provisions of the TransTexas Intercompany Loan
Agreement, in addition to any other rights and remedies that may be
available to the Lender under the UCC or the TransTexas Intercompany
Loan Agreement or under Section 5(a) or 5(b) of this Agreement or
otherwise under this Agreement or at law, the Lender shall also have
the following rights and powers:
(i) The Lender may, without being required to
give any notice except as hereinafter provided, sell the
Collateral, or any part thereof, at public or private sale,
for cash, upon credit or for future delivery and at such price
or prices as the Lender deems satisfactory, and the Lender
and/or its collateral agent may be the purchaser of any or all
of the Collateral so sold and thereafter hold the same
absolutely free from any right or claim of whatsoever kind,
and the Indebtedness or any portion of the Indebtedness may be
applied as a credit against the purchase price.
(ii) Upon any such sale, the Lender shall have the
right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right
of whatsoever kind by or on behalf of the Company, including
any equity or rights of redemption of the Company, and the
Company hereby specifically waives, to the full extent
permitted by applicable law, all rights of redemption, stay or
appraisal which it has or may have under any rule or law or
statute now existing or hereafter adopted.
(iii) The Lender shall give the Company ten (10)
business days' written notice (which the Company agrees is
reasonable notification within the meaning of Section 9.504 of
the UCC) of its intention to make any such public or private
sale. Such notice, in case of public sale, shall state the
time and place fixed for such sale and, in case of a private
sale, shall state the date after which such sale is to be
made.
(iv) Any such public sale shall be held at such
time or times within ordinary business hours and at such
places as the Lender may fix in the notices of such sale. At
any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as the Lender may, in its
sole discretion, determine.
(v) The Lender shall not be obligated to make any
sale of the Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of the Collateral
may have been given. The Lender may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may, without
further notice, be made at any time or place to which the same
shall be so adjourned.
(vi) In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Lender until the selling price is
paid by the purchaser thereof, but the Lender shall not incur
any liability in case
12
<PAGE> 14
of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice.
(vii) The Lender, instead of exercising the power
of sale herein conferred upon it, may proceed by a suit or
suits at law or in equity to exercise its remedies regarding
the Collateral and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of
competent jurisdiction.
(viii) The Company agrees that if any Event of
Default shall have occurred and be continuing, then the Lender
shall have the right to take possession of the Collateral, and
for that purpose the Lender may, so far as the Company can
give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom with
or without notice or process of law. The Company waives any
and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Lender's rights
hereunder, including, without limitation, its right following
an Event of Default to take immediate possession of the
Collateral and to exercise its rights with respect thereto.
To the extent that any of the Obligations are to be paid or
performed by a person other than the Company, the Company
waives and agrees not to assert any rights or privileges which
it may have under Section 9-112 of the UCC.
(ix) If under mandatory requirements of applicable
law, the Lender shall be required to make disposition of the
Collateral within a period of time that does not permit the
giving of notice to the Company as hereinbefore provided, the
Lender need give the Company only such notice of disposition
as shall be reasonably practicable in view of such mandatory
requirements of law.
(x) The Lender may instruct the obligor or
obligors on any agreement, instrument or other obligation
constituting the Collateral to make any payment or render any
performance required by the terms of such agreement,
instrument or obligation directly to the Lender or its
designee.
(c) The Lender shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private sale
other than for its own gross negligence, willful misconduct or bad
faith. The Company hereby waives, to the maximum extent permitted by
applicable law, any claims against the Lender arising by reason of the
fact that the price at which the Collateral may have been sold at such
private sale was less than the price which might have been obtained at
a public sale or was less than the aggregate amount of the
Indebtedness, even if the Lender accepts the first offer received and
does not offer such Collateral to more than one offeree.
(d) The Lender shall not be obligated to pursue or
exhaust its rights and remedies against any particular Collateral or
other security for the Indebtedness before pursuing or enforcing its
rights and remedies against any other Collateral or other security for
the Indebtedness.
(e) To the extent permitted by law, the Company hereby
waives (i) any rights to require the Lender to proceed first against
any other Person, to exhaust its rights in the Collateral or other
security for the Indebtedness or to pursue any other right that the
Lender might have, (ii) with respect to the TransTexas Intercompany
Note, presentment and demand for payment, protest, notice of protest
and nonpayment, notice of dishonor, notice of the intention to
accelerate
13
<PAGE> 15
and notice of acceleration (except as otherwise set forth in the
TransTexas Intercompany Loan Agreement), and (iii) all rights of
marshalling in respect of any and all of the Collateral.
(f) Without precluding any other methods of sale, the
Company acknowledges that the sale of the Collateral shall have been
made in a commercially reasonable manner if conducted in conformity
with reasonable commercial practices of banks disposing of similar
property. The Lender shall not be liable for any depreciation in the
value of the Collateral.
(g) The Company agrees that its obligation to deliver the
Collateral is of the essence of this Agreement and that accordingly,
upon application to a court of equity having jurisdiction, the Lender
shall be entitled to a decree requiring specific performance by the
Company of such obligation.
(h) Remedies of the Lender are cumulative and the
exercise of any one or more of the remedies provided herein shall not
be construed as a waiver of any of the other remedies of the Lender.
(i) If an Event of Default shall have occurred and be
continuing, the proceeds of any sale of or other realization upon all
or any part of the Collateral and any other amounts held by the Lender
under this Agreement shall be applied by the Lender as provided in the
Indenture.
Any amounts remaining after such applications and the payment
in full of the TransTexas Intercompany Note with respect to the Indebtedness
shall be remitted to the Company, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
Section 8. Registration Rights.
(a) If the Lender shall determine to exercise the right
to sell any or all of the Pledged Collateral pursuant to Section 7
hereof, and if in the opinion of counsel for the Lender it is
necessary (or if in the opinion of the Lender it is advisable) to have
the Pledged Collateral, or that portion thereof to be sold, registered
under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the Company will cause each issuing corporation to
execute and deliver, and cause the directors and officers of each
thereof to execute and deliver, all at the Company's expense, all such
instruments and documents, and to do or cause to be done all such
other acts and things as may be necessary or, in the opinion of the
Lender, advisable to register the Pledged Collateral, or that portion
thereof to be sold, under the provisions of the Securities Act and to
use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of
one year from the date of the first public offering of the Pledged
Collateral, or that portion thereof to be sold, and to make all
amendments or supplements thereto and/or to the related prospectus
which, in the opinion of the Lender, are necessary or advisable, all
in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission
applicable thereto. The Company agrees to use its best efforts to
cause each such issuing corporation to comply with the provisions of
the securities or "Blue Sky" laws of any jurisdiction which the Lender
shall designate and to cause each such issuing corporation to make
available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.
14
<PAGE> 16
(b) The Company recognizes that the Lender may be unable,
or find it undesirable, to effect a public sale of any or all the
Pledged Collateral by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise, but
may be compelled or desire to resort to one or more private sales
thereof to a restricted group of purchasers who will be obliged to
agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or
resale thereof in violation of the Securities Act. The Company
acknowledges and agrees that any such private sale may result in
prices and other terms less favorable to the seller than if such sale
were a public sale, but, notwithstanding such circumstances, such
private sale shall be deemed to have been made in a commercially
reasonable manner. The Lender shall be under no obligation to delay a
sale of any of the Pledged Collateral for the period of time necessary
to permit the issuing corporation of such securities to register such
securities for public sale under the Securities Act, or under
applicable state securities laws, even if the issuing corporation
would agree to do so.
(c) The Company further agrees to use commercially
reasonable efforts to do or cause to be done all such other acts and
things as may be necessary to make such sale or sales of any portion
or all of the Pledged Collateral valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having
jurisdiction over any such sale or sales, all at the Company's
expense. The Company further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to
the Lender, that the Lender has no adequate remedy at law in respect
of such breach and, as a consequence, agrees that each and every
covenant contained in this Section 8 shall be specifically enforceable
against the Company, and the Company hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred
under the Indenture.
Section 9. General Provisions.
(a) Continuing Security Interest; Binding Effect. This
Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until
termination of the obligations of the Company under the TransTexas
Intercompany Loan Agreement and the indefeasible payment in full
thereafter of the Obligations; (b) be binding upon the Company and its
successors and assigns; and (c) inure to the benefit of the Lender and
its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Lender may assign or
otherwise transfer any of its rights under this Agreement to any other
Person, and such Person shall thereupon become vested with all the
benefits in respect thereof granted herein or otherwise to the Lender.
Upon the termination of the obligations of the Lender under the
Indenture and the indefeasible payment in full thereafter of the
Obligations, the Company shall be entitled to the return, upon its
request and at its expense, of such of the Collateral as is in the
Lender's possession and as shall not have been sold or otherwise
disposed of pursuant to the terms hereof.
(b) Security Interest Absolute. The lien and security
interest created hereunder and the Company's obligations hereunder and
the Lender's rights hereunder shall not be released, diminished,
impaired or adversely affected by the occurrence of any one or more of
the following events:
15
<PAGE> 17
(i) The taking or accepting of any other security
or assurance for any or all of the Indebtedness;
(ii) Any release, surrender, exchange,
subordination or loss of any security or assurance at any time
existing in connection with any or all of the Indebtedness;
(iii) The modification of, amendment to, or waiver
of compliance with any terms of the TransTexas Intercompany
Loan Agreement or the TransTexas Intercompany Note;
(iv) Any renewal, extension and/or rearrangement
of the payment of any or all of the Indebtedness or any
statement, indulgence, forbearance or compromise that may be
granted or given by the Lender to the Company or any other
Person;
(v) any neglect, delay, omission, failure or
refusal of the Lender to take or prosecute any action in
connection with any agreement, document or other instrument
evidencing, securing or assuring the payment of any or all of
the Indebtedness;
(vi) the illegality, invalidity or
unenforceability of all or any part of the TransTexas
Intercompany Loan Agreement or the TransTexas Intercompany
Note; or
(vii) any other circumstance (other than payment in
full of the Obligations) that might otherwise constitute a
defense available to, or a discharge of, the Company or any
party to any document in respect of the Obligations.
(c) Amendments. This Agreement or any term hereof may be
amended or changed only by an instrument in writing executed jointly
by the Company and the Lender and in accordance with Article IX of the
Indenture.
(d) Remedies Cumulative. Each right, power and remedy
herein specifically granted to the Lender or otherwise available to it
or now or hereafter existing in law or in equity shall be cumulative
and concurrent, and shall be in addition to every other right, power
and remedy herein specifically given or now or hereafter existing at
law, in equity, or otherwise (including, without limitation, all
rights, powers and remedies granted to a secured party under the UCC),
and each such right, power and remedy, whether specifically granted
herein or otherwise existing, may be exercised at any time and from
time to time as often and in such order as may be deemed expedient by
the Lender in its sole and complete discretion. The provisions of
this Agreement may only be waived by an instrument in writing signed
by the Lender, and no failure on the part of the Lender to exercise,
and no delay in exercising, and no course of dealing with respect to,
any such right, power or remedy, shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise
of any other right. No notice to or demand on the Company hereunder
shall, of itself, entitle the Company to any other or further notice
or demand in the same or similar circumstances.
(e) Assignment. Neither this Agreement nor any interest
herein or in the Collateral, or any part thereof, may be assigned by
the Company without the prior written consent of the Lender, except as
expressly permitted herein or in the Indenture or in the Disbursement
Agreement. The Company hereby acknowledges and consents to the
collateral assignment by the
16
<PAGE> 18
Lender of this Agreement and the Lender's interest in the Collateral
to the Indenture Trustee, as defined in the TARC Intercompany Loan
Agreement. The Company also agrees that, in the case of an Event of
Default, the Indenture Trustee may exercise any rights and remedies of
the Lender under this Agreement, and any reference to the "Lender"
hereunder shall also include the Indenture Trustee.
(f) Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the
provisions hereof.
(g) Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof
or affecting the validity of enforceability or such provision in any
other jurisdiction.
(h) Survival. All representations and warranties
contained herein, in the Indenture or made in writing by the Company
in connection herewith or therewith, shall survive the execution and
delivery of this Agreement, the Indenture and any documents executed
in connection herewith or therewith.
(i) Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original, but all of which when taken together shall
constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Lender.
(j) Waiver. To the extent permitted by applicable law
the Company hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Indenture obligations
and this Agreement and any requirement that the Lender protect,
secure, perfect or insure any security interest or any property
subject thereto or exhaust any right or take any action against the
Company or any other person or entity; provided however, that the
Lender shall in any event take such care in the handling of any
Collateral in its possession as it takes with respect to its own
property of a similar nature in its possession.
(k) Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by facsimile or
registered or certified mail, postage prepaid, return receipt
requested, addressed as provided in Section 9.3 of the TransTexas
Intercompany Loan Agreement. Any party hereto may by notice to the
other party designate such additional or different addresses as shall
be furnished in writing by such party. Any notice or communication to
any party 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 faxed; and five (5) calendar days
after mailing, if sent by registered or certified mail (except that a
notice of change of address shall not be deemed to have been given
until actually received by the addressee).
(l) Conflicting Terms. In the event of any conflict or
inconsistency between the terms, covenants, conditions and provisions
set forth in this Agreement and the terms, covenants, conditions and
provisions set forth in the Indenture, the terms, covenants,
conditions and provisions of the Indenture shall prevail.
17
<PAGE> 19
(m) Release. The Collateral, in whole or in part, may be
released in accordance with the TransTexas Intercompany Loan Agreement
and the Indenture.
(n) Conflicts. If any provision of the TransTexas
Intercompany Loan Agreement limits, qualifies, or conflicts with any
similar provision of this Agreement, such provision of the TransTexas
Intercompany Loan Agreement shall control.
(o) 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 EXCEPT SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS 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 THE LENDER 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.
18
<PAGE> 20
IN WITNESS WHEREOF, the Company and the Lender have executed
this Agreement as of the date first above written.
TRANSTEXAS GAS CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
TRANSAMERICAN ENERGY CORPORATION,
as Lender
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 21
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, Chief Financial Officer of TransTexas Gas
Corporation, a Delaware corporation (the "Company"), hereby certify with
reference to the Security and Pledge Agreement dated as of June 13, 1997
between the Company and TransAmerican Energy Corporation, as Lender (terms
defined therein being used herein as therein defined), to the Lender as
follows:
Section 1. Names.
(a) The exact corporate name of the Company, as it
appears in its certificate of incorporation is as follows:
TransTexas Gas Corporation
(b) Set forth below is each other corporate name the
Company has had since its organization, together with the date of the
relevant change:
n/a
(c) The Company has not changed its identity or corporate
structure in any way within the past five years except:
n/a
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Company or any of its
divisions or other business units at any time during the past five
years:
Southwest Texas Services Diamond Services
Southwest Texas Drilling Diamond Frac
Southwest Petro American
Section 2. Current Locations.
(a) The chief executive office of the Company is located
at the following address:
<TABLE>
<CAPTION>
Mailing Address County State
--------------- ------ -----
<S> <C> <C>
1300 N. Sam Houston Parkway East Harris Texas
Houston, 77032
</TABLE>
A-1
<PAGE> 22
(b) The following are all the places of business of the
Company not identified above:
<TABLE>
<CAPTION>
Mailing Address County State
--------------- ------ -----
<S> <C> <C>
Alabama
Louisiana
Mississippi
North Dakota
</TABLE>
Section 3. Prior Locations. Set forth below is the information
required by subparagraphs (a) and (b) of Section 2 with respect to each
location or place of business maintained by the Company at any time during the
past five years:
<TABLE>
<CAPTION>
Mailing Address County State
--------------- ------ -----
<S> <C> <C>
363 N. Sam Houston Parkway East Harris Texas
Suite 1900
Houston, 77060
140 Cypress Station Drive Harris Texas
Houston, 77090
</TABLE>
Section 4. UCC Filings. A duly signed financing statement on Form
UCC-1 in substantially the form of Schedule 4(a) hereto has been duly filed in
the UCC filing office in each jurisdiction identified in Section 2 hereof. The
Company will deliver a true copy of each such filing duly acknowledged by the
filing officer as soon as practicable after the date hereof.
Section 5. Schedule of Filings. Attached hereto as Schedule 5 is a
schedule setting forth filing information with respect to the filings described
in Section 4 above.
Section 6. Filings Fees. All filing fees and taxes payable in
connection with the filings described in Section 4 above have been paid.
A-2
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands this ___ day of June, 1997 in the respective capacities indicated below
their signatures.
------------------------------
Name:
-------------------------
Title:
------------------------
A-3
<PAGE> 24
SCHEDULE 2(b)
PLEDGED COLLATERAL
<TABLE>
<CAPTION>
=========================================================================================================================
Percentage
Stock Number of
Stock Class of Certificate Par of Outstanding
Issuer Stock No.(s) Value Shares Shares
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
TransTexas Drilling Common 1 $0.01 1,000 100%
Services, Inc.
=========================================================================================================================
</TABLE>
1
<PAGE> 25
SCHEDULE 4(a)
DESCRIPTION OF COLLATERAL
All of the Debtor's right, title and interest in, to and under any and all of
the following described property, assets and rights, in each case, wherever
located, whether now owned or hereafter acquired or arising, all accessions and
additions thereto, all substitutions and replacements therefor, and all
proceeds and products thereof and assigns all rights in and to all collateral
securing the following described property, assets and rights:
(i) all personal and fixture property of every
kind and nature including, without limitation, all furniture,
fixtures, raw materials, goods, contract rights, rights to the
payment of money, insurance refund claims and all other
insurance claims and proceeds, tort claims, chattel paper,
documents, instruments (including certificated securities),
deposit accounts and all general intangibles including,
without limitation, all uncertificated securities, tax refund
claims, license fees, patents, patent applications,
trademarks, trademark applications, trade names, copyrights,
copyright applications, rights to sue and recover for past
infringement of patents, trademarks and copyrights, computer
programs, computer software, engineering drawings, service
marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which the Debtor
possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess,
use or have authority to possess or use property (whether
tangible or intangible) of the Debtor, and all recorded data
of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics (any and all such property being
the "UCC Collateral"); provided, however, that nothing herein
shall be construed to include within, and there is expressly
excluded from, the Company UCC Collateral, any now owned or
hereafter acquired equipment, inventory or receivables ;
(ii) all of the issued and outstanding shares of
common stock identified on Schedule 2(b) attached hereto of
any other subsidiary of the Debtor presently existing or
hereafter created or acquired (the "Pledged Subsidiaries")
therein set forth;
(iii) all other shares of common stock or other
equity securities now or hereafter acquired by the Debtor in
any manner issued by the Pledged Subsidiaries, and the
certificates representing such securities, and any present or
future options, warrants or other rights to subscribe for or
purchase any property described in Section 2(b)(i) or any
notes, bonds, debentures or other evidences of indebtedness
now or hereafter owned or acquired by the Debtor in any manner
that (A) are at any time convertible, exchangeable or
exercisable into capital stock or other equity securities of
the Pledged Subsidiaries or (B) have or at any time could by
their terms have voting rights with respect to any matter
affecting the Pledged Subsidiaries and all securities,
certificates and instruments representing or evidencing
ownership of any of the property described in Section 2(b)
hereof;
(iv) all proceeds and products of the foregoing
and distributions thereof or with respect thereto, including
without limitation dividends, distributions, cash,
1
<PAGE> 26
instruments and other property or securities, now or hereafter
at any time or from time to time received or receivable or
otherwise distributed or distributable in respect of or in
exchange for any or all of the foregoing; and
(v) The disbursement account (the "Disbursement
Account") maintained at Firstar Bank of Minnesota, N.A., more
specifically described on Schedule I attached hereto, owned by
the Debtor and created by that certain Disbursement Agreement
by and among the Debtor, the Secured Party, the disbursement
agent named therein and the construction supervisor named
therein, as amended pursuant to the terms thereof, and all
investments, securities, financial assets credited thereto and
security entitlements with respect thereto, and all
certificates and instruments, if any, from time to time
representing or evidencing the Disbursement Account or any
property credited thereto, whether now owned by the Debtor or
existing or hereafter acquired, created or arising including
the proceeds thereof (the "Assigned Collateral" and, together
with the UCC Collateral and the Pledged Collateral, the
"Collateral").
Notwithstanding anything contained herein to the contrary, the stock of any
Unrestricted Subsidiary shall not constitute Collateral hereunder.
2
<PAGE> 27
SCHEDULE 5
SCHEDULE OF FILINGS
<TABLE>
<CAPTION>
Debtor Filing Officer File Number Date(1)
- ------ -------------- ----------- ------
<S> <C> <C> <C>
</TABLE>
- ---------------
(1) Indicate lapse date, if other than fifth anniversary.
1
<PAGE> 1
EXHIBIT 4.8
TRANSAMERICAN REFINING CORPORATION
SECURITY AND PLEDGE AGREEMENT
by
TRANSAMERICAN REFINING CORPORATION
in favor of
TRANSAMERICAN ENERGY CORPORATION
Dated as of June 13, 1997
<PAGE> 2
TRANSAMERICAN REFINING CORPORATION
SECURITY AND PLEDGE AGREEMENT
This Security and Pledge Agreement (this "Agreement") is made and
entered into as of June 13, 1997 by TransAmerican Refining Corporation, a Texas
corporation (the "Company"), in favor of TransAmerican Energy Corporation (the
"Lender").
RECITALS
WHEREAS, the Company has entered into that certain Loan Agreement
dated as of June 13, 1997 (the "TARC Intercompany Loan Agreement") executed by
the Company in favor of the Lender; and
WHEREAS, the Company's obligations under the TARC Intercompany
Loan Agreement are further evidenced by that certain promissory note in the
amount of $920,000,000 dated as of June 13, 1997 (the "TARC Intercompany
Note"), and executed by the Company in favor of the Lender; and
WHEREAS, the obligations of the Company under the TARC
Intercompany Note and the TARC Intercompany Loan Agreement are secured by that
certain Act of Mortgage, Security Agreement and Financing Statement dated as of
June 13, 1997 (the "TARC Mortgage"); and
WHEREAS, in order to secure the payment and performance in full
of the obligations of the Company under the TARC Intercompany Loan Agreement,
the parties hereto desire to set forth their mutual understanding and certain
agreements regarding the terms and conditions of the grant of a security
interest in the Company UCC Collateral, the Assigned Collateral and the Pledged
Collateral (as defined below);
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and the Lender
hereby agree as follows:
Section 1. Definitions.
(a) As used in this Agreement, capitalized terms not otherwise
defined herein have the meanings set forth in the TARC Intercompany Loan
Agreement, and the following terms shall have the respective meanings
set forth below (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Assigned Collateral" shall have the meaning assigned to that
term in Section 2 of this Agreement.
"Collateral" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Default" and "Event of Default" shall have the meanings assigned
to those terms in Section 6(a) of this Agreement.
"Disbursement Account" means the account or accounts owned by the
Company and created by that certain Disbursement Agreement by and among
the Company, the Lender, the disbursement agent named therein, or its
successor, and the construction supervisor named therein, as amended
pursuant to the terms thereof.
<PAGE> 3
"Equipment" shall mean and include all now owned or hereafter
acquired Vehicles, rolling stock and related equipment and other assets
accounted for as equipment by the Company 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; provided, however, that
"Equipment" shall not include any assets constituting part of the
Company's refinery or used in the Company's processing or storage
operations.
"GAAP" means generally accepted accounting principles of the
United States of America, consistently applied.
"Obligations" shall have the meaning assigned to that term in
Section 2 of this Agreement.
"Indebtedness" means the following indebtedness and liabilities
of the Company (and any extensions, renewals, refunding, increases,
substitutions, replacements, consolidations, modifications or
rearrangements of such indebtedness and liabilities, regardless of
whether the Company executes any extension agreement or renewal
instrument):
(i) all amounts advanced or expended by the Lender
under the TARC Intercompany Loan Agreement and/or under or in
connection with this Agreement, all reasonable costs and out-of-
pocket expenses (excluding expenses representing administrative
overhead) at any time and from time to time incurred by the
Lender in connection with the administration and/or enforcement
of this Agreement (including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel employed by the Lender
in connection therewith), and all indemnities at any time and
from time to time payable hereunder to the Lender, and
(ii) all principal, premium and accrued interest owing
on the TARC Intercompany Note, and
(iii) all other amounts payable by the Company under the
TARC Intercompany Loan Agreement.
"Inventory" shall mean and include, 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.
"Pledged Collateral" shall have the meaning assigned to that term
in Section 2 of this Agreement.
"Receivables" shall mean and include, any and all 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.
2
<PAGE> 4
"UCC" means the Uniform Commercial Code as in effect in the State
of New York.
"Vehicles" means all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
(b) All terms used in this Agreement which are defined in the
UCC, other than those which are defined in the Indenture or specifically
defined in Section 1(a) above, shall have the same meaning herein as in
the UCC.
Section 2. Grant of Security Interest.
(a) The Company hereby grants to the Lender, to secure the
payment and performance in full of the Obligations, a security interest
in and a lien on and so pledges and assigns to the Lender all of the
Company's right, title and interest in, to and under any and all of the
following described property, assets and rights, in each case, wherever
located, whether now owned or hereafter acquired or arising, all
accessions and additions thereto, all substitutions and replacements
therefor, and all proceeds and products thereof and assigns all rights
in and to all collateral securing the following described property,
assets and rights:
(i) all personal and fixture property of every kind and
nature including, without limitation, all furniture, fixtures,
raw materials, goods, contract rights, rights to the payment of
money, insurance refund claims and all other insurance claims and
proceeds, tort claims, chattel paper, documents, instruments
(including certificated securities), deposit accounts and all
general intangibles including, without limitation, all
uncertificated securities, tax refund claims, license fees,
patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, rights to sue
and recover for past infringement of patents, trademarks and
copyrights, computer programs, computer software, engineering
drawings, service marks, customer lists, goodwill, and all
licenses, permits, agreements of any kind or nature pursuant to
which the Company possesses, uses or has authority to possess or
use property (whether tangible or intangible) of others or others
possess, use or have authority to possess or use property
(whether tangible or intangible) of the Company, and all recorded
data of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics (any and all such property being
the "Company UCC Collateral"); provided, however, that nothing
herein shall be construed to include within and there is
expressly excluded from, the Company UCC Collateral, any now
owned or hereafter acquired Equipment, Inventory or Receivables .
(b) The Company also pledges to the Lender, and grants to the
Lender a security interest in all of the Company's right, title and
interest in, to and under any and all of the following described
property, rights and interests, in each case, wherever located, whether
now owned or hereafter acquired or arising, all accessions and additions
thereto, all substitutions and replacements therefor, and all proceeds
and products thereof (collectively, the "Pledged Collateral"):
(i) all of the issued and outstanding shares of common
stock identified on Schedule 2(b) attached hereto of any other
subsidiary of the Company presently existing or hereafter created
or acquired (the "Pledged Subsidiaries") therein set forth;
3
<PAGE> 5
(ii) all other shares of common stock or other equity
securities now or hereafter acquired by the Company in any manner
issued by the Pledged Subsidiaries, and the certificates
representing such securities, and any present or future options,
warrants or other rights to subscribe for or purchase any
property described in Schedule 2(b)(i) or any notes, bonds,
debentures or other evidences of indebtedness now or hereafter
owned or acquired by the Company in any manner that (A) are at
any time convertible, exchangeable or exercisable into capital
stock or other equity securities of the Pledged Subsidiaries or
(B) have or at any time could by their terms have voting rights
with respect to any matter affecting the Pledged Subsidiaries and
all securities, certificates and instruments representing or
evidencing ownership of any of the property described in Schedule
2(b) hereof; and
(iii) all proceeds and products of the foregoing and
distributions thereof or with respect thereto, including without
limitation dividends, distributions, cash, instruments and other
property or securities, now or hereafter at any time or from time
to time received or receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of the
foregoing.
(c) The Company hereby also assigns to the Lender and grants
to the Lender a security interest in, pledge of and lien on, the
Disbursement Account and all investments, securities, financial assets
credited thereto and security entitlements with respect thereto and all
certificates and instruments, if any, from time to time representing or
evidencing the Disbursement Account or any property credited thereto,
whether now owned by the Company or existing or hereafter acquired,
created or arising including the proceeds thereof (the "Assigned
Collateral" and, together with the Company UCC Collateral and the
Pledged Collateral, the "Collateral").
Subject to any Permitted Liens, pursuant to the terms
hereof, the Company has endorsed, assigned and delivered to the Lender
or such other Person that the Lender has designated as its agent to hold
for perfection purposes all negotiable or non-negotiable instruments
(including certificated securities) and chattel paper pledged by it
hereunder, together with instruments of transfer or assignment duly
executed in blank as the Lender may have specified. In the event that
the Company shall, after the date of this Agreement, acquire any other
negotiable or non-negotiable instruments (including certificated
securities) or chattel paper to be pledged by it hereunder, the Company
shall, subject to Permitted Liens, forthwith endorse, assign and deliver
the same to the Lender, accompanied by such instruments of transfer or
assignment duly executed in blank as the Lender may from time to time
specify. To the extent that any securities are uncertificated,
appropriate book-entry transfers reflecting the pledge of such
securities created hereby have been or, in the case of uncertificated
securities hereafter acquired by the Company, will at the time of such
acquisition be, duly made for the account of the Lender or one or more
nominees of the Lender with the issuer of such securities or other
appropriate book-entry facility or financial intermediary, with the
Lender having at all times the right to obtain definitive certificates
(in the Lender's name or in the name of one or more nominees of the
Lender) where the issuer customarily or otherwise issues certificates,
all to be held as Collateral hereunder. The Company hereby acknowledges
that the Lender may, in its discretion, appoint one or more financial
institutions to act as the Lender's agent in holding in custodial
accounts instruments or other financial assets, including securities, in
which the Lender is granted a security interest hereunder, including,
without limitation, certificates of deposit and other instruments
evidencing short term obligations.
4
<PAGE> 6
(d) The inclusion of proceeds in this Agreement does not
authorize the Company to sell, dispose of or otherwise use the
Collateral in any manner not specifically authorized hereby or under the
Indenture.
(e) This Agreement secures the prompt and complete (i) payment
of all obligations of the Company to the Lender under the TARC
Intercompany Note, whether such obligations are now existing or
hereafter arising, and all renewals, extensions, amendments, supplements
and rearrangements thereof and (ii) payment and performance of all
covenants and conditions by the Company contained herein and in the TARC
Intercompany Loan Agreement in each case whether for principal,
interest, prepayment premium, taxes, costs, losses, compensation,
reimbursements, fees, expenses or any other amount payable to the Lender
under the terms of this Agreement (all such obligations, covenants and
conditions described in the foregoing clauses (i) and (ii) being
hereinafter collectively referred to as the "Obligations").
(f) Notwithstanding anything herein to the contrary, the stock
of any Unrestricted Subsidiary shall not constitute Collateral
hereunder.
Section 3. Representations and Warranties. The Company represents and
warrants, as of the date hereof, to the Lender as follows:
(a) The chief executive office and principal place of business
of the Company is located at 1300 N. Sam Houston Parkway East, Suite
320, Houston, Harris County, Texas 77032. Any and all Collateral not
delivered to the Lender or its designated agent is and will continue to
be located only in the States of Texas and Louisiana.
(b) The Company is the legal and beneficial owner of all of
the Collateral free and clear of any lien, security interest, charge or
encumbrance of any kind or nature, except for the lien and security
interest created hereby and for Permitted Liens, and has not made any
other pledge, assignment, mortgage, hypothecation or transfer of the
Collateral except as permitted hereunder or under the TARC Intercompany
Loan Agreement. Except for the lien and security interest created
hereby, all of the Collateral is free from any material credit,
deduction, allowance, defense, dispute, setoff or counterclaim and there
is no material extension or indulgence with respect thereto. The
Pledged Collateral is not subject to any put, call, option or other
right in favor of any other person whatsoever.
(c) The Pledged Collateral is accurately described in Schedule
2(b) hereto and has been duly authorized and validly issued and non-
assessable.
(d) This Agreement has been duly executed and delivered by the
Company and creates a valid security interest in, and lien on, the
Collateral securing the payment of the Indebtedness. Upon the delivery
of physical certificates evidencing the Pledged Collateral to the Lender
or its designated agent and the making of the filings and the taking of
all other actions necessary to perfect the security interests created
hereby, including, without limitation, those actions specified in
Section 2(b) and Section 4, the security interests created by this
Agreement will be duly perfected security interests subject to no equal
or prior lien, security interest or encumbrance of any kind or nature
other than Permitted Liens.
5
<PAGE> 7
(e) The Company has the requisite corporate power and
authority to pledge the Collateral in the manner hereby done or
contemplated and to defend its title thereto against the lawful claims
of all persons whomsoever.
(f) Neither the execution and delivery of this Agreement by
the Company, the performance by the Company of its obligations
hereunder, nor the transactions herein contemplated will (i) violate the
Company's charter or bylaws, (ii) violate the terms of any agreement,
indenture, mortgage, deed of trust, equipment lease, instrument or other
document to which the Company is a party, (iii) violate any law, order,
rule or regulation applicable to the Company of any court or any
government, regulatory body or administrative agency or other
governmental body having jurisdiction over the Company or its
properties, or (iv) result in or require the creation or imposition of
any lien (other than the lien contemplated hereby), upon or with respect
to any of the property now owned or hereafter acquired by the Company,
which violation or conflict would have a material adverse effect on the
financial condition, business, assets or liabilities of the Company or
on the value of the Collateral or a material adverse effect on the
security interests hereunder.
(g) The Pledged Collateral includes the issued and outstanding
shares of Common Stock of the Pledged Subsidiaries as described in
Schedule 2(b) attached hereto, and as of the date of execution hereof,
there are no outstanding options, warrants or other rights to subscribe
for or purchase any property described in Schedule 2(b) or any notes,
bonds, debentures or other evidences of indebtedness that (i) are at any
time convertible into capital stock of the Pledged Subsidiaries or (ii)
have or at any time could by their terms have voting rights with respect
to any matters affecting the Pledged Subsidiaries.
(h) No consent or approval which has not been obtained prior
to the date hereof of any other person or entity and no authorization,
approval or other action (other than delivery of physical certificates
evidencing the Pledged Collateral) by, and no notice to or filing with
any governmental body (other than UCC filings), regulatory authority or
securities exchange, was or is necessary as a condition to the validity
of the pledge hereunder of the Collateral, and such pledge is effective
to vest in the Lender the rights of the Lender in the Collateral as set
forth herein. There are no restrictions on the transferability of any
of the Collateral transferred or delivered by the Company hereunder or,
except for restrictions related to federal and state securities laws
governing the sale of "restricted stock" or "control stock," with
respect to the foreclosure, transfer or disposition thereof by the
Lender.
Section 4.Covenants. During the term of this Agreement and until all
the Obligations with respect to the Indebtedness have been fully and finally
paid and discharged in full, the Company covenants and agrees with the Lender
that:
(a) Except as permitted by the TARC Intercompany Loan
Agreement or in the ordinary course of business, the Company will not
make any compromise or settlement with respect to the Collateral without
notice to or consent of the Lender.
(b) The Company shall deliver to the Lender or its designated
agent concurrently with the execution of this Agreement or, to the
extent acquired subsequent to the date of execution hereof, including
without limitation Pledged Collateral issued by a newly created or
acquired Subsidiary, immediately upon the Company's acquisition thereof:
(i) all certificates and instruments representing the Pledged Collateral
and a revised Schedule 2(b), and (ii) all
6
<PAGE> 8
certificates and instruments representing each other item of Collateral
(including all certificates, instruments and notes representing any such
Company UCC Collateral). Any and all Pledged Collateral delivered to
the Lender or its designated agent shall be accompanied by undated duly
executed powers in blank and by such other instruments of transfer or
documents as the Lender may reasonably request. The Lender may hold the
certificates representing the Pledged Collateral delivered to it in its
own name or in the name of its nominee, all in form and substance
satisfactory to the Lender.
(c) From time to time, the Company shall, at its own expense,
promptly give, execute, deliver, file and/or otherwise formalize any
such notice, statement, instrument, document, agreement or other papers,
and do all such other acts and things, as may be necessary or desirable,
or as the Lender may reasonably request, in order to create, evidence,
preserve, perfect, validate or continue any lien or security interest
created pursuant to this Agreement or to enable the Lender to exercise
or enforce its rights hereunder with respect to such lien or security
interest, or otherwise further to effect the purposes of this Agreement.
Without limiting the generality of the foregoing, the Company shall, at
any time or from time to time upon the request of the Lender and at the
Company's own expense, execute, acknowledge, witness, deliver, file
and/or record such financing and continuation statements, notices,
additional assignments and other documents or instruments (all of which
shall be in form and substance satisfactory to the Lender and its
counsel) as the Lender may from time to time reasonably request for the
perfection of the liens and security interests created hereby.
(d) The Company shall promptly notify the Lender (i) of any
material changes in any fact or circumstance represented or warranted by
the Company with respect to any material portion of the Collateral, (ii)
of any material impairment of the Collateral and (iii) of any claim,
action or proceeding affecting title to all or any of the Collateral.
(e) Except for the liens and security interests created by
this Agreement and the Permitted Liens in the Collateral, the Company
shall at its own expense defend the Collateral against any and all
liens, claims, security interests and other encumbrances or interests,
howsoever arising and shall maintain and preserve the security interest
granted hereunder with respect to the Collateral as long as this
Agreement shall remain in full force and effect. The Company shall not
make any other pledge, assignement, mortgage, hypothecation or transfer
of the Collateral except as permitted hereunder or under the TARC
Intercompany Loan Agreement.
(f) The Company shall at all times keep accurate and complete
records with respect to the Collateral, including, without limitation,
records of all payments made, credit granted and proceeds received in
connection therewith.
(g) The Company shall not relocate its principal place of
business or chief executive office to a county or state other than that
specified in Section 3(a) of this Agreement unless the Company gives 30
days' prior written notice to the Lender, which notice shall specify the
county and state into which such relocation is to be made. The
Collateral, to the extent not delivered to the Lender pursuant to
Section 2, will be kept at those locations listed on the Perfection
Certificate delivered to the Lender herewith in the form attached as
Exhibit A hereto and the Company will not remove the Collateral from
such locations, without providing at least 30 days' prior written notice
to the Lender.
7
<PAGE> 9
(h) The Company will keep the Collateral in good order and
repair, except in situations where not to do so would not be material,
and will not use the same in violation of law or any policy of insurance
thereon. The Lender, or its designee, may inspect the Collateral at any
reasonable time, wherever located.
(i) The Lender, or its representative, shall at all times have
full and free access during normal business hours to all of the books,
correspondence and records of the Company relating to the Collateral
(other than information that is privileged and confidential) and the
Lender and its representatives may examine the same, make abstracts
therefrom and make photocopies thereof, and the Company agrees to render
to the Lender, at the Company's cost and expense, such clerical and
other assistance as may be reasonably requested by the Lender with
regard thereto.
(j) The Company shall not permit any of the Pledged
Subsidiaries to issue to the Company any securities of the type required
to be pledged hereunder unless such securities are promptly pledged and
delivered hereunder to the Lender or its designated agent in accordance
with Section 2(b).
(k) If, while this Agreement is in effect, any stock dividend,
stock split, reclassification, readjustment, reorganization, merger,
consolidation, exchange offer, tender offer or other change in the
capital structure, including the creation of any subscription or other
rights relating to the Pledged Collateral, is declared or made, or
proposed to be declared or made, by any of the Pledged Subsidiaries or
any other issuer of the Collateral, all substituted and additional
securities or interest issued with respect to the Collateral and
evidenced by certificates shall be endorsed in blank by the Company
promptly upon receipt thereof or otherwise appropriately transferred to
the Lender in negotiable form, and all certificates or instruments
evidencing such securities shall be delivered to the Lender to be held
under the terms of this Agreement in the same manner as, and as a part
of, the Collateral. All Pledged Collateral shall be evidenced by one or
more certificates. Any securities that may be issued upon exercise of
any subscription or other rights relating to the Pledged Collateral
shall be endorsed in blank and delivered to the Lender with any
necessary powers.
Section 5. Powers of the Secured Party.
(a) The Company hereby irrevocably designates and appoints the
Lender as its attorney-in-fact, with full power of substitution, for the
purposes of carrying out the provisions of this Agreement and taking any
action and executing any instrument, including,without limitation, any
financing statement or continuation statement, and taking any other
action to maintain the validity, perfection, priority and enforcement of
the security interest intended to be created hereunder, that the Lender
may reasonably deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled
with an interest.
(b) Without limiting the generality of Section 5(a) hereof,
the Company hereby irrevocably authorizes and empowers the Lender, upon
the occurrence and during the continuation of any Event of Default, at
the expense of the Company, either in the Lender's own name or in the
name of the Company, at any time and from time to time:
8
<PAGE> 10
(i) to ask, demand, receive, issue a receipt for, give
acquittance for, settle and compromise any and all monies which
may be or become due or payable or remain unpaid at any time or
times to the Company, and any and all other property which may be
or become deliverable at any time or times to the Company, under
or with respect to the Collateral;
(ii) to endorse any drafts, checks, orders or other
instruments for the payment of money payable to the Company on
account of the Collateral (including any such draft, check, order
or instrument issued by any insurance company payable jointly to
the Company and the Lender); and
(iii) to settle, compromise, prosecute or defend any
action, claim or proceeding, or take any other action, all either
in its own name or in the name of the Company or otherwise, which
the Lender may deem to be necessary or advisable for the purpose
of exercising and enforcing its powers and rights under this
Agreement or in furtherance of the purposes hereof, including any
action which by the terms of this Agreement is to be taken by the
Company.
(c) Nothing in this Agreement shall be construed as requiring
or obligating the Lender to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by it, or to
present or file any claim or notice, or to take any other action with
respect to any of the Collateral or any part thereof or the amounts due
or to become due in respect thereof or any property covered thereby, or
to collect or enforce the payment of any amounts assigned to it or to
which it may otherwise be entitled hereunder at any time or times other
than to account for amounts or Collateral received.
(d) The Lender shall be entitled at any time to file this
Agreement, or a carbon, photographic or any other reproduction of this
Agreement, as a financing statement, but the failure of the Lender to do
so shall not impair the validity or enforceability of this Agreement.
The Lender shall have no duty to comply with any recording, filing or
other legal requirements necessary to establish or maintain the
validity, priority or enforceability of, or the Lender's rights in or
to, any of the Collateral.
(e) In its discretion, the Lender may discharge taxes and
other encumbrances at any time levied or placed on any of the
Collateral, make repairs thereto and pay any necessary filing fees. The
Company agrees to reimburse the Lender on demand for any and all
reasonable expenditures so made with interest on unpaid amounts at the
maximum rate permitted by law. The Lender shall have no obligation to
the Company to make any such expenditures, nor shall the making thereof
relieve the Company of any default.
(f) Anything herein to the contrary notwithstanding, the
Company shall remain liable under each contract or agreement comprised
in the Collateral to be observed or performed by the Company thereunder.
The Lender shall not have any obligation or liability under any such
contract or agreement by reason of or arising out of this Agreement or
the receipt by the Lender of any payment relating to any of the
Collateral, nor shall the Lender be obligated in any manner to perform
any of the obligations of the Company under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency
of any payment received by the Lender in respect of the Collateral or as
to the sufficiency of any performance by any party under any such
contract or agreement, to present or file any claim, to take any action
to enforce any
9
<PAGE> 11
performance or to collect the payment of any amounts which may have been
assigned to the Lender or to which the Lender may be entitled at any
time or times other than to account for amounts or Collateral received,
and no action taken or omitted shall give rise to any defense,
counterclaim or right of action against the Lender, unless the Lender's
actions are taken or omitted to be taken with gross negligence or bad
faith or constitute willful misconduct. The Lender's sole duty with
respect to the custody, safe keeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or
otherwise, shall be to deal with such Collateral in the same manner as
the Lender deals with similar property for its own account.
(g) If an Event of Default has occurred and is continuing, the
Lender may at any time, at its option, transfer to itself or any nominee
any securities constituting the Pledged Collateral, receive any income
thereon and hold such income as additional Collateral or apply it to the
Indebtedness. Regardless of whether any Indebtedness is due, the Lender
may demand, sue for, collect, or make any settlement or compromise which
it deems desirable with respect to the Collateral. Regardless of the
adequacy of Collateral or any other security for the Indebtedness, any
deposits or other sums at any time credited by or due from the Lender to
the Company may at any time be applied to or set off against any of the
Indebtedness.
(h) If an Event of Default shall have occurred and be
continuing, the Company shall, at the request of the Lender, notify
obligors on chattel paper and general intangibles of the Company and
obligors on instruments for which the Company is an obligee of the
security interest of the Lender in any chattel paper, general intangible
or instrument and that payment thereof is to be made directly to the
Lender or to any financial institution designated by the Lender as the
Lender's agent therefor, and the Lender may itself, if an Event of
Default shall have occurred and be continuing, without notice to or
demand upon the Company, so notify said obligors. After the making of
such a request or the giving of any such notification, the Company shall
hold any proceeds of collection of chattel paper, general intangibles
and instruments received by the Company as trustee for the Lender
without commingling the same with other funds of the Company and shall
turn the same over to the Lender in the identical form received,
together with any necessary endorsements or assignments. The Lender
shall apply the proceeds of collection of chattel paper, general
intangibles and instruments received by the Lender to the Indebtedness,
such proceeds to be immediately entered after final payment in cash of
the items giving rise to them.
Section 6.Voting Rights, Dividends, Etc.
(a) Until an Event of Default shall have occurred and be
continuing:
(i) except as otherwise provided in this Agreement, the
Company shall be entitled to exercise any and all voting or
consensual rights and powers, including subscription rights, in
relation to the Pledged Collateral; provided, however, that no
vote shall be cast or consent, waiver or ratification given or
action taken which would materially impair the securities or the
value thereof or violate any provision of this Agreement, the
Indenture or any other ancillary document;
(ii) except as otherwise provided in this Agreement, the
Company shall be entitled to receive and retain any and all
dividends, distributions or other payments in respect of the
Pledged Collateral and the Lender, upon receipt of any of the
foregoing, shall promptly pay or distribute the same to the
Company, and, to the extent so
10
<PAGE> 12
permitted, any distributions received by the Company and
transferred to other persons shall pass free and clear of the
lien and security interest hereof; and
(iii) the Lender shall execute and deliver to the Company
or cause to be executed and delivered to the Company, all such
proxies, powers of attorney, dividend orders and other
instruments as the Company may reasonably request for the purpose
of enabling it to exercise the voting or consensual rights and
powers which the Company is entitled to exercise pursuant to the
foregoing Section 6(a)(i) or to receive the dividends,
distributions or other payments which the Company is authorized
to retain pursuant to the foregoing Section 6(a)(ii).
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Company to exercise the voting or
consensual rights and powers which the Company would otherwise be
entitled to exercise pursuant to Section 6(a)(i) and to receive the
dividends, distributions and other payments which the Pledgor would
otherwise be authorized to receive and retain pursuant to Section
6(a)(ii) shall automatically cease, and all such rights shall thereupon
become vested in the Lender, which shall then have the sole and
exclusive right and authority to exercise, in its sole discretion, all
such voting and consensual rights and powers and to receive and retain
as Collateral all such dividends, distributions and other payments.
Without limiting the foregoing, in such event the Lender may exercise
all voting and corporate rights at any meeting of any corporation
issuing any such securities and any and all rights of conversion,
exchange, subscription or any other rights, privileges or options
pertaining to any such securities as if it were the absolute owner
thereof, including, without limitation, the rights to exchange at its
discretion, any and all such securities upon the merger, consolidation,
reorganization, recapitalization or other readjustment of any
corporation issuing any such securities or upon the exercise by any such
issuer or the Lender of any right, privilege or option pertaining to any
such securities, and, in connection therewith, to deposit and deliver
any and all securities with any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions as
it may determine, all without liability except to account for the
property actually received by it, but the Lender shall have no duty to
exercise any of the aforesaid rights, privileges or options and the
Lender shall not be responsible for any failure to do so or delay in so
doing.
Section 7. Default.
(a) It shall constitute a Default or an Event of Default under
this Agreement if a "Default" or an "Event of Default" shall occur under
the Indenture.
(b) If an Event of Default shall have occurred and is
continuing and if the maturity of the Note is accelerated under the
provisions of the TARC Intercompany Loan Agreement, in addition to any
other rights and remedies that may be available to the Lender under the
UCC or the TARC Intercompany Loan Agreement or under Section 5(a) or
5(b) of this Agreement or otherwise under this Agreement or at law, the
Lender shall also have the following rights and powers:
(i) The Lender may, without being required to give any
notice except as hereinafter provided, sell the Collateral, or
any part thereof, at public or private sale, for cash, upon
credit or for future delivery and at such price or prices as the
Lender deems satisfactory, and the Lender and/or its collateral
agent may be the purchaser of any or
11
<PAGE> 13
all of the Collateral so sold and thereafter hold the same
absolutely free from any right or claim of whatsoever kind, and
the Indebtedness or any portion of the Indebtedness may be
applied as a credit against the purchase price.
(ii) Upon any such sale, the Lender shall have the right
to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold
the property sold absolutely free from any claim or right of
whatsoever kind by or on behalf of the Company, including any
equity or rights of redemption of the Company, and the Company
hereby specifically waives, to the full extent permitted by
applicable law, all rights of redemption, stay or appraisal which
it has or may have under any rule or law or statute now existing
or hereafter adopted.
(iii) The Lender shall give the Company ten (10) business
days' written notice (which the Company agrees is reasonable
notification within the meaning of Section 9.504 of the UCC) of
its intention to make any such public or private sale. Such
notice, in case of public sale, shall state the time and place
fixed for such sale and, in case of a private sale, shall state
the date after which such sale is to be made.
(iv) Any such public sale shall be held at such time or
times within ordinary business hours and at such places as the
Lender may fix in the notices of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate
parcels, as the Lender may, in its sole discretion, determine.
(v) The Lender shall not be obligated to make any sale
of the Collateral if it shall determine not to do so, regardless
of the fact that notice of sale of the Collateral may have been
given. The Lender may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the
sale, and such sale may, without further notice, be made at any
time or place to which the same shall be so adjourned.
(vi) In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Lender until the selling price is
paid by the purchaser thereof, but the Lender shall not incur any
liability in case of the failure of such purchaser to take up and
pay for the Collateral so sold and, in case of any such failure,
such Collateral may again be sold upon like notice.
(vii) The Lender, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law
or in equity to exercise its remedies regarding the Collateral
and sell the Collateral, or any portion thereof, under a judgment
or decree of a court or courts of competent jurisdiction.
(viii) The Company agrees that if any Event of Default
shall have occurred and be continuing, then the Lender shall have
the right to take possession of the Collateral, and for that
purpose the Lender may, so far as the Company can give authority
therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom with or without notice or
process of law. The Company waives any and all rights that it
may have to a judicial hearing in advance of the enforcement of
any of the Lender's rights hereunder, including, without
limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights
with
12
<PAGE> 14
respect thereto. To the extent that any of the Obligations are to
be paid or performed by a person other than the Company, the
Company waives and agrees not to assert any rights or privileges
which it may have under Section 9-112 of the UCC.
(ix) If under mandatory requirements of applicable law,
the Lender shall be required to make disposition of the
Collateral within a period of time that does not permit the
giving of notice to the Company as hereinbefore provided, the
Lender need give the Company only such notice of disposition as
shall be reasonably practicable in view of such mandatory
requirements of law.
(x) The Lender may instruct the obligor or obligors on
any agreement, instrument or other obligation constituting the
Collateral to make any payment or render any performance required
by the terms of such agreement, instrument or obligation directly
to the Lender or its designee.
(c) The Lender shall incur no liability as a result of the
sale of the Collateral, or any part thereof, at any private sale other
than for its own gross negligence, willful misconduct or bad faith. The
Company hereby waives, to the maximum extent permitted by applicable
law, any claims against the Lender arising by reason of the fact that
the price at which the Collateral may have been sold at such private
sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the Indebtedness, even if
the Lender accepts the first offer received and does not offer such
Collateral to more than one offeree.
(d) The Lender shall not be obligated to pursue or exhaust its
rights and remedies against any particular Collateral or other security
for the Indebtedness before pursuing or enforcing its rights and
remedies against any other Collateral or other security for the
Indebtedness.
(e) To the extent permitted by law, the Company hereby waives
(i) any rights to require the Lender to proceed first against any other
Person, to exhaust its rights in the Collateral or other security for
the Indebtedness or to pursue any other right that the Lender might
have, (ii) with respect to the Note, presentment and demand for payment,
protest, notice of protest and nonpayment, notice of dishonor, notice of
the intention to accelerate and notice of acceleration (except as
otherwise set forth in the TARC Intercompany Loan Agreement), and (iii)
all rights of marshalling in respect of any and all of the Collateral.
(f) Without precluding any other methods of sale, the Company
acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with
reasonable commercial practices of banks disposing of similar property.
The Lender shall not be liable for any depreciation in the value of the
Collateral.
(g) The Company agrees that its obligation to deliver the
Collateral is of the essence of this Agreement and that accordingly,
upon application to a court of equity having jurisdiction, the Lender
shall be entitled to a decree requiring specific performance by the
Company of such obligation.
(h) Remedies of the Lender are cumulative and the exercise of
any one or more of the remedies provided herein shall not be construed
as a waiver of any of the other remedies of the Lender.
13
<PAGE> 15
(i) If an Event of Default shall have occurred and be
continuing, the proceeds of any sale of or other realization upon all or
any part of the Collateral and any other amounts held by the Lender
under this Agreement shall be applied by the Lender as provided in the
Indenture.
Any amounts remaining after such applications and the payment in
full of the Note with respect to the Indebtedness shall be remitted to the
Company, its successors or assigns, or as a court of competent jurisdiction may
otherwise direct.
Section 8. Registration Rights.
(a) If the Lender shall determine to exercise the right to
sell any or all of the Pledged Collateral pursuant to Section 7 hereof,
and if in the opinion of counsel for the Lender it is necessary (or if
in the opinion of the Lender it is advisable) to have the Pledged
Collateral, or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Company will cause each issuing corporation to execute and
deliver, and cause the directors and officers of each thereof to execute
and deliver, all at the Company's expense, all such instruments and
documents, and to do or cause to be done all such other acts and things
as may be necessary or, in the opinion of the Lender, advisable to
register the Pledged Collateral, or that portion thereof to be sold,
under the provisions of the Securities Act and to use its best efforts
to cause the registration statement relating thereto to become effective
and to remain effective for a period of one year from the date of the
first public offering of the Pledged Collateral, or that portion thereof
to be sold, and to make all amendments or supplements thereto and/or to
the related prospectus which, in the opinion of the Lender, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto. The Company agrees to use its
best efforts to cause each such issuing corporation to comply with the
provisions of the securities or "Blue Sky" laws of any jurisdiction
which the Lender shall designate and to cause each such issuing
corporation to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which
will satisfy the provisions of Section 11(a) of the Securities Act.
(b) The Company recognizes that the Lender may be unable, or
find it undesirable, to effect a public sale of any or all the Pledged
Collateral by reason of certain prohibitions contained in the Securities
Act and applicable state securities laws or otherwise, but may be
compelled or desire to resort to one or more private sales thereof to a
restricted group of purchasers who will be obliged to agree, among other
things, to acquire such securities for their own account for investment
and not with a view to the distribution or resale thereof in violation
of the Securities Act. The Company acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to
the seller than if such sale were a public sale, but, notwithstanding
such circumstances, such private sale shall be deemed to have been made
in a commercially reasonable manner. The Lender shall be under no
obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the issuing corporation of such
securities to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if the
issuing corporation would agree to do so.
(c) The Company further agrees to use commercially reasonable
efforts to do or cause to be done all such other acts and things as may
be necessary to make such sale or sales of any portion or all of the
Pledged Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all
14
<PAGE> 16
courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at the
Company's expense. The Company further agrees that a breach of any of
the covenants contained in this Section 8 will cause irreparable injury
to the Lender, that the Lender has no adequate remedy at law in respect
of such breach and, as a consequence, agrees that each and every
covenant contained in this Section 8 shall be specifically enforceable
against the Company, and the Company hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred
under the Indenture.
Section 9. General Provisions.
(a) Continuing Security Interest; Binding Effect. This
Agreement shall create a continuing security interest in the Collateral
and shall (a) remain in full force and effect until termination of the
obligations of the Company under the TARC Intercompany Loan Agreement
and the indefeasible payment in full thereafter of the Obligations; (b)
be binding upon the Company and its successors and assigns; and (c)
inure to the benefit of the Lender and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c),
the Lender may assign or otherwise transfer any of its rights under this
Agreement to any other Person, and such Person shall thereupon become
vested with all the benefits in respect thereof granted herein or
otherwise to the Lender. Upon the termination of the obligations of the
Lender under the Indenture and the indefeasible payment in full
thereafter of the Obligations, the Company shall be entitled to the
return, upon its request and at its expense, of such of the Collateral
as is in the Lender's possession and as shall not have been sold or
otherwise disposed of pursuant to the terms hereof.
(b) Security Interest Absolute. The lien and security
interest created hereunder and the Company's obligations hereunder and
the Lender's rights hereunder shall not be released, diminished,
impaired or adversely affected by the occurrence of any one or more of
the following events:
(i) The taking or accepting of any other security or
assurance for any or all of the Indebtedness;
(ii) Any release, surrender, exchange, subordination or
loss of any security or assurance at any time existing in
connection with any or all of the Indebtedness;
(iii) The modification of, amendment to, or waiver of
compliance with any terms of the TARC Intercompany Loan Agreement
or the Note;
(iv) Any renewal, extension and/or rearrangement of the
payment of any or all of the Indebtedness or any statement,
indulgence, forbearance or compromise that may be granted or
given by the Lender to the Company or any other Person;
(v) any neglect, delay, omission, failure or refusal of
the Lender to take or prosecute any action in connection with any
agreement, document or other instrument evidencing, securing or
assuring the payment of any or all of the Indebtedness;
(vi) the illegality, invalidity or unenforceability of
all or any part of the TARC Intercompany Loan Agreement or the
Note; or
15
<PAGE> 17
(vii) any other circumstance (other than payment in full
of the Obligations) that might otherwise constitute a defense
available to, or a discharge of, the Company or any party to any
document in respect of the Obligations.
(c) Amendments. This Agreement or any term hereof may be
amended or changed only by an instrument in writing executed jointly by
the Company and the Lender and in accordance with Article IX of the
Indenture.
(d) Remedies Cumulative. Each right, power and remedy herein
specifically granted to the Lender or otherwise available to it or now
or hereafter existing in law or in equity shall be cumulative and
concurrent, and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in
equity, or otherwise (including, without limitation, all rights, powers
and remedies granted to a secured party under the UCC), and each such
right, power and remedy, whether specifically granted herein or
otherwise existing, may be exercised at any time and from time to time
as often and in such order as may be deemed expedient by the Lender in
its sole and complete discretion. The provisions of this Agreement may
only be waived by an instrument in writing signed by the Lender, and no
failure on the part of the Lender to exercise, and no delay in
exercising, and no course of dealing with respect to, any such right,
power or remedy, shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right.
No notice to or demand on the Company hereunder shall, of itself,
entitle the Company to any other or further notice or demand in the same
or similar circumstances.
(e) Assignment. Neither this Agreement nor any interest
herein or in the Collateral, or any part thereof, may be assigned by the
Company without the prior written consent of the Lender, except as
expressly permitted herein or in the Indenture or in the Disbursement
Agreement. The Company hereby acknowledges and consents to the
collateral assignment by the Lender of this Agreement and the Lender's
interest in the Collateral to the Indenture Trustee, as defined in the
TARC Intercompany Loan Agreement. The Company also agrees that, in the
case of an Event of Default, the Indenture Trustee may exercise any
rights and remedies of the Lender under this Agreement, and any
reference to the "Lender" hereunder shall also include the Indenture
Trustee.
(f) Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the
provisions hereof.
(g) Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity of enforceability or such provision in any other
jurisdiction.
(h) Survival. All representations and warranties contained
herein, in the Indenture or made in writing by the Company in connection
herewith or therewith, shall survive the execution and delivery of this
Agreement, the Indenture and any documents executed in connection
herewith or therewith.
16
<PAGE> 18
(i) Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original, but all of which when taken together shall
constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Lender.
(j) Waiver. To the extent permitted by applicable law the
Company hereby waives promptness, diligence, notice of acceptance and
any other notice with respect to any of the Indenture obligations and
this Agreement and any requirement that the Lender protect, secure,
perfect or insure any security interest or any property subject thereto
or exhaust any right or take any action against the Company or any other
person or entity; provided however, that the Lender shall in any event
take such care in the handling of any Collateral in its possession as it
takes with respect to its own property of a similar nature in its
possession.
(k) Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given
if made by hand delivery, by telex, by facsimile or registered or
certified mail, postage prepaid, return receipt requested, addressed as
provided in Section 9.3 of the TARC Intercompany Loan Agreement. Any
party hereto may by notice to the other party designate such additional
or different addresses as shall be furnished in writing by such party.
Any notice or communication to any party 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 faxed; and
five (5) calendar days after mailing, if sent by registered or certified
mail (except that a notice of change of address shall not be deemed to
have been given until actually received by the addressee).
(l) Conflicting Terms. In the event of any conflict or
inconsistency between the terms, covenants, conditions and provisions
set forth in this Agreement and the terms, covenants, conditions and
provisions set forth in the Indenture, the terms, covenants, conditions
and provisions of the Indenture shall prevail.
(m) Release. The Collateral, in whole or in part, may be
released in accordance with the TARC Intercompany Loan Agreement and the
Indenture.
(n) Conflicts. If any provision of the TARC Intercompany Loan
Agreement limits, qualifies, or conflicts with any similar provision of
this Agreement, such provision of the TARC Intercompany Loan Agreement
shall control.
(o) 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 EXCEPT SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS 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
17
<PAGE> 19
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 THE LENDER 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.
18
<PAGE> 20
IN WITNESS WHEREOF, the Company and the Lender have executed this
Agreement as of the date first above written.
TRANSAMERICAN REFINING CORPORATION
By:
-------------------------------
Name:
----------------------------
Title:
----------------------------
TRANSAMERICAN ENERGY CORPORATION,
as Lender
By:
-------------------------------
Name:
----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE> 21
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, Vice President of TransAmerican Refining
Corporation, a Texas corporation (the "Company"), hereby certify with reference
to the Security and Pledge Agreement dated as of June 13, 1997 between the
Company and TransAmerican Energy Corporation, as Lender (terms defined therein
being used herein as therein defined), to the Lender as follows:
Section 1. Names.
(a) The exact corporate name of the Company, as it appears in
its certificate of incorporation is as follows:
TransAmerican Refining Corporation
(b) Set forth below is each other corporate name the Company
has had since its organization, together with the date of the relevant
change:
n/a
(c) The Company has not changed its identity or corporate
structure in any way within the past five years except:
n/a
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Company or any of its
divisions or other business units at any time during the past five
years:
n/a
Section 2. Current Locations.
(a) The chief executive office of the Company is located at
the following address:
Mailing Address County State
--------------- ------ -----
1300 N. Sam Houston Parkway East Harris Texas
Houston, 77032
(b) The following are all the places of business of the
Company not identified above:
Mailing Address County State
--------------- ------ -----
14902 River Road St. Charles Louisiana
New Sarpy, 70078
A-1
<PAGE> 22
Section 3. Prior Locations. Set forth below is the information required
by subparagraphs (a) and (b) of Section 2 with respect to each location or
place of business maintained by the Company at any time during the past five
years:
n/a
Section 4. UCC Filings. A duly signed financing statement on Form UCC-1
in substantially the form of Schedule 4(a) hereto has been duly filed in the
UCC filing office in each jurisdiction identified in Section 2 hereof. The
Company will deliver a true copy of each such filing duly acknowledged by the
filing officer as soon as practicable after the date hereof.
Section 5. Schedule of Filings. Attached hereto as Schedule 5 is a
schedule setting forth filing information with respect to the filings described
in Section 4 above.
Section 6. Filings Fees. All filing fees and taxes payable in
connection with the filings described in Section 4 above have been paid.
A-2
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have hereunto set their hands
this ___ day of June, 1997 in the respective capacities indicated below their
signatures.
-----------------------------------
Name:
-----------------------------
Title:
----------------------------
A-3
<PAGE> 24
SCHEDULE 2(b)
PLEDGED COLLATERAL
<TABLE>
<CAPTION>
================================================================================
Percentage
Stock Number of
Stock Class of Certificate Par of Outstanding
Issuer Stock No.(s) Value Shares Shares
------ ----- ------ ----- ------ ------
================================================================================
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
1
<PAGE> 25
SCHEDULE 4(a)
DESCRIPTION OF COLLATERAL
All of the Debtor's right, title and interest in, to and under any and all of
the following described property, assets and rights, in each case, wherever
located, whether now owned or hereafter acquired or arising, all accessions and
additions thereto, all substitutions and replacements therefor, and all
proceeds and products thereof and assigns all rights in and to all collateral
securing the following described property, assets and rights:
(i) all personal and fixture property of every kind and
nature including, without limitation, all furniture, fixtures,
raw materials, goods, contract rights, rights to the payment of
money, insurance refund claims and all other insurance claims and
proceeds, tort claims, chattel paper, documents, instruments
(including certificated securities), deposit accounts and all
general intangibles including, without limitation, all
uncertificated securities, tax refund claims, license fees,
patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, rights to sue
and recover for past infringement of patents, trademarks and
copyrights, computer programs, computer software, engineering
drawings, service marks, customer lists, goodwill, and all
licenses, permits, agreements of any kind or nature pursuant to
which the Debtor possesses, uses or has authority to possess or
use property (whether tangible or intangible) of others or others
possess, use or have authority to possess or use property
(whether tangible or intangible) of the Debtor, and all recorded
data of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics (any and all such property being
the "UCC Collateral"); provided, however, that nothing herein
shall be construed to include within, and there is expressly
excluded from, the UCC Collateral, any now owned or hereafter
acquired equipment, inventory or receivables ;
(ii) all of the issued and outstanding shares of common
stock identified on Schedule 2(b) attached hereto of any other
subsidiary of the Debtor presently existing or hereafter created
or acquired (the "Pledged Subsidiaries") therein set forth;
(iii) all other shares of common stock or other equity
securities now or hereafter acquired by the Debtor in any manner
issued by the Pledged Subsidiaries, and the certificates
representing such securities, and any present or future options,
warrants or other rights to subscribe for or purchase any
property described in Section 2(b)(i) or any notes, bonds,
debentures or other evidences of indebtedness now or hereafter
owned or acquired by the Debtor in any manner that (A) are at any
time convertible, exchangeable or exercisable into capital stock
or other equity securities of the Pledged Subsidiaries or (B)
have or at any time could by their terms have voting rights with
respect to any matter affecting the Pledged Subsidiaries and all
securities, certificates and instruments representing or
evidencing ownership of any of the property described in Section
2(b) hereof;
(iv) all proceeds and products of the foregoing and
distributions thereof or with respect thereto, including without
limitation dividends, distributions, cash,
1
<PAGE> 26
instruments and other property or securities, now or hereafter at
any time or from time to time received or receivable or otherwise
distributed or distributable in respect of or in exchange for any
or all of the foregoing; and
(v) The disbursement account (the "Disbursement
Account") maintained at Firstar Bank of Minnesota, N.A., more
specifically described on Schedule I, owned by the Debtor and
created by that certain Disbursement Agreement by and among the
Debtor, the Secured Party, the disbursement agent named therein
and the construction supervisor named therein, as amended
pursuant to the terms thereof, and all investments, securities,
financial assets credited thereto and security entitlements with
respect thereto, and all certificates and instruments, if any,
from time to time representing or evidencing the Disbursement
Account or any property credited thereto, whether now owned by
the Debtor or existing or hereafter acquired, created or arising
including the proceeds thereof (the "Assigned Collateral" and,
together with the UCC Collateral and the Pledged Collateral, the
"Collateral").
Notwithstanding anything herein to the contrary, the stock of any Unrestricted
Subsidiary shall not constitute Collateral hereunder.
2
<PAGE> 27
SCHEDULE 5
SCHEDULE OF FILINGS
<TABLE>
<CAPTION>
Debtor Filing Officer File Number Date(1)
- ------ -------------- ----------- -------
<S> <C> <C> <C>
</TABLE>
- --------------------
(1) Indicate lapse date, if other than fifth anniversary.
1
<PAGE> 1
EXHIBIT 4.9
DISBURSEMENT AGREEMENT
among
TRANSAMERICAN REFINING CORPORATION,
TRANSAMERICAN ENERGY CORPORATION,
FIRSTAR BANK OF MINNESOTA, N.A.,
as securities intermediary and disbursement agent,
FIRSTAR BANK OF MINNESOTA, N.A.,
as trustee,
and
BAKER & O'BRIEN, INC.,
as Construction Supervisor
June 13, 1997
<PAGE> 2
DISBURSEMENT AGREEMENT
This Disbursement Agreement dated as of June 13, 1997 (this
"Agreement") is entered into by and among TransAmerican Refining Corporation, a
Texas corporation ("TARC"), TransAmerican Energy Corporation, a Delaware
corporation ("TEC"), Firstar Bank of Minnesota, N.A., as securities
intermediary (as defined in the Revised UCC) and disbursement agent (the
"Disbursement Agent"), Firstar Bank of Minnesota, N.A., as trustee, and Baker &
O'Brien, Inc., as Construction Supervisor (the "Construction Supervisor").
WHEREAS, TEC and the Trustee have entered into an Indenture
dated as of June 13, 1997 (the "Indenture"), pursuant to which TEC will issue
$475,000,000 aggregate principal amount of Senior Secured Notes due 2002 and
$1,130,000,000 aggregate principal amount of Senior Secured Discount Notes due
2002 (collectively, the "Notes");
WHEREAS, TEC and TARC have entered into a loan agreement dated
as of the date hereof (the "TARC Loan Agreement"), pursuant to which TEC will
lend to TARC an aggregate of $675,648,920 out of the proceeds of the issuance
of the Notes and TARC will execute a promissory note in such amount in favor of
TEC (the "TARC Intercompany Note" and together with the TARC Loan Agreement,
the "TARC Intercompany Loan Documents");
WHEREAS, as security for the prompt and complete payment and
performance in full of TARC's obligations under the TARC Intercompany Loan
Documents, TARC has granted to TEC a security interest in, among other things,
the TARC Accounts (as defined below);
WHEREAS, as security for the prompt and complete payment and
performance in full of TEC's obligations under the Indenture and the Notes, TEC
has granted to the Trustee a security interest in, among other things, the TARC
Intercompany Loan Documents and the TEC Accounts (as defined below); and
WHEREAS, the Disbursement Agent has agreed to take such action
with respect to the Accounts as is specified herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. Capitalized terms used but not
defined herein and in any schedules and exhibits hereto shall have the meanings
set forth in the TARC Loan Agreement.
As used in this Agreement, the following terms shall have the
following meanings:
"Accounts" means the TARC Disbursement Account, the TEC Disbursement
Account, the Contingency Reserve Account, the Feedstock Reserve Account, the
Operating Reserve Account and the Interest Accumulation Account.
<PAGE> 3
"Agreement" has the meaning given to such term in the introductory
paragraph hereof.
"Alternate" has the meaning given to such term in Section 3.4(a).
"Budget" means the total budget for the Project attached hereto as
Exhibit A.
"Budgeted Line Item" means a separate line item included within the
Budget relating to a unit or component of the Project and specifying an amount
allocated for achieving Mechanical Completion of such unit or component in
accordance with the Plans.
"Coking Unit Completion Notice" has the meaning given to such term in
Section 5.4(a).
"Collateral Investments" has the meaning given to such term in Section
4.7(a).
"Construction Supervisor" has the meaning given to such term in the
introductory paragraph hereof.
"Construction Supervisor Certificate" has the meaning given to such
term in Section 5.2(c).
"Contingency Reserve Account" has the meaning given to such term in
Section 4.1(b).
"Date of Disbursement" means the date designated as such in each
Disbursement Certificate or TEC Certificate, as the case may be.
"Disbursement Agent" has the meaning given to such term in the
introductory paragraph hereof.
"Disbursement Certificate" has the meaning given to such term in
Section 5.2(a).
"Feedstock Disbursements" has the meaning given to such term in
Section 5.3(b).
"Feedstock Reserve Account" has the meaning given to such term in
Section 4.1(c).
"Final Disbursement Date" has the meaning given to such term in
Section 5.4(d).
"Indenture" has the meaning given to such term in the recitals hereof.
"Initial Disbursement" has the meaning given to such term in Section
5.3(c).
"Interest Accumulation Account" has the meaning given to such term in
Section 4.2(b).
"Mechanical Completion" means with respect to the Project, Phase I,
Phase II or any specified unit or component thereof, sufficient completion of
the construction of the Project, Phase I, Phase II or such specified unit or
component, as the case may be, in accordance with the Plans, so that the
Project, Phase I, Phase II or such unit or component, as the case may be, can
be utilized for its intended purpose.
"Minimum Contingency Reserve Amount" means initially $75,000,000,
subject to reduction as set forth below in this definition. Upon delivery of a
Coking Unit Completion Notice by the Construction Supervisor to the
Disbursement Agent and TEC in accordance with the provisions of Section 5.4(a),
the Minimum Contingency Reserve Amount shall be reduced to zero.
2
<PAGE> 4
"New York UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"Notes" has the meaning given to such term in the recitals hereof.
"Offering Circular" means TEC's Offering Circular dated June 5, 1997
relating to the offering of the Notes.
"Operating Disbursement" has the meaning given to such term in Section
5.3(e).
"Operating Reserve Account" has the meaning given to such term in
Section 4.1(d).
"Phase I Budgeted Amount" means the aggregate amount of expenditures
allocated for Phase I in the Budget.
"Phase I Completion Estimate" has the meaning given to such term in
Section 3.2(b).
"Phase I Completion Notice" has the meaning given to such term in
Section 5.4(b).
"Phase II Completion Estimate" has the meaning given to such term in
Section 3.2(b).
"Plans" means the plans and specifications relating to the proposed
expansion and modification of the Refinery, a summary of which is included in
the Offering Circular.
"Project" means the expansion and modification of the Refinery
pursuant to the Plans.
"Project Completion Notice" has the meaning given to such term in
Section 5.4(c).
"Refinery" means refinery owned and operated by TARC and located in
St. Charles Parish, Louisiana, as more fully described in the Offering
Circular.
"Reserve Accounts" means the Contingency Reserve Account, the
Feedstock Reserve Account and the Operating Reserve Account.
"Revised UCC" means Uniform Commercial Code, Revised Article 8,
Investment Securities (with Conforming and Miscellaneous Amendments to Articles
1, 3, 4, 5, 9 and 10), 1994 Official Text, as adopted by the American Law
Institute and the National Conference of Commissioners on Uniform State Laws
and approved by the American Bar Association on February 15, 1995; provided,
however, that if and when the Revised UCC is enacted in the State of New York,
"Revised UCC" shall mean the Revised UCC as enacted in the State of New York
from time to time.
"Special Purpose Disbursements" means Feedstock Disbursements, the
Initial Disbursement, TARC Notes Disbursements, Operating Disbursements and
Interest Disbursements.
"Status Report" has the meaning given to such term in Section 3.2(b).
"Substantial Completion" means with respect to the Project, Phase I,
Phase II or any specified unit or component thereof, (a) the Mechanical
Completion of the Project, Phase I, Phase II or such specified unit or
component, as the case may be and (b) the completion of performance tests of
the Project, Phase I, Phase II or such specified unit or component, as the case
may be, that demonstrate
3
<PAGE> 5
performance in all material respects in accordance with the Plans. Without
limiting the generality of the foregoing, (a) Substantial Completion of Phase I
shall include without limitation, the Mechanical Completion of the process
units and supporting facilities set forth under the heading "Business of TARC
- -- Capital Improvement Program -- Phase I" in the Offering Circular and the
demonstration to the reasonable satisfaction of the Construction Supervisor
that for a period of at least fifteen consecutive days, the Refinery has
sustained (i) the successful performance of the Delayed Coking Unit, the
Hydrodesulfurization 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, (b) Substantial
Completion of Phase II shall include without limitation, the Mechanical
Completion of the process units and supporting facilities set forth under the
heading "Business of TARC -- Capital Improvement Program -- Phase II" in the
Offering Circular and the demonstration to the reasonable satisfaction of the
Construction Supervisor that for a period of at least 72 uninterrupted hours,
the Refinery has sustained (i) the successful performance of all of the
facilities comprising Phase I 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 as input a combined Crude Unit feedstock slate with an average API
Gravity of 22 degrees or less and (c) Substantial Completion of the Project
shall mean the occurrence of both Substantial Completion of Phase I and
Substantial Completion of Phase II.
"TARC" has the meaning given to such term in the introductory
paragraph hereof.
"TARC Accounts" means the TARC Disbursement Account and the Interest
Accumulation Account.
"TARC Disbursement Account" has the meaning given to such term in
Section 4.2(a).
"TARC Intercompany Loan Documents" has the meaning given to such term
in the recitals hereof.
"TARC Intercompany Note" has the meaning given to such term in the
recitals hereof.
"TARC Loan Agreement" has the meaning given to such term in the
recitals hereof.
"TARC Notes Disbursement" has the meaning given to such term in
Section 5.3(d).
"TARC Security Agreement" means the Security and Pledge Agreement
dated as of June 13, 1997 by and between TARC and TEC.
"TEC" has the meaning given to such term in the introductory paragraph
hereof.
"TEC Accounts" means the TEC Disbursement Account, the Contingency
Reserve Account, the Feedstock Reserve Account and the Operating Reserve
Account.
"TEC Certificate" has the meaning given to such term in Section 5.1.
"TEC Disbursement Account" has the meaning given to such term in
Section 4.1(a).
4
<PAGE> 6
"TEC Security Agreement" means the Security and Pledge Agreement dated
as of June 13, 1997 by and between TEC and the Trustee.
"TransTexas Dividend/Share Repurchase Program" means the dividend and
share repurchase program (including without limitation the dividend and share
repurchase program described in the Offering Circular) to be implemented by
TransTexas, pursuant to which TransTexas will effect the payment of one or more
dividends on the common stock of TransTexas or the redemption, acquisition or
purchase, pursuant to a tender offer or any other transaction or mechanism, of
any shares of common stock of TransTexas.
"Trustee" means the trustee under the Indenture.
SECTION 1.2 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding."
ARTICLE II
DISBURSEMENT AGENT
SECTION 2.1 Appointment and Duties.
(a) TEC and TARC acknowledge and agree that Firstar Bank
of Minnesota, N.A. shall act as the Disbursement Agent under this
Agreement, and that the Disbursement Agent is and will act as a
"securities intermediary" (as defined in the Revised UCC) and as a
"financial intermediary" (as defined in the New York UCC as in effect
on the date hereof). TEC and TARC hereby authorize the Disbursement
Agent to take such actions, exercise such powers and perform such
duties as are expressly delegated to the Disbursement Agent by the
terms of this Agreement, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere herein, the Disbursement Agent shall not have any
duties or responsibilities except those expressly set forth herein,
and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or
otherwise exist against the Disbursement Agent.
(b) The Disbursement Agent shall give written notice to
TEC, TARC and the Construction Supervisor of any action taken by it
hereunder (provided that no such notice need be given under
circumstances in which TEC, TARC and the Construction Supervisor shall
have received such notice by any other Person pursuant to the terms of
any other document); such notice shall be given prior to the taking of
such action, unless the Disbursement Agent determines that to do so
would be detrimental to the interests of TEC, in which event such
notice shall be given promptly after the taking of such action.
(c) The Disbursement Agent shall maintain appropriate
books and records with respect to the Accounts in which shall be
recorded all deposits and disbursements hereunder and any Investments
made by the Disbursement Agent and shall permit TEC, TARC or any of
their respective agents or representatives to inspect and to make
copies of such books and records at TARC's sole cost and expense.
(d) The Disbursement Agent shall use its good faith
efforts and utilize prudence in
5
<PAGE> 7
performing its duties hereunder consistent with those of similar and
prudent institutions disbursing disbursement control funds.
(e) On or prior to the last day of each calendar month,
the Disbursement Agent shall deliver to each of TEC, TARC and the
Construction Supervisor a reasonably detailed statement showing the
balance of, disbursements from, reserves to, releases from and
deposits to each of the Accounts.
SECTION 2.2 Rights of Disbursement Agent.
(a) The Disbursement Agent may execute any of its duties
under this Agreement by or through agents or attorneys-in-fact and
shall be entitled to rely on advice of counsel concerning all matters
pertaining to such duties, and protected in respect of any action
taken in good faith and in accordance with such advice.
(b) Neither the Disbursement Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with
this Agreement (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to TEC for
any recitals, statements, representations or warranties made by TARC
or any officer thereof contained in any certificate, report, statement
or other document referenced or provided for in, or received by the
Disbursement Agent under or in connection with, this Agreement. The
Disbursement Agent shall not be under any obligation to TEC to inspect
the properties, books or records of TARC.
(c) The Disbursement Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document or conversation reasonably believed by it to
be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to TARC), independent
accountants and other experts selected by the Disbursement Agent. The
Disbursement Agent shall be fully justified in failing or refusing to
take any action hereunder if such action would, in the opinion of the
Disbursement Agent, be contrary to law or the terms of this Agreement.
(d) The Disbursement Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default unless
the Disbursement Agent has received written notice from TEC, TARC or
the Trustee, describing such Event of Default and stating that such
notice is a "notice of default." The Disbursement Agent shall take
such action with respect to such Event of Default as shall be required
by this Agreement. No provision of this Agreement shall require the
Disbursement Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder 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.
SECTION 2.3 Resignation and Removal of Disbursement Agent.
(a) Subject to the appointment and acceptance of a
successor Disbursement Agent as provided below, the Disbursement Agent
may, at any time, give a notice of resignation to TEC,
6
<PAGE> 8
TARC and the Trustee. Upon receipt of any such notice of resignation,
TARC shall have the right to appoint a successor Disbursement Agent,
which shall be a bank or trust company reasonably acceptable to TEC
and the Trustee. If no successor Disbursement Agent shall have been
appointed by TARC and shall have accepted such appointment within
thirty (30) days after the retiring Disbursement Agent's giving of
notice of resignation, then the retiring Disbursement Agent may
appoint a successor Disbursement Agent, which shall be a bank or trust
company reasonably acceptable to TEC, TARC and the Trustee.
(b) Each of TEC and TARC shall have the right, upon the
expiration of thirty (30) days following delivery of written notice to
the Disbursement Agent and the other party, to cause the Disbursement
Agent to be relieved of its duties hereunder and to select a successor
Disbursement Agent to serve hereunder, which shall be a bank or trust
company reasonably acceptable to the other party.
(c) Upon the acceptance of any appointment as
Disbursement Agent hereunder by a successor Disbursement Agent, (i)
such successor Disbursement Agent, TEC, TARC, the Construction
Supervisor and the Trustee shall enter into an agreement substantially
identical to this Agreement, (ii) such agreement shall provide that
such successor Disbursement Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of
the retiring Disbursement Agent, and that the retiring Disbursement
Agent shall be discharged from its duties and obligations hereunder
and (iii) the retiring Disbursement Agent shall promptly transfer all
Collateral Investments (and other funds on deposit in the Accounts)
within its possession or control to the possession or control of the
successor Disbursement Agent and shall execute and deliver such
notices, instructions and assignment as may be necessary to transfer
the rights of the Disbursement Agent with respect to the Collateral
(and such other funds) to the successor Disbursement Agent. After any
retiring Disbursement Agent's resignation or removal hereunder as
Disbursement Agent, the provisions of this Article shall continue in
effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Disbursement Agent.
SECTION 2.4 Confirmations. The Disbursement Agent hereby confirms
that (i) it is a "securities intermediary" within the meaning of such term in
the Revised UCC, (ii) each of the Accounts is a "securities account" as such
term in defined in Section 8-501(a) of the Revised UCC, (iii) the Disbursement
Agent shall, subject to the terms of this Agreement, treat the Trustee as
entitled to exercise the rights that comprise any financial asset credited to
the account, (iv) all property delivered to the Disbursement Agent pursuant to
this Agreement will be promptly credited to the appropriate Account in
accordance with the terms hereof and (v) all securities or other property
underlying any financial assets credited to the Accounts shall be registered in
the name of the Disbursement Agent, endorsed to the Disbursement Agent or in
blank or credited to another securities account maintained in the name of the
Disbursement Agent.
SECTION 2.5 "Financial Assets" Election. The Disbursement Agent
hereby agrees that each item of property (whether investment property,
financial asset, security, instrument or cash) credited to each of the Accounts
shall be treated as a "financial asset" within the meaning of Section
8-102(a)(9) of the Revised UCC.
SECTION 2.6 Entitlement Orders. If at any time the Disbursement
Agent shall receive an "entitlement order" (within the meaning of Section
8-102(a)(8) of the Revised UCC) issued by the Trustee and relating to any of
the Accounts, the Disbursement Agent shall comply with such entitlement order
7
<PAGE> 9
without further consent by TEC, TARC or any other Person.
SECTION 2.7 Representations, Warranties and Covenants of the
Disbursement Agent. The Disbursement Agent hereby makes the following
representations, warranties and covenants:
(a) Each of the Accounts will be maintained in the manner
set forth herein until termination of this Agreement. The
Disbursement Agent shall not change the name or account number of any
of the Accounts without the prior written consent of the Trustee (in
the case of the TEC Accounts) or TEC (in the case of the TARC
Accounts).
(b) No financial asset is or will be registered in the name
of TEC or TARC, payable to the order of TEC or TARC, or specially
endorsed to TEC or TARC, except to the extent such financial asset has
been endorsed to the Disbursement Agent or in blank.
(c) This Agreement is the valid and legally binding obligation
of the Disbursement Agent.
(d) The Disbursement Agent has not entered into, and until the
termination of this Agreement will not enter into, any agreement with
any other Person relating to any of the Accounts and/or any financial
assets credited thereto pursuant to which it has agreed to comply with
entitlement orders (as defined in Section 8- 102(a)(8) of the Revised
UCC) of such Person. The Disbursement Agent has not entered into any
other agreement with TEC, TARC or the Trustee purporting to limit or
condition the obligation of the Disbursement Agent to comply with
entitlement orders as set forth in Section 2.6.
SECTION 2.8 Notice of Adverse Claims. Except for the claims and
interest of TEC, the Trustee and of TARC in the Accounts, the Disbursement
Agent does not know of any claim to, or interest in, the Accounts or in any
"financial asset" (as defined in Section 8-102(a) of the Revised UCC) credited
thereto. If any Person asserts any lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against any of the Accounts or in any financial asset carried
therein, the Disbursement Agent will promptly notify TEC, the Trustee and TARC
thereof.
SECTION 2.9 Correspondence. The Disbursement Agent will promptly
send copies of all statements, confirmations and other correspondence
concerning the Accounts and/or any financial assets credited thereto
simultaneously to each of TEC, TARC, the Construction Supervisor and the
Trustee in accordance with Section 8.2.
SECTION 2.10 Subordination of Lien; Waiver of Set-Off. In the event
that the Disbursement Agent has or subsequently obtains by agreement, operation
of law or otherwise a security interest in any of the Accounts or any security
entitlement credited thereto, the Disbursement Agent hereby agrees that such
security interest shall be subordinate to the security interests of the Trustee
and of TEC as assigned to the Trustee. The financial assets and other items
credited to the Accounts will not be subject to deduction, set-off, banker's
lien, or any other right in favor of any Person other than the Trustee, except
that the Disbursement Agent may set off (i) all amounts due to it in respect of
its customary fees and expenses for the routine maintenance and operation of
the Accounts, and (ii) the face amount of any checks which have been credited
to the Accounts but are subsequently returned unpaid because of uncollected or
insufficient funds.
8
<PAGE> 10
ARTICLE III
CONSTRUCTION SUPERVISOR
SECTION 3.1 Appointment. TARC hereby designates and appoints Baker &
O'Brien, Inc., as the Construction Supervisor under this Agreement, and
authorizes the Construction Supervisor to take such actions, exercise such
powers and perform such duties as are expressly delegated to the Construction
Supervisor by the terms of this Agreement, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere herein, the Construction Supervisor shall not have any
duties or responsibilities, except those expressly set forth herein, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Construction Supervisor.
SECTION 3.2 Duties. In addition to those expressly set forth
elsewhere in this Agreement, the Construction Supervisor shall have the
following duties and responsibilities:
(a) The Construction Supervisor shall spend as much time
at the site of the Project as it determines to be reasonably necessary
to fulfill its duties hereunder but shall, in any event, inspect the
Project at least once per calendar week.
(b) During the term of this Agreement, the Construction
Supervisor shall deliver to the Disbursement Agent, TARC and TEC
reasonably detailed written reports on the progress of work on the
Project (each, a "Status Report"), at least once during each period of
two consecutive calendar months beginning on January 1, March 1, May
1, July 1, September 1 and November 1 of each calendar year. Each
Status Report shall include estimates as to (i) the total amount of
additional expenditures required to be incurred in order to achieve
Substantial Completion of Phase I (the "Phase I Completion Estimate")
and, (ii) the total amount of additional expenditures required to be
incurred in order to achieve Substantial Completion of Phase II (the
"Phase II Completion Estimate"). Such estimates shall be based on
estimates and reasonably detailed supporting documentation that TARC
shall prepare and provide to the Construction Supervisor. The
Construction Supervisor shall review such estimates prepared by TARC
as well as such supporting documentation, and if the Construction
Supervisor, in its sole judgment, believes that such estimates are
reasonable, then the Construction Supervisor shall include such
estimates in the Status Report; provided, however, that if the
Construction Supervisor, in its sole judgment, does not believe that
such estimates are reasonable, then the Construction Supervisor shall
revise such estimates in order to produce estimates that it believes
are reasonable, and shall include such revised estimates in the Status
Report. If the Phase I Completion Estimate exceeds the difference
between the Phase I Budgeted Amount and the aggregate amount of funds
expended in connection with Phase I on or prior to the date of the
Status Report, then the Status Report shall include an instruction to
the Disbursement Agent to reserve from the TEC Disbursement Account to
the Contingency Reserve Account an amount equal to the lesser of such
excess and the total amount remaining in the TEC Disbursement Account.
If the difference between the Phase I Budgeted Amount and the
aggregate amount of funds expended in connection with Phase I on or
prior to the date of the Status Report, exceeds the Phase I Completion
Estimate, then the Status Report shall include an instruction to the
Disbursement Agent to release from the Contingency Reserve Account to
the TEC Disbursement Account an amount equal to the lesser of such
excess and the positive difference, if any, between the total amount
remaining in the Contingency Reserve Account and the Minimum
Contingency Reserve Amount; provided, however, that such Status Report
shall include an instruction to the Trustee to not release any funds
from the Contingency
9
<PAGE> 11
Reserve Account to the TEC Disbursement Account, if such release would
cause the total amount of funds in the Contingency Reserve Account to
be less than the Minimum Contingency Reserve Amount.
(c) The Construction Supervisor shall review each
Disbursement Certificate submitted by TARC. The Construction
Supervisor shall deliver a Construction Supervisor Certificate to the
Disbursement Agent approving a disbursement if and only if the
Construction Supervisor determines that:
(i) such disbursement has been requested to (A)
reimburse TARC for a Budgeted Line Item or pay for any other
disbursement contemplated in Section 5.3, (B) reimburse TARC
for the cost of work that has been performed on the Project in
accordance with the Plans, (C) reimburse TARC for the cost of
goods or materials necessary for Substantial Completion of the
Project that have been or will be delivered to the Project
site, (D) reimburse TARC for the cost of progress payments
that have been made pursuant to contracts with other Persons
supplying goods or services to TARC that are necessary for
Substantial Completion of the Project, or (E) reimburse TARC
for the cost of deposits to secure letters of credit for goods
or materials to be delivered to the Project site and used in
the Project;
(ii) the reimbursement for which such disbursement is
requested does not cause the total expenditures for Phase II
to exceed $129,000,000 prior to the delivery by the
Construction Supervisor to the Disbursement Agent of a Coking
Unit Completion Notice;
(iii) with respect to any such disbursement relating
to Phase II and requested prior to the delivery of a Coking
Unit Completion Notice by the Construction Supervisor to the
Disbursement Agent and TEC, after giving effect to such
disbursement, there shall remain funds in the TEC Disbursement
Account that are not reserved in any of the Reserve Accounts;
and
(iv) the Construction Supervisor is satisfied, by
representations from TARC (unless the Construction Supervisor
has reason to believe otherwise) or by any other means, that
all of TARC's transactions in connection with the Project for
which a disbursement is requested are arm's length
transactions with unrelated, unaffiliated Persons or are on
terms that are at least as favorable to TARC as the terms that
could be obtained in a comparable transaction made on an arm's
length basis with unrelated, unaffiliated Persons.
(d) Prior to approving any requested disbursement, the
Construction Supervisor shall (i) review invoices for goods and
services provided to the Project for which TARC seeks reimbursement
from any of the Accounts, (ii) review all contracts of TARC pursuant
to which TARC is required to make progress payments, estimated
payments or deposits and for which TARC seeks a disbursement from any
of the Accounts, (iii) review copies of all lien waivers and releases
provided to TARC by its contractors and suppliers and (iv) review all
other documents and information that the Construction Supervisor deems
appropriate in order to determine the accuracy of the information set
forth in the Disbursement Certificate.
(e) If the Construction Supervisor is unable to approve a
disbursement within five (5) Business Days of receipt of the
Disbursement Certificate, the Construction Supervisor shall
10
<PAGE> 12
give written notice to TARC, the Disbursement Agent and TEC to such
effect.
SECTION 3.3 Rights of Construction Supervisor.
(a) The Construction Supervisor may execute any of its
duties under this Agreement by or through agents and shall be entitled
to advice of counsel concerning all matters pertaining to such duties.
(b) Neither the Construction Supervisor nor any of its
officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be liable for any action lawfully taken or omitted to
be taken by it or such Person under or in connection with this
Agreement (except for its or such Person's own gross negligence or
willful misconduct).
(c) The Construction Supervisor shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to TARC), independent accountants and
other experts selected by the Construction Supervisor. The
Construction Supervisor shall be fully justified in failing or
refusing to take any action hereunder if such action would, in the
opinion of the Construction Supervisor, be contrary to law or the
terms of this Agreement.
(d) If, with respect to a proposed action to be taken by
it, the Construction Supervisor shall determine in good faith that the
provisions of this Agreement relating to the functions or
responsibilities or discretionary powers of the Construction
Supervisor are or may be ambiguous or inconsistent, the Construction
Supervisor shall notify TARC and TEC (identifying the proposed action
and the provisions that it considers are or may be ambiguous or
inconsistent) and may decline either to perform such function or
responsibility or to exercise such discretionary power unless it has
received the written confirmation of TARC and TEC that it concurs in
the circumstances that the action proposed to be taken by the
Construction Supervisor is consistent with the terms of this Agreement
or is otherwise appropriate.
SECTION 3.4 Resignation and Removal of Construction Supervisor.
(a) Subject to the appointment and acceptance of a
successor Construction Supervisor as provided below, the Construction
Supervisor may, at any time, give a notice of resignation to TEC and
TARC. Upon receipt of any such notice of resignation, TARC shall have
the right to appoint a successor Construction Supervisor, which
successor shall not be affiliated with, or under the control of, TARC
or any of its affiliates. If no successor Construction Supervisor
shall have been appointed by TARC and shall have accepted such
appointment within thirty (30) days after the retiring Construction
Supervisor's giving of notice of resignation, then the retiring
Construction Supervisor may appoint a successor Construction
Supervisor, which shall be (i) reasonably acceptable to TARC but not
affiliated with, or under the control of, TARC or any of its
affiliates or (ii) one of the alternate Construction Supervisors set
forth on Schedule I hereto (each, an "Alternate").
(b) TARC and TEC shall each, individually, have the
right, upon the expiration of thirty (30) days following delivery of
written notice to the Construction Supervisor, TARC, TEC
11
<PAGE> 13
and the Disbursement Agent, to cause the Construction Supervisor to be
relieved of its duties hereunder and to select a successor
Construction Supervisor to serve hereunder, which shall be either (i)
reasonably acceptable to the other party or (ii) one of the
Alternates; provided, that the successor Construction Supervisor shall
not be affiliated with or under the control of, TARC or any of its
affiliates.
(c) Upon the acceptance of any appointment as
Construction Supervisor hereunder by a successor Construction
Supervisor, (i) such successor Construction Supervisor, the
Disbursement Agent, TEC and TARC shall enter into an agreement
substantially identical to this Agreement, and (ii) such agreement
shall provide that such successor Construction Supervisor shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Construction Supervisor, and
that the retiring Construction Supervisor shall be discharged from its
duties and obligations hereunder. After any retiring Construction
Supervisor's resignation or removal hereunder as Construction
Supervisor, the provisions of this Article shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Construction Supervisor.
ARTICLE IV
ACCOUNTS
SECTION 4.1 Establishment of the TEC Accounts.
(a) On the date hereof, TEC has opened and shall
hereafter cause to be maintained with and at the corporate trust
department of the Disbursement Agent a custodial account (the "TEC
Disbursement Account") under the sole dominion and control of the
Trustee, in the name of TEC but indicating the lien of the Trustee.
Funds shall be released from the TEC Disbursement Account only in
accordance with the provisions of Article V.
(b) TEC shall maintain with the Disbursement Agent a
segregated subaccount of the TEC Disbursement Account (the
"Contingency Reserve Account") under the sole dominion and control of
the Trustee, in the name of TEC but indicating the lien of the
Trustee. Funds shall be released from the Contingency Reserve Account
only in accordance with the provisions of Section 4.4(b) and Article
V.
(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.
(d) TEC shall maintain with the Disbursement Agent a
segregated subaccount of the TEC Disbursement Account (the "Operating
Reserve Account") under the sole dominion and control of the Trustee,
in the name of TEC but indicating the lien of the Trustee. Funds
shall be released from the Operating Reserve Account only in
accordance with the provisions of Article V.
12
<PAGE> 14
SECTION 4.2 Establishment of the TARC Accounts.
(a) On the date hereof, TARC has opened and shall
hereafter cause to be maintained with and at the corporate trust
department of the Disbursement Agent a separate custodial account (the
"TARC Disbursement 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
Disbursement Account only in accordance with the provisions of Article
V.
(b) TARC shall maintain with the Disbursement Agent a
separate custodial account (the "Interest Accumulation 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 Interest Accumulation Account only in accordance
with the provisions of Article V.
SECTION 4.3 Deposits to the Accounts.
(a) On the date hereof, TEC shall deposit $73,293,184.54
in the TEC Disbursement Account. Thereafter, TEC shall deposit
promptly all funds that it receives pursuant to the TransTexas
Dividend/Share Repurchase Program.
(b) On the date hereof, TARC shall deposit in the TARC
Disbursement Account $135,100,255.92 out of the proceeds received by
it from the loan made pursuant to the TARC Intercompany Loan
Documents. Thereafter, TARC shall deposit promptly all funds that it
receives pursuant to the TransTexas Dividend/Share Repurchase Program.
(c) TARC may deposit in the TARC Disbursement Account
insurance proceeds in accordance with Section 4.6 of the Mortgage.
(d) TARC may deposit in the TARC Disbursement Account the
Net Cash Proceeds from Asset Sales in accordance with Section 8.4 of
the TARC Loan Agreement.
SECTION 4.4 Reserves to and Releases from the Reserve Accounts.
(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, and thereafter, 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 Feedstock Reserve Account, until the aggregate amount
reserved therein equals the difference between $50,000,000 and the
aggregate amount of Feedstock Disbursements made on or prior to the
date on which such amount is so reserved.
(b) Upon receipt of each Status Report, the Disbursement
Agent shall comply promptly (or as promptly as practicable when funds
become available in the appropriate Account) with the instructions, if
any, therein regarding the reserve of funds from the TEC Disbursement
Account to the Contingency Reserve Account or the release of funds
from the Contingency Reserve Account to the TEC Disbursement Account.
Upon delivery by the Construction Supervisor to the Disbursement Agent
of a Coking Unit Completion Notice, the Disbursement
13
<PAGE> 15
Agent shall release from the Contingency Reserve Account to the TEC
Disbursement Account all remaining funds in the Contingency Reserve
Account.
SECTION 4.5 Security Interest in the TEC Accounts.
(a) As security for the prompt and complete payment and
performance in full of all obligations under the Indenture and the
Notes, TEC has agreed, pursuant to the TEC Security Agreement, to
grant to the Trustee a security interest in and a lien on and to
pledge and assign to the Trustee all of its right, title and interest
in and to the TEC Accounts and all funds and investments deposited
therein.
(b) The Disbursement Agent acknowledges notice of, and
consents to the terms and provisions of, the TEC Security Agreement
and agrees that notwithstanding anything to the contrary in this or
any other agreement relating to the TEC Accounts, the TEC Accounts are
and will be subject to the terms and conditions of the TEC Security
Agreement, will be held in trust on behalf of the Trustee and not
commingled with any ordinary deposit or commercial bank account, will
be maintained with the corporate trust department of the Disbursement
Agent solely for the Trustee pursuant to the TEC Security Agreement
and will be subject to the written instructions of the Trustee given
in accordance with the TEC Security Agreement.
SECTION 4.6 Security Interest in the TARC Accounts.
(a) As security for the prompt and complete payment and
performance in full of all obligations under the TARC Intercompany
Loan Documents, including without limitation the TARC Intercompany
Note, TARC has agreed, pursuant to the TARC Security Agreement, to
grant to TEC a security interest in and a lien on and to pledge and
assign to TEC all of its right, title and interest in and to the TARC
Accounts and all funds deposited therein. Furthermore, pursuant to
the TEC Security Agreement, TEC has assigned its interest in any
collateral securing the TARC Intercompany Note, including without
limitation the TARC Accounts, to the Trustee.
(b) The Disbursement Agent acknowledges notice of, and
consents to the terms and provisions of, the TARC Security Agreement
and the TEC Security Agreement and agrees that notwithstanding
anything to the contrary in this or any other agreement relating to
the TARC Accounts, the TARC Accounts are and will be subject to the
terms and conditions of the TARC Security Agreement and the TEC
Security Agreement, will be held in trust on behalf of TEC and the
Trustee and not commingled with any ordinary deposit or commercial
bank account, will be maintained with the corporate trust department
of the Disbursement Agent solely for TEC and the Trustee pursuant to
the TARC Security Agreement and the TEC Security Agreement and will be
subject to the written instructions of TEC and the Trustee given in
accordance with the TARC Security Agreement and the TEC Security
Agreement.
SECTION 4.7 Certain Agreements with respect to the Accounts.
(a) In accordance with written instructions received from
TARC, the Disbursement Agent shall, unless otherwise instructed by the
Trustee, (i) invest amounts on deposit in each of the Accounts in such
Cash Equivalents as TEC may select (in the case of the TEC Accounts)
or as TARC may select (in the case of the TARC Accounts) and credit
such Cash Equivalents to the respective Account, (ii) deposit and hold
in the Interest Accumulation Account all interest paid on the Cash
Equivalents referenced in clause (i) above and invest such interest in
such Cash
14
<PAGE> 16
Equivalents as TARC may select and credit such Cash Equivalents to the
respective Account, (iii) reinvest other proceeds of the Cash
Equivalents referred to in clause (i) or (ii) above that may mature or
be sold in such Cash Equivalents as TEC may select (in the case of the
TEC Accounts) or as TARC may select (in the case of the TARC Accounts)
and credit such Cash Equivalents to the respective Account (all the
Cash Equivalents referenced in clauses (i) and (ii) above being,
collectively, "Collateral Investments") and (iv) deposit and hold in
the respective Accounts all proceeds that are not invested or
reinvested in Collateral Investments.
(b) All disbursements and releases made pursuant to this
Agreement shall be made by the Disbursement Agent irrespective of, and
without deduction for, any counterclaim, defense, recoupment or
set-off and shall be final, and the Disbursement Agent will not seek
to recover from TEC for any reason any such payment once made.
(c) All service charges and fees with respect to this
Agreement or the Accounts shall be paid by TARC in accordance with the
provisions of Section 6.1(d).
(d) The Trustee and TEC shall be entitled to exercise any
and all rights of TARC in respect of the Accounts in accordance with
the terms of the TEC Security Agreement and the TARC Security
Agreement, respectively, and the Disbursement Agent shall comply with
such exercise, subject to the provisions of Section 8.8.
SECTION 4.8 Valuation of Accounts. For purposes of determining the
value of any amounts in the Accounts, all Collateral Investments shall be
valued at the lower of cost or market value.
ARTICLE V
DISBURSEMENTS FROM THE ACCOUNTS
SECTION 5.1 Priority Disbursements. At any time after the TARC
Intercompany Note is due and payable, upon maturity, acceleration thereof or
otherwise, funds in any of the Accounts specified by TEC shall be disbursed by
the Disbursement Agent to any account specified by TEC, upon receipt of a
certificate of TEC substantially in the form of Exhibit B hereto (each, a "TEC
Certificate"), certifying that such amounts will be applied promptly in
satisfaction of obligations of TARC under the TARC Intercompany Loan Documents.
SECTION 5.2 Conditions to Disbursement of Funds. Funds in the
Accounts shall be disbursed for the account of TARC pursuant to the provisions
of Section 5.3(a) or Section 5.3(b) only upon satisfaction of each of the
conditions set forth below in this Section 5.2. All other disbursements from
the Accounts shall be made only upon satisfaction of each of the conditions set
forth in Section 5.2(d) and Section 5.2(e).
(a) TARC shall have delivered to the Disbursement Agent,
TEC and the Construction Supervisor a written notice substantially in
the form of Exhibit C hereto (the "Disbursement Certificate"),
specifying the amount and date of the requested disbursement. The
Disbursement Certificate shall be executed by a duly authorized
officer of TARC and shall be completed and certified to be accurate by
TARC. The Disbursement Certificate shall specifically identify the
nature of each expense.
(b) In addition to the copy of the Disbursement
Certificate referenced above and the
15
<PAGE> 17
documents referenced therein (but without duplication), TARC shall
have delivered, or caused the delivery, to TEC and the Construction
Supervisor copies of invoices, purchase orders, contracts, delivery
receipts, payroll ledgers and any further information or certificates
required hereunder and such other information as TEC or the
Construction Supervisor may from time to time reasonably require to
determine the accuracy of the information set forth in the
Disbursement Certificate.
(c) The Construction Supervisor shall have reviewed and
approved the Disbursement Certificate and shall have sent a written
notice substantially in the form of Exhibit D hereto (the
"Construction Supervisor Certificate") to the Disbursement Agent and
TEC confirming its approval.
(d) If the Project has been materially injured or damaged
by fire or other casualty, funds equal to the amount of any insurance
proceeds received in respect of such fire or other casualty shall have
been deposited in the TARC Disbursement Account in accordance with the
provisions of the Mortgage.
(e) An Event of Default shall not have occurred and be
continuing.
SECTION 5.3 Disbursements from the Accounts.
(a) To the extent that the amount of funds in the TARC
Disbursement Account is greater than zero, all disbursements from the
Accounts (other than Special Purpose Disbursements) shall be made out
of the TARC Disbursement Account until the amount of funds in such
account is exhausted, and thereafter, as long as the TEC Disbursement
Account contains any funds that have not been reserved in any of the
Reserve Accounts, all disbursements from the Accounts (other than
Special Purpose Disbursements) shall be made from the TEC Disbursement
Account out of funds that have not been reserved in any of the Reserve
Accounts. If the amount of funds in the TEC Disbursement Account that
has not been reserved in any of the Reserve Accounts is zero,
disbursements from the Accounts (other than Special Purpose
Disbursements) shall be made first from the Contingency Reserve
Account, until the amount of funds therein is exhausted, and second
from the Feedstock Reserve Account, until the amount of funds therein
is exhausted, third from the Operating Account, until the amount of
funds therein is exhausted and fourth from the Interest Accumulation
Account, until the amount of funds therein is exhausted.
(b) 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; 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.
(c) Notwithstanding any provision hereof to the contrary,
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.
16
<PAGE> 18
(d) Disbursements ("TARC Notes Disbursements") of funds
specified in a Disbursement Certificate for the payment of interest
on, or the redemption, purchase, defeasance or other retirement of,
any or all of TARC's Guaranteed First Mortgage Discount Notes due 2002
or TARC's Guaranteed First Mortgage Notes due 2002 (collectively,
"TARC Notes") shall be made out of the TARC Disbursement Account.
(e) If requested by TARC pursuant to a Disbursement
Certificate, once during each calendar month, the Disbursement Agent
shall make a disbursement from the Operating Reserve Account (an
"Operating Disbursement") to TARC in the amount requested by TARC (or
such lesser amount as may be reserved in the Operating Reserve
Account); provided, that the amount of each Operating Disbursement may
not exceed $1,500,000 (or $4,500,000 if such amount is to be disbursed
in December 1997); provided, further, that if less than $1,500,000 is
disbursed pursuant to this Section 5.3(e) in any calendar month (or
less than $4,500,000 is disbursed in December 1997), then each such
difference shall be carried forward and shall be added to the amounts
that may be disbursed pursuant to this Section 5.3(e) in one or more
subsequent months.
(f) If requested by TARC or TEC, the Disbursement Agent
shall make disbursements from the Interest Accumulation Account (an
"Interest Disbursement") to TARC or TEC, as the case may be, in the
amount requested by such party (or such lesser amount as may be on
deposit in the Interest Accumulation Account);
(g) Subject to the terms and conditions of the TARC
Security Agreement and the TEC Security Agreement, the Disbursement
Agent shall sell all or such portion of the investments held in the
appropriate Accounts (with the investments having the shortest
maturities sold first) as shall be necessary to fund the requested
disbursement in accordance with the terms hereof and in accordance
with written instructions of TEC or TARC, as the case may be,
delivered to the Disbursement Agent at least one Business Day prior to
any proposed Date of Disbursement.
(h) Subject to the provisions of this Section 5.3, if
TARC has delivered a Disbursement Certificate with all required
supporting information, the Construction Supervisor has delivered a
Construction Supervisor Certificate and the other conditions specified
in Section 5.2 have been satisfied, the Disbursement Agent shall make
the requested disbursement from the appropriate Account by the later
to occur of (i) the requested Date of Disbursement or (ii) the second
Business Day after satisfaction of all such conditions.
SECTION 5.4 Completion of the Project.
(a) Upon Mechanical Completion (in accordance with the
Plans) of the Delayed Coking Unit, the Hydrodesulfurization Unit and
the related Sulfur Recovery System (with a capacity of 160 long tons
per day), all of which are included within Phase I and described in
the Plans, TARC shall give written notice of such Mechanical
Completion to the Construction Supervisor. Promptly after receipt of
such notice, the Construction Supervisor shall determine, by whatever
means it deems appropriate, whether it agrees that such Mechanical
Completion has occurred, and if the Construction Supervisor so agrees,
then the Construction Supervisor shall provide prompt written notice
of such Mechanical Completion (a "Coking Unit Completion Notice") to
the Disbursement Agent and TEC.
(b) Upon Substantial Completion (in accordance with the
Plans) of Phase I, TARC shall give written notice of such Substantial
Completion to the Construction Supervisor.
17
<PAGE> 19
Promptly after receipt of such notice, the Construction Supervisor
shall determine, by whatever means it deems appropriate, whether it
agrees that such Substantial Completion has occurred, and if the
Construction Supervisor so agrees, then the Construction Supervisor
shall provide prompt written notice of such Substantial Completion (a
"Phase I Completion Notice") to the Disbursement Agent and TEC.
(c) Upon Substantial Completion (in accordance with the
Plans) of the Project, TARC shall give written notice of such
Substantial Completion to the Construction Supervisor. Promptly after
receipt of such notice, the Construction Supervisor shall determine,
by whatever means it deems appropriate, whether it agrees that such
Substantial Completion has occurred, and if the Construction
Supervisor so agrees, then the Construction Supervisor shall provide
prompt written notice of such Substantial Completion (a "Project
Completion Notice") to the Disbursement Agent and TEC.
(d) If the Construction Supervisor has provided a Project
Completion Notice to the Disbursement Agent and TEC and either (i)
sixty-five (65) days have passed since the date of such Project
Completion Notice and TARC has furnished to the Disbursement Agent and
TEC a clear lien and privilege certificate, dated after such
sixty-five (65) days have passed, from the St. Charles Parish Clerk of
Court, reflecting no outstanding mechanic's or materialman's liens
with respect to the Project, or (ii) TARC has obtained an endorsement
to its title policy for the Mortgage Property affirmatively insuring
against all liens that may be asserted with respect to the Project and
has delivered evidence of such endorsement to the Disbursement Agent
and TEC, then, within five (5) days after the satisfaction of such
conditions, the Disbursement Agent shall liquidate all investments in
the Accounts and release all amounts remaining on deposit in the
Accounts to TARC in accordance with written instructions provided by
TARC. The date of such release shall be the "Final Disbursement
Date."
ARTICLE VI
COVENANTS OF TARC AND TEC
SECTION 6.1 Covenants of TARC.
(a) Copies of the Contracts, Etc. TARC shall deliver to
the Construction Supervisor and, upon the request of the Disbursement
Agent or TEC, to the Disbursement Agent or TEC (i) as promptly as
practicable, and in any event no later than five (5) Business Days
after the execution thereof, copies of any contract for work or
materials for the Project, or series of related contracts for
substantially the same work or materials, with payments in an amount
equal to or in excess of $100,000, together with all amendments and
modifications thereto, and, upon the request of the Disbursement
Agent, TEC or the Construction Supervisor, copies of any other
contracts for work or materials for the Project, and (ii) as promptly
as practicable, copies of all work permits, building permits and other
required permits.
(b) Access to Information. TARC shall permit and cause
each of its Subsidiaries to permit the Construction Supervisor, TEC
and the Disbursement Agent on reasonable notice and at such times as
shall be reasonably requested (i) to inspect the Plans and the Budget,
(ii) to inspect and review (and receive copies of, if requested) (A)
all contracts relating to the Project, (B) all books and records of
TARC and any of its Subsidiaries related to the Project and (C) such
other information as such Person shall reasonably request relating to
the Project, including copies
18
<PAGE> 20
of receipts, invoices and other supporting documentation to
substantiate the costs to be paid from the proceeds of any requested
disbursement hereunder, (iii) to attend any job progress meetings and
(iv) to discuss the Project and other matters related thereto with any
Project engineer, any contractor or subcontractor performing work or
supplying material for the Project or any employee of TARC and its
Subsidiaries.
(c) Delivery of Prepaid Goods and Materials. TARC shall
cause all goods and materials paid for with funds disbursed from any
of the Accounts to be delivered to (to the extent TARC controls such
delivery), and used in, the Project in due course in accordance with
the Plans or cause such goods and materials to be (i) sold for cash
and the proceeds of such sale deposited in the TARC Disbursement
Account or (ii) exchanged for other goods and materials that are
delivered to, and used in, the Project, in the case of each of clause
(i) and (ii) above, to the extent not prohibited pursuant to the terms
of the TARC Intercompany Loan Agreement.
(d) Payment of Fees and Expenses. TARC shall promptly,
but no later than thirty (30) days after its receipt of an invoice,
pay the reasonable fees and expenses of the Disbursement Agent and the
Construction Supervisor in connection with this Agreement. To the
extent available, such fees and expenses may be paid through the TARC
Disbursement Account or the TEC Disbursement Account by including such
amounts in a Disbursement Certificate.
SECTION 6.2 Covenants of TEC. TEC shall give prompt written notice
to the Disbursement Agent upon (i) the occurrence of an Event of Default known
to it and (ii) upon cure or waiver of any such Event of Default known to it.
ARTICLE VII
ARBITRATION
SECTION 7.1 Arbitration. Any disagreement with respect to the
release of funds from any of the Accounts, or any related disagreement with
respect to the construction, meaning or effect of this Agreement, arising out
of this Agreement or concerning the rights or obligations of the parties
hereunder shall be submitted to arbitration, one arbitrator to be chosen by
TARC, one by the Construction Supervisor, and a third to be chosen by the first
two arbitrators before they enter into arbitration. The arbitrators shall be
impartial and shall be active or retired persons with experience in
construction, development and/or construction lending. The third arbitrator
chosen by the first two arbitrators shall also have experience in the petroleum
refining, energy or petrochemical industry.
In the event that either party should fail to choose an arbitrator
within fifteen (15) days following a written request by the other party to
enter into arbitration, the requesting party may choose two arbitrators who
shall, in turn, choose the third arbitrator. If the first two arbitrators have
not chosen a third arbitrator at the end of fifteen (15) days following the
last day of the selection of the first two arbitrators, each of the first two
arbitrators shall name three candidates, of whom the other arbitrator shall
eliminate two, and the determination of the third arbitrator shall be made from
the remaining two candidates by drawing lots. Each party shall present its
case to the arbitrators within fifteen (15) days following the date of the
appointment of the third arbitrator. The decision of a majority of the three
arbitrators shall be final and binding upon both parties. Judgment may be
entered upon the arbitration award in any court having jurisdiction. Each
party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other the expense of the third arbitrator and of the
arbitration. In the event that the two arbitrators are chosen by one party, as
above provided, the expense of the arbitrators
19
<PAGE> 21
and the arbitration shall be equally divided between the two parties. Any such
arbitration shall take place in New Orleans, Louisiana unless some other
location is mutually agreed upon by the parties. The arbitrators shall resolve
any dispute arising hereunder in a manner consistent with the intent of the
parties as expressed in this Agreement. The arbitrators shall not award any
punitive, consequential or exemplary damages or any amount in excess of the
amount to be released from the Accounts. All awards by the arbitrators shall
be payable solely from the amounts on deposit in the Accounts.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc. No amendment, modification or waiver of
any provisions of this Agreement may be made except by written agreement of the
parties hereto.
SECTION 8.2 Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be sufficiently
given if made by hand delivery, by telex, by facsimile or registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:
To the Disbursement Agent:
Firstar Bank of Minnesota, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Facsimile: (612) 229-6415
Attention: Frank Leslie
To TEC:
TransAmerican Energy Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Facsimile: (281) 986-8865
Attention: Ed Donahue
with a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Facsimile: (214) 999-4667
Attention: C. Robert Butterfield
20
<PAGE> 22
To the Construction Supervisor:
Baker & O'Brien, Inc.
7557 Rambler Road, Suite 200 LB 85
Dallas, Texas 75231
Facsimile: (214) 368-0190
Attention: John O'Brien
To TARC:
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Facsimile: (281) 986-8865
Attention: Ed Donahue
with a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Facsimile: (214) 999-4667
Attention: C. Robert Butterfield
Any party hereto may by notice to each other party designate such
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to any party 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 faxed; five
calendar days after mailing, if sent by registered or certified mail; and one
business day after mailing, if sent by overnight delivery service (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
SECTION 8.3 No Waiver, Remedies. No failure on the part of the
Disbursement Agent, TEC or any Holder to exercise, and no delay in exercising,
any right under any Security Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.
SECTION 8.4 Indemnity and Expenses.
(a) TARC agrees to indemnify the Disbursement Agent and
the Construction Supervisor, and their officers, directors, employees,
agents, attorneys-in-fact and affiliates (the "Indemnified Parties"),
from and against any and all claims, losses and liabilities directly
or indirectly caused by, related to or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from (i) valid claims of TARC
against such Indemnified Party arising out of a breach of this
Agreement by such Indemnified Party or (ii) such Indemnified Party's
bad faith, gross negligence or willful misconduct, in either case, as
determined by a final judgment of a court of competent jurisdiction.
21
<PAGE> 23
(b) TARC shall, promptly upon demand but no later than
thirty (30) days after its receipt of an invoice, pay to the
Disbursement Agent and the Construction Supervisor the amount of any
and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the
Disbursement Agent, TEC or the Construction Supervisor may incur in
connection with (i) this Agreement, (ii) the exercise or enforcement
of any rights hereunder or (iii) the failure by TARC to perform or
observe any of the provisions hereof.
(c) The issuance of a Construction Supervisor's
Certificate or the making of any disbursement from any of the Accounts
or part thereof shall not constitute an approval or acceptance of the
work or material by TEC, the Construction Supervisor or the
Disbursement Agent, nor shall it give rise to any liability or
responsibility related to:
(i) the quality of the work, the quantity of the
work, the rate or progress in completion of the work, or the
sufficiency of materials or labor being supplied in connection
therewith; and
(ii) any errors, omissions, inconsistencies or
other defects of any nature in the Plans.
(d) Any inspection of the work that either TEC, the
Disbursement Agent or the Construction Supervisor may choose to make,
whether through any consulting engineer, agent or employee or officer,
during the progress of the work shall be solely for TEC's, the
Disbursement Agent's or the Construction Supervisor's information, and
under no circumstances will any such inspection be deemed to have been
made for the purpose of supervising or superintending the work or for
the information or protection of any right or interest of any Persons
other than TEC, the Disbursement Agent, the Construction Supervisor or
the Holders.
(e) In no event shall TEC, the Disbursement Agent or the
Construction Supervisor be liable for any Liens that may be filed by
third parties against the Project.
SECTION 8.5 Execution in Counterparts. This Agreement may be
executed in any number of separate counterparts and by different 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. Delivery of an executed counterpart of a signature page to
this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 8.6 Relationship of Disbursement Agent. The Disbursement
Agent shall not be under any responsibility in respect of the validity or
sufficiency of this Agreement or the execution and delivery hereof or in
respect of the validity or sufficiency of any document or agreement delivered
in connection herewith, including, but not limited to, any document or
agreement the forms of which are attached hereto as Exhibits to this Agreement.
The Disbursement Agent shall not be accountable for the use or application of
the funds in the Accounts or for disbursements therefrom, except as set forth
in this Agreement.
SECTION 8.7 Governing Law; Submission to Jurisdiction, Waiver of Jury
Trial; Etc. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF
THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW. EACH OF THE PARTIES HERETO (OTHER
22
<PAGE> 24
THAN THE DISBURSEMENT AGENT) 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. EACH OF THE PARTIES HERETO (OTHER THAN THE DISBURSEMENT AGENT)
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. EACH OF
THE PARTIES HERETO (OTHER THAN THE DISBURSEMENT AGENT) 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 SUCH PARTY AT THE ADDRESS OF SUCH PARTY SET FORTH HEREIN,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE DISBURSEMENT AGENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE OTHER PARTIES HERETO IN ANY OTHER JURISDICTION.
SECTION 8.8 Certain Rights. None of the Disbursement Agent, the
Trustee, the Construction Supervisor, TEC and TARC shall have any rights with
respect to the Accounts, except as specifically set forth in the TARC Loan
Agreement, the TEC Security Agreement, the TARC Security Agreement and this
Agreement. If at any time the Disbursement Agent shall receive a notice, order
or instruction from any Person, which conflicts with a notice, order or
instruction given by the Trustee, the Trustee's notice, order or instruction
shall always prevail. All provisions of this Agreement are subject to the
foregoing sentence.
SECTION 8.9 Confidentiality. The parties agree that they and their
employees have maintained and will maintain, in confidence, all data,
summaries, reports or information of all kinds, whether oral or written,
provided pursuant to this Agreement or acquired or developed in any manner from
any party's personnel or files (the "Confidential Information"), and that they
have not and will not reveal the same to any persons not employed by the party
from whom such information was obtained except: (a) at the written direction of
such party; (b) to the extent necessary to comply with the law, reporting
requirements imposed by the Securities and Exchange Commission or in connection
with any arbitration proceeding, or the valid order of a court of competent
jurisdiction, in which event the disclosing party shall so notify the party
from whom such information was obtained as promptly as practicable (and, if
possible, prior to making any disclosure) and shall seek confidential treatment
of such information; (c) as part of its normal reporting or review procedure to
its parent company, its auditors and its attorneys, and such parent company,
auditors and attorneys agree to be bound by the provisions of this Section; (d)
in order to enforce any of its rights pursuant to, or in any other dispute with
respect to, this Agreement; (e) if, at the time of disclosure to the recipient,
the Confidential Information is in the public domain; (f) if, after disclosure
to the recipient, the Confidential Information becomes part of the public
domain by written publication through no fault of the recipient; or (g) to any
one or more holders of Notes and their representatives and agents.
23
<PAGE> 25
SECTION 8.10 Termination. This Agreement shall terminate
automatically thirty (30) days following disbursement of all funds remaining in
the Accounts.
SECTION 8.11 Invalidity. If, for any reason whatsoever, any one or
more of the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid in a particular case or in all cases, it
is the intent of the parties hereto that such circumstances shall not have the
effect of rendering any of the other provisions of this Agreement inoperative,
unenforceable or invalid, and the inoperative, unenforceable or invalid
provisions shall be construed as if it were written so as to effectuate to the
maximum extent possible, the intent of the parties hereto.
SECTION 8.12 Assignment. This Agreement is personal to the parties
hereto, and the rights and duties hereunder of any party hereto shall not be
assignable, except with the prior written consent of the other parties hereto
or as described in Section 2.3 or in Section 2.4; provided, however, that the
rights and obligations of TEC hereunder may be assigned to the Trustee in
accordance with the provisions of the TEC Security Agreement. In any event,
this Agreement shall inure to and be binding upon the parties and their
successors and permitted assigns.
SECTION 8.13 Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings and commitments,
whether oral or written. This Agreement may only be amended as provided
herein.
SECTION 8.14 Captions. Captions in this Agreement are for
convenience only and shall not be considered or referenced in resolving
questions of interpretation of this Agreement.
24
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
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:
------------------------------------
25
<PAGE> 27
<TABLE>
<CAPTION>
Schedule I
Alternate Construction Supervisors
----------------------------------
<S> <C>
Muse, Stancil & Company Pace Consultants
3131 McKinney Avenue, Suite 100 4848 Loop Central Drive
Dallas, TX 75204 Houston, TX 77081
Ernst & Young / Wright Killen & Company Arthur D. Little
5847 San Felipe, Suite 3300 1001 Fannin, Suite 2050
Houston, TX 77057-3067 Houston, TX 77002-6678
Purvin & Gertz Bechtel Corporation
600 Travis, Suite 2150 3000 Post Oak Blvd.
Houston, TX 77002 Houston, TX 77056
Bonner & Moore Associates Foster Wheeler Engineering Co.
2727 Allen Parkway 2020 Dairy Ashford Avenue
Houston, TX 77019 Houston, TX 77002
</TABLE>
1
<PAGE> 28
Exhibit A
<TABLE>
<CAPTION>
Budget
------
Expenditures Daily Capacity
to Complete --------------
----------- (BPD)
(dollars in millions)
<S> <C> <C>
PHASE 1:
Crude Unit . . . . . . . . . . . . . $ 3 200,000
Delayed Coking Unit . . . . . . . . 27 75,000
Naphtha Pretreater . . . . . . . . . 12 30,000
No. 2 Reformer . . . . . . . . . . . 9 12,000
HDS Unit . . . . . . . . . . . . . . 24 60,000
Sulfur Recovery System . . . . . . . 53 370 (1)
Offsite Facilities/Tankage . . . . . 46 N/A
Other . . . . . . . . . . . . . . 3 N/A
Engineering and Administrative . . . 7 N/A
Contingencies (2) . . . . . . . . . 39 N/A
--
Total Phase I . . . . . . . . . . . $223
PHASE II:
FCC Unit . . . . . . . . . . . . . . 115 100,000
FCC Flue Gas Scrubber . . . . . . . 14 N/A
Alkylation Unit . . . . . . . . . . 24 26,000
Offsite Facilities/Tankage . . . . . 26 N/A
Other . . . . . . . . . . . . . . 2 N/A
Engineering and Administrative . . . 3 N/A
Contingencies (2) . . . . . . . . . 20 N/A
--
Total Phase II . . . . . . . 204
---
Total Phase I and
Phase II . . . . . . . . . $427
====
</TABLE>
- -------------------------------
(1) Units are LT/D. Capacity can be increased to 510 LT/D with oxygen
enrichment.
(2) To the extent expenditures exceed the approved capital budget for a
unit or units, the contingencies portion of the budget will be
allocated to specific units.
A-1
<PAGE> 29
Exhibit B
[Form of TEC Certificate]
[Date]
Firstar Bank of Minnesota, N.A.,
as Disbursement Agent under the Disbursement
Agreement referenced below
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Baker & O'Brien, Inc.,
as Construction Supervisor under the Disbursement
Agreement referenced below
7557 Rambler Road, Suite 200 LB 85
Dallas, Texas 75231
Facsimile: (214) 368-0190
Attention: John O'Brien
Ladies and Gentlemen:
We refer to (i) the Disbursement Agreement dated as of June
13, 1997 (as amended, supplemented or otherwise modified from time to time, the
"Disbursement Agreement") among TransAmerican Refining Corporation, a Texas
corporation ("TARC"), TransAmerican Energy Corporation, a Delaware corporation
("TEC"), Firstar Bank of Minnesota, N.A., as Disbursement Agent, Firstar Bank
of Minnesota, N.A., as Trustee, and Baker & O'Brien, Inc., as Construction
Supervisor, and (ii) the Loan Agreement dated as of June 13, 1997 (as amended,
supplemented or otherwise modified from time to time, the "TARC Loan
Agreement") between TEC and TARC. Capitalized terms used but not defined
herein have the respective meanings given to such terms in the Disbursement
Agreement and the TARC Loan Agreement.
TEC hereby requests that the Disbursement Agent disburse funds
from the Accounts in an aggregate amount equal to $__________, on _____________
(the "Date of Disbursement"). In connection with the requested disbursement of
funds, TEC hereby represents, warrants and certifies that
B-1
<PAGE> 30
such funds will be applied promptly to the satisfaction of TARC's obligations
under the TARC Intercompany Loan Documents. Such disbursement is to be made by
liquidating investments in the Accounts and making payment to TEC in accordance
with the following procedures and instructions:
[Insert procedures and instructions]
TRANSAMERICAN ENERGY CORPORATION
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
B-2
<PAGE> 31
Exhibit C
[Form of Disbursement Certificate]
DISBURSEMENT CERTIFICATE NO. ___
[Date]
Firstar Bank of Minnesota, N.A.,
as Disbursement Agent under the Disbursement
Agreement referenced below
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie
TransAmerican Energy Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Baker & O'Brien, Inc.,
as Construction Supervisor under the Disbursement
Agreement referenced below
7557 Rambler Road, Suite 200 LB 85
Dallas, Texas 75231
Facsimile: (214) 368-0190
Attention: John O'Brien
Ladies and Gentlemen:
We refer to (i) the Disbursement Agreement dated as of June
13, 1997 (as amended, supplemented or otherwise modified from time to time, the
"Disbursement Agreement") among TransAmerican Refining Corporation, a Texas
corporation ("TARC"), TransAmerican Energy Corporation, a Delaware corporation
("TEC"), Firstar Bank of Minnesota, N.A., as Disbursement Agent, Firstar Bank
of Minnesota, N.A., as Trustee, and Baker & O'Brien, Inc., as Construction
Supervisor, and (ii) the Loan Agreement dated as of June 13, 1997 (as amended,
supplemented or otherwise modified from time to time, the "TARC Loan
Agreement") between TEC and TARC. Capitalized terms used but not defined
herein have the respective meanings given to such terms in the Disbursement
Agreement and the TARC Loan Agreement.
TARC hereby requests that the Construction Supervisor approve
the disbursement of, and the Disbursement Agent disburse, funds from the
Account specified below in an aggregate amount equal to $__________, on
________ __, ____ (the "Date of Disbursement"). Such funds will be used as
follows (with specific reference to each line item in the Budget, the amount
requested to be disbursed for such line item, the amount previously disbursed
in respect of the same line item and whether such funds will be expended in
connection with Phase I or Phase II):
[Insert specification of use of funds]
C-1
<PAGE> 32
The undersigned hereby certifies that the following statements
are true on the date hereof and will be true on the Date of Disbursement:
(a) No event has occurred and is continuing that
constitutes an Event of Default under the TARC Loan Agreement and no
Event of Default under the TARC Loan Agreement would result from such
disbursement or from the application of the proceeds thereof.
(b) All work and materials for which disbursement is
requested hereunder conform in all material respects with the Plans.
(c) The amount of the requested disbursement has been
incurred for costs of the Project. This disbursement is requested
expressly for the purpose of reimbursing TARC for actual expenditures
on the Project. TARC has provided to the Construction Supervisor
access to supporting invoices, receipts and other documentation for
all costs relating to the Project for which this disbursement is
requested.
(d) All amounts due and payable to any of our contractors
or suppliers in connection with the Project have been paid in full or
are not overdue or are being contested in good faith in appropriate
proceedings. We have used commercially reasonable efforts to cause
each such contractor and supplier that has completed work in
connection with the Project to provide lien waivers and releases and
subordination agreements to the Disbursement Agent, the Construction
Supervisor and TEC. Attached hereto are true, correct and complete
copies of all such lien waivers and releases provided to us by such
contractors and suppliers not heretofore delivered to the Disbursement
Agent, the Construction Supervisor and TEC.
(e) Attached hereto is an endorsement to TARC's title
policy for the Project site indicating that, as of a date not more
than three months prior hereto, there has been no change in the state
of title with respect to the Project site except for changes that are
permitted by the Indenture and the Mortgage.
(f) Attached hereto is evidence of the insurance coverage
required by the Indenture, the TARC Security Agreement and the
Mortgage (if different from the coverage reflected in evidence of
insurance previously provided in connection with a Disbursement
Certificate).
(g) TARC has received all authorizations, approvals,
permits and licenses from governmental authorities that are required,
as of the date hereof, for the Project; all work on the Project as of
the date hereof has been performed substantially in accordance with
applicable laws; and set forth below is a summary of each governmental
authorization, approval, permit and license related to the Project
that has been applied for, obtained, amended, challenged, revoked or
terminated since the date of the last Disbursement Certificate.
(h) Phase I is proceeding in such a manner that it is
estimated to be completed by ______________, and Phase II is
proceeding in such a manner that it is estimated to be completed by
______________.
(i) A copy of this Disbursement Certificate and the
attached documentation have been delivered to TEC and the Construction
Supervisor at their respective addresses for notices as set forth in
the Disbursement Agreement.
C-2
<PAGE> 33
(j) All conditions to this disbursement have been met in
accordance with the terms of the Disbursement Agreement.
TRANSAMERICAN REFINING CORPORATION
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
C-3
<PAGE> 34
Exhibit D
[Form of Construction Supervisor Certificate]
[Date]
Firstar Bank of Minnesota, N.A.,
as Disbursement Agent under the Disbursement
Agreement referenced below
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie
TransAmerican Energy Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
TransAmerican Refining Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Re: Disbursement Certificate No. [____].
Ladies and Gentlemen:
We refer to (i) the Disbursement Agreement dated as of June
13, 1997 (as amended, supplemented or otherwise modified from time to time, the
"Disbursement Agreement") among TransAmerican Refining Corporation, a Texas
corporation ("TARC"), TransAmerican Energy Corporation, a Delaware corporation
("TEC"), Firstar Bank of Minnesota, N.A., as Disbursement Agent, Firstar Bank
of Minnesota, N.A., as Trustee, and Baker & O'Brien, Inc., as Construction
Supervisor, and (ii) the Loan Agreement dated as of June 13, 1997 (as amended,
supplemented or otherwise modified from time to time, the "TARC Loan
Agreement") between TEC and TARC. Capitalized terms used but not defined
herein have the respective meanings given to such terms in the Disbursement
Agreement and the TARC Loan Agreement.
The Construction Supervisor has reviewed (i) from time to
time, and within the last calendar week, the progress of construction of the
Project and (ii) Disbursement Certificate No. ____.
D-1
<PAGE> 35
Our review and observations were performed in accordance with generally
accepted technical consulting practice and included such investigations,
observations and review as we in our professional capacity deemed necessary
under the circumstances within the scope of our service. Except as required by
Section 3.2 of the Disbursement Agreement, we have relied upon statements and
representations of TARC set forth in Disbursement Certificate No. ___ and have
not independently verified the accuracy or completeness of such statements and
representations. With respect to TARC's request for disbursement of funds
pursuant to Disbursement Certificate No. ___, the Construction Supervisor
hereby (i) approves such request to the extent of $_____________ and (ii)
rejects such request to the extent of $_____________ for the following reasons:
[insert reasons for rejection of request]
BAKER & O'BRIEN, INC.,
as Construction Supervisor under
the Disbursement Agreement
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
D-2
<PAGE> 1
EXHIBIT 4.10
DISBURSEMENT AGREEMENT
among
TRANSTEXAS GAS CORPORATION,
TRANSAMERICAN ENERGY CORPORATION,
FIRSTAR BANK OF MINNESOTA, N.A.,
as securities intermediary and disbursement agent,
and
FIRSTAR BANK OF MINNESOTA, N.A.,
as trustee
June 13, 1997
<PAGE> 2
DISBURSEMENT AGREEMENT
This Disbursement Agreement dated as of June 13, 1997 (this
"Agreement") is entered into by and among TransTexas Gas Corporation, a
Delaware corporation ("TransTexas"), TransAmerican Energy Corporation, a
Delaware corporation ("TEC"), Firstar Bank of Minnesota, N.A., as securities
intermediary (as defined in the Revised UCC) and disbursement agent (the
"Disbursement Agent"), and Firstar Bank of Minnesota, N.A., as Trustee.
WHEREAS, TEC and the Trustee have entered into an Indenture dated
as of June 13, 1997 (the "Indenture"), pursuant to which TEC will issue
$475,000,000 aggregate principal amount of Senior Secured Notes due 2002 and
$1,130,000,000 aggregate principal amount of Senior Secured Discount Notes due
2002 (collectively, the "Notes");
WHEREAS, TEC and TransTexas have entered into a loan agreement
dated as of the date hereof (the "TransTexas Loan Agreement"), pursuant to
which TEC will lend to TransTexas an aggregate of $450,000,000 out of the
proceeds of the issuance of the Notes and TransTexas will execute a promissory
note in such amount in favor of TEC (the "TransTexas Intercompany Note" and
together with the TransTexas Loan Agreement, the "TransTexas Intercompany Loan
Documents");
WHEREAS, as security for the prompt and complete payment and
performance in full of obligations of TransTexas under the TransTexas
Intercompany Loan Documents, TransTexas has granted to TEC a security interest
in, among other things, the Disbursement Account (as defined below);
WHEREAS, as security for the prompt and complete payment and
performance in full of TEC's obligations under the Indenture and the Notes, TEC
has granted to the Trustee a security interest in, among other things, the
TransTexas Intercompany Loan Documents; and
WHEREAS, the Disbursement Agent has agreed to take such action
with respect to the Disbursement Account as is specified herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. Capitalized terms used but not
defined herein and in any schedules and exhibits hereto shall have the meanings
set forth in the TransTexas Loan Agreement.
As used in this Agreement, the following terms shall have the following
meanings:
"Accounts" means the Disbursement Account and the Interest Accumulation
Account.
"Agreement" has the meaning given to such term in the introductory
paragraph hereof.
"Date of Disbursement" means the date designated as such in each
Disbursement Certificate or
<PAGE> 3
TEC Certificate, as the case may be.
"Disbursement Account" has the meaning given to such term in Section
3.1(a).
"Disbursement Agent" has the meaning given to such term in the
introductory paragraph hereof.
"Disbursement Certificate" has the meaning given to such term in Section
4.2(a).
"Indenture" has the meaning given to such term in the recitals hereof.
"Interest Accumulation Account" has the meaning given to such term in
Section 3.1(b).
"Investments" has the meaning given to such term in Section 3.4(a).
"New York UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"Notes" has the meaning given to such term in the recitals hereof.
"Offering Circular" means TEC's Offering Circular dated June 5, 1997
relating to the offering of the Notes.
"Revised UCC" means Uniform Commercial Code, Revised Article 8,
Investment Securities (with Conforming and Miscellaneous Amendments to Articles
1, 3, 4, 5, 9 and 10), 1994 Official Text, as adopted by the American Law
Institute and the National Conference of Commissioners on Uniform State Laws
and approved by the American Bar Association on February 15, 1995; provided,
however, that if and when the Revised UCC is enacted in the State of New York,
"Revised UCC" shall mean the Revised UCC as enacted in the State of New York
from time to time.
"TARC Disbursement Agreement" means the Disbursement Agreement dated as
of June 13, 1997 by and among TransAmerican Refining Corporation, a Texas
corporation, TEC, Firstar Bank of Minnesota, N.A., as disbursement agent, the
Trustee and Baker & O'Brien, Inc., as Construction Supervisor.
"TransTexas" has the meaning given to such term in the introductory
paragraph hereof.
"TransTexas Dividend/Share Repurchase Program" means the dividend and
share repurchase program (including without limitation the dividend and share
repurchase program described in the Offering Circular) to be implemented by
TransTexas, pursuant to which TransTexas will effect the payment of one or more
dividends on the common stock of TransTexas or the redemption, acquisition or
purchase, pursuant to a tender offer or any other transaction or mechanism, of
any shares of common stock of TransTexas.
"TransTexas Intercompany Loan Documents" has the meaning given to such
term in the recitals hereof.
"TransTexas Intercompany Note" has the meaning given to such term in the
recitals hereof.
"TransTexas Loan Agreement" has the meaning given to such term in the
recitals hereof.
2
<PAGE> 4
"TransTexas Security Agreement" means the Security and Pledge Agreement
dated as of June 13, 1997 by and between TransTexas and TEC.
"TEC" has the meaning given to such term in the introductory paragraph
hereof.
"TEC Security Agreement" means the Security and Pledge Agreement dated
as of June 13, 1997 by and between TEC and the Trustee.
"Trustee" means the trustee under the Indenture.
SECTION 1.2 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding."
ARTICLE II
DISBURSEMENT AGENT
SECTION 2.1 Appointment and Duties.
(a) TEC and TransTexas acknowledge and agree that Firstar Bank
of Minnesota, N.A. shall act as the Disbursement Agent under this
Agreement, and that the Disbursement Agent is and will act as a
"securities intermediary" (as defined in the Revised UCC) and as a
"financial intermediary" (as defined in the New York UCC as in effect on
the date hereof). TEC and TransTexas hereby authorize the Disbursement
Agent to take such actions, exercise such powers and perform such duties
as are expressly delegated to the Disbursement Agent by the terms of
this Agreement, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary
elsewhere herein, the Disbursement Agent shall not have any duties or
responsibilities except those expressly set forth herein, and no implied
covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against
the Disbursement Agent.
(b) The Disbursement Agent shall give written notice to TEC
and TransTexas of any action taken by it hereunder (provided that no
such notice need be given under circumstances in which TEC and
TransTexas shall have received such notice by any other Person pursuant
to the terms of any other document); such notice shall be given prior to
the taking of such action, unless the Disbursement Agent determines that
to do so would be detrimental to the interests of TEC, in which event
such notice shall be given promptly after the taking of such action.
(c) The Disbursement Agent shall maintain appropriate books
and records with respect to the Accounts in which shall be recorded all
deposits and disbursements hereunder and any Investments made by the
Disbursement Agent and shall permit TEC, TransTexas or any of their
respective agents or representatives to inspect and to make copies of
such books and records at TransTexas's sole cost and expense.
(d) The Disbursement Agent shall use its good faith efforts
and utilize prudence in performing its duties hereunder consistent with
those of similar and prudent institutions disbursing disbursement
control funds.
3
<PAGE> 5
(e) On or prior to the last day of each calendar month, the
Disbursement Agent shall deliver to each of TEC and TransTexas a
reasonably detailed statement showing the balance of, disbursements from
and deposits to each of the Accounts.
SECTION 2.2 Rights of Disbursement Agent.
(a) The Disbursement Agent may execute any of its duties under
this Agreement by or through agents or attorneys-in-fact and shall be
entitled to rely on advice of counsel concerning all matters pertaining
to such duties, and protected in respect of any action taken in good
faith and in accordance with such advice.
(b) Neither the Disbursement Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or
such Person under or in connection with this Agreement (except for its
or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to TEC for any recitals, statements,
representations or warranties made by TransTexas or any officer thereof
contained in any certificate, report, statement or other document
referenced or provided for in, or received by the Disbursement Agent
under or in connection with, this Agreement. The Disbursement Agent
shall not be under any obligation to TEC to inspect the properties,
books or records of TransTexas.
(c) The Disbursement Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document
or conversation reasonably believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and
upon advice and statements of legal counsel (including, without
limitation, counsel to TransTexas), independent accountants and other
experts selected by the Disbursement Agent. The Disbursement Agent
shall be fully justified in failing or refusing to take any action
hereunder if such action would, in the opinion of the Disbursement
Agent, be contrary to law or the terms of this Agreement.
(d) The Disbursement Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default unless the
Disbursement Agent has received written notice from TEC, TransTexas or
the Trustee, describing such Event of Default and stating that such
notice is a "notice of default." The Disbursement Agent shall take such
action with respect to such Event of Default as shall be required by
this Agreement. No provision of this Agreement shall require the
Disbursement Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder 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.
SECTION 2.3 Resignation and Removal of Disbursement Agent.
(a) Subject to the appointment and acceptance of a successor
Disbursement Agent as provided below, the Disbursement Agent may, at any
time, give a notice of resignation to TEC, TransTexas and the Trustee.
Upon receipt of any such notice of resignation, TransTexas shall have
the right to appoint a successor Disbursement Agent, which shall be a
bank or trust company reasonably acceptable to TEC and the Trustee. If
no successor Disbursement Agent
4
<PAGE> 6
shall have been appointed by TransTexas and shall have accepted such
appointment within thirty (30) days after the retiring Disbursement
Agent's giving of notice of resignation, then the retiring Disbursement
Agent may appoint a successor Disbursement Agent, which shall be a bank
or trust company reasonably acceptable to TEC, TransTexas and the
Trustee.
(b) Each of TEC and TransTexas shall have the right, upon the
expiration of thirty (30) days following delivery of written notice to
the Disbursement Agent and the other party, to cause the Disbursement
Agent to be relieved of its duties hereunder and to select a successor
Disbursement Agent to serve hereunder, which shall be a bank or trust
company reasonably acceptable to the other party.
(c) Upon the acceptance of any appointment as Disbursement
Agent hereunder by a successor Disbursement Agent, (i) such successor
Disbursement Agent, TEC, TransTexas and the Trustee shall enter into an
agreement substantially identical to this Agreement, (ii) such agreement
shall provide that such successor Disbursement Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Disbursement Agent, and that the retiring
Disbursement Agent shall be discharged from its duties and obligations
hereunder and (iii) the retiring Disbursement Agent shall promptly
transfer all cash and Investments in the Accounts to the possession or
control of the successor Disbursement Agent and shall execute and
deliver such notices, instructions and assignment as may be necessary to
transfer the rights of the Disbursement Agent with respect to all such
cash and Investments to the successor Disbursement Agent. After any
retiring Disbursement Agent's resignation or removal hereunder as
Disbursement Agent, the provisions of this Article shall continue in
effect for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as Disbursement Agent.
SECTION 2.4 Confirmations. The Disbursement Agent hereby confirms that
(i) it is a "securities intermediary" within the meaning of such term in the
Revised UCC, (ii) each of the Accounts is a "securities account" as such term
in defined in Section 8-501(a) of the Revised UCC, (iii) the Disbursement Agent
shall, subject to the terms of this Agreement, treat TEC as entitled to
exercise the rights that comprise any financial asset credited to any of the
Accounts, (iv) all property delivered to the Disbursement Agent pursuant to
this Agreement will be promptly credited to the Disbursement Account in
accordance with the terms hereof and (v) all securities or other property
underlying any financial assets credited to the Accounts shall be registered in
the name of the Disbursement Agent, endorsed to the Disbursement Agent or in
blank or credited to another securities account maintained in the name of the
Disbursement Agent.
SECTION 2.5 "Financial Assets" Election. The Disbursement Agent hereby
agrees that each item of property (whether investment property, financial
asset, security, instrument or cash) credited to the Accounts shall be treated
as a "financial asset" within the meaning of Section 8-102(a)(9) of the Revised
UCC.
SECTION 2.6 Entitlement Orders. If at any time the Disbursement Agent
shall receive an "entitlement order" (within the meaning of Section 8-102(a)(8)
of the Revised UCC) issued by TEC and relating to the Accounts, the
Disbursement Agent shall comply with such entitlement order without further
consent by TransTexas or any other Person.
5
<PAGE> 7
SECTION 2.7 Representations, Warranties and Covenants of the
Disbursement Agent. The Disbursement Agent hereby makes the following
representations, warranties and covenants:
(a) The Accounts will be maintained in the manner set forth
herein until termination of this Agreement. The Disbursement Agent
shall not change the name or account number of any of the Accounts
without the prior written consent of TEC.
(b) No financial asset is or will be registered in the name of
TEC or TransTexas, payable to the order of TEC or TransTexas, or
specially endorsed to TEC or TransTexas, except to the extent such
financial asset has been endorsed to the Disbursement Agent or in blank.
(c) This Agreement is the valid and legally binding obligation of
the Disbursement Agent.
(d) The Disbursement Agent has not entered into, and until the
termination of this Agreement will not enter into, any agreement with
any other Person relating to the Accounts and/or any financial assets
credited thereto pursuant to which it has agreed to comply with
entitlement orders (as defined in Section 8-102(a)(8) of the Revised
UCC) of such Person. The Disbursement Agent has not entered into any
other agreement with TEC, TransTexas or the Trustee purporting to limit
or condition the obligation of the Disbursement Agent to comply with
entitlement orders as set forth in Section 2.6.
SECTION 2.8 Notice of Adverse Claims. Except for the claims and
interest of TEC, the Trustee and of TransTexas in the Accounts, the
Disbursement Agent does not know of any claim to, or interest in, the Accounts
or in any "financial asset" (as defined in Section 8-102(a) of the Revised UCC)
credited thereto. If any Person asserts any lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against the Accounts or in any financial asset carried
therein, the Disbursement Agent will promptly notify TEC, the Trustee and
TransTexas thereof.
SECTION 2.9 Correspondence. The Disbursement Agent will promptly send
copies of all statements, confirmations and other correspondence concerning the
Accounts and/or any financial assets credited thereto simultaneously to each of
TEC, TransTexas and the Trustee in accordance with Section 6.2.
SECTION 2.10 Subordination of Lien; Waiver of Set-Off. In the event
that the Disbursement Agent has or subsequently obtains by agreement, operation
of law or otherwise a security interest in the Accounts or any security
entitlement credited thereto, the Disbursement Agent hereby agrees that such
security interest shall be subordinate to the security interests of TEC as
assigned to the Trustee. The financial assets and other items credited to the
Accounts will not be subject to deduction, set-off, banker's lien, or any other
right in favor of any Person other than the Trustee, except that the
Disbursement Agent may set off (i) all amounts due to the Disbursement Agent in
respect of the Disbursement Agent's customary fees and expenses for the routine
maintenance and operation of the Accounts, and (ii) the face amount of any
checks which have been credited to the Accounts but are subsequently returned
unpaid because of uncollected or insufficient funds.
6
<PAGE> 8
ARTICLE III
ACCOUNTS
SECTION 3.1 Establishment of the Accounts.
(a) On the date hereof, TransTexas has opened and shall
hereafter cause to be maintained with and at the corporate trust
department of the Disbursement Agent a custodial account (the
"Disbursement Account") under the sole dominion and control of the
Trustee, in the name of TransTexas but indicating the lien of the
Trustee as assignee. Funds shall be released from the Disbursement
Account only in accordance with the provisions of Article IV.
(b) TransTexas shall maintain with the Disbursement Agent a
segregated sub-account of the Disbursement Account (the "Interest
Accumulation Account") under the sole dominion and control of the
Trustee, in the name of TransTexas but indicating the lien of the
Trustee as assignee. Funds shall be deposited into the Interest
Accumulation Account in accordance with Section 3.4 and released
therefrom only in accordance with the provisions of Article IV.
SECTION 3.2 Deposits to the Disbursement Account. TransTexas shall
initially deposit to the Disbursement Account $399,284,000 out of the proceeds
received by it from the loan made pursuant to the TransTexas Intercompany Loan
Documents.
SECTION 3.3 Security Interest in the Disbursement Account.
(a) As security for the prompt and complete payment and
performance in full of all obligations under the TransTexas Intercompany
Loan Documents, including without limitation the TransTexas Intercompany
Note, TransTexas has agreed, pursuant to the TransTexas Security
Agreement, to grant to TEC a security interest in and a lien on and to
pledge and assign to TEC all of its right, title and interest in and to
the Accounts and all funds and investments deposited therein.
Furthermore, pursuant to the TEC Security Agreement, TEC has assigned
its interest in any collateral securing the TransTexas Intercompany
Note, including without limitation the Accounts, to the Trustee.
(b) The Disbursement Agent acknowledges notice of, and
consents to the terms and provisions of, the TransTexas Security
Agreement and the TEC Security Agreement and agrees that notwithstanding
anything to the contrary in this or any other agreement relating to the
Accounts, the Accounts are and will be subject to the terms and
conditions of the TransTexas Security Agreement and the TEC Security
Agreement, will be held in trust on behalf of TEC and the Trustee and
not commingled with any ordinary deposit or commercial bank account,
will be maintained with the corporate trust department of the
Disbursement Agent solely for TEC and the Trustee pursuant to the
TransTexas Security Agreement and the TEC Security Agreement and will be
subject to the written instructions of TEC and the Trustee given in
accordance with the TransTexas Security Agreement and the TEC Security
Agreement.
SECTION 3.4 Certain Agreements with respect to the Accounts.
(a) In accordance with written instructions received from
TransTexas, the Disbursement Agent shall (i) invest amounts on deposit
in the Accounts in such Cash Equivalents
7
<PAGE> 9
as TransTexas may select and credit such Cash Equivalents to the
Disbursement Account, (ii) deposit and hold in the Interest Accumulation
Account all interest paid on the Cash Equivalents referenced in clause
(i) above and invest such interest in such Cash Equivalents as
TransTexas may select and credit such Cash Equivalents to the Interest
Accumulation Account, (iii) reinvest other proceeds of the Cash
Equivalents referred to in clause (i) or (ii) above that may mature or
be sold in such Cash Equivalents and credit such Cash Equivalents to the
respective Account (all the Cash Equivalents referenced in clauses (i)
and (ii) above being, collectively, "Investments") and (iii) deposit and
hold in the respective Account all proceeds that are not invested or
reinvested in Investments.
(b) All disbursements and releases made pursuant to this
Agreement shall be made by the Disbursement Agent irrespective of, and
without deduction for, any counterclaim, defense, recoupment or set-off
and shall be final, and the Disbursement Agent will not seek to recover
from TEC for any reason any such payment once made.
(c) The Trustee and TEC shall be entitled to exercise any and
all rights of TransTexas in respect of the Accounts in accordance with
the terms of the TEC Security Agreement and the TransTexas Security
Agreement, respectively, and the Disbursement Agent shall comply with
such exercise, subject to the provisions of Section 6.8.
(d) All service charges and fees with respect to this
Agreement or the Accounts shall be paid by TransTexas if not offset
against the Interest Accumulation Account.
SECTION 3.5 Valuation of Investments. For purposes of determining the
value of any amounts in the Accounts, all Investments shall be valued at the
lower of cost or market value.
ARTICLE IV
DISBURSEMENTS
SECTION 4.1 Priority Disbursements to TEC. At any time after the
TransTexas Intercompany Note is due and payable, upon maturity, acceleration
thereof or otherwise, funds in the Disbursement Account specified by TEC shall
be disbursed by the Disbursement Agent to any account specified by TEC, upon
receipt by the Disbursement Agent of a certificate of TEC substantially in the
form of Exhibit A hereto certifying that such amounts will be applied promptly
in satisfaction of obligations of TransTexas under the TransTexas Intercompany
Loan Documents.
SECTION 4.2 Ordinary Disbursements.
(a) Funds in the Disbursement Account shall be disbursed at
any time and from time to time for the account of TransTexas; provided
that TransTexas shall have delivered to the Disbursement Agent and TEC a
written notice substantially in the form of Exhibit B hereto (the
"Disbursement Certificate"), specifying the amount and date of the
requested disbursement. The Disbursement Certificate shall be executed
by a duly authorized officer of TransTexas.
(b) The Disbursement Agent shall disburse to TransTexas from
the Interest Accumulation Account any amount up to the balance therein
that TransTexas requests at any time that TransTexas so requests;
8
<PAGE> 10
(c) All remaining funds in the Disbursement Account shall be
disbursed for the account of TransTexas upon satisfaction of any of the
following conditions:
(i) The Disbursement Agent (as defined in the TARC
Disbursement Agreement) shall have received a Phase II Completion
Notice (as defined in the TARC Disbursement Agreement).
(ii) TransTexas shall have caused the Disbursement Agent
and TEC to receive an opinion of counsel reasonably satisfactory
to the Disbursement Agent, stating that completion of the
TransTexas Dividend/Share Repurchase Program is precluded by
applicable law.
SECTION 4.3 Disbursement Procedures.
(a) Subject to the terms and conditions of the TransTexas
Security Agreement and the TEC Security Agreement, the Disbursement
Agent shall sell all or such portion of the investments held in the
Disbursement Account (with the investments having the shortest
maturities sold first) as shall be necessary to fund the requested
disbursement in accordance with the terms hereof and in accordance with
written instructions of TEC or TransTexas, as the case may be, delivered
to the Disbursement Agent at least one Business Day prior to any
proposed Date of Disbursement.
(b) All disbursements shall be made by the later to occur of
(i) the requested Date of Disbursement or (ii) the second Business Day
after satisfaction of all conditions to such disbursement.
ARTICLE V
COVENANTS OF TRANSTEXAS AND TEC
SECTION 5.1 Covenants of TransTexas.
(a) Access to Information. TransTexas shall permit and cause
each of its Subsidiaries to permit TEC and the Disbursement Agent on
reasonable notice and at such times as shall be reasonably requested to
inspect and review all books and records of TransTexas and its
Subsidiaries relating to the TransTexas Dividend/Share Repurchase
Program and such other information as such Person shall reasonably
request relating to the TransTexas Dividend/Share Repurchase Program,
including contracts, offering documents and other supporting
documentation to substantiate amounts requested pursuant to a
Disbursement Certificate.
(b) Payment of Fees and Expenses. TransTexas shall promptly,
but no later than thirty (30) days after its receipt of an invoice, pay
the reasonable fees and expenses of the Disbursement Agent in connection
with this Agreement. To the extent available, such fees and expenses
may be paid through the Disbursement Account by including such amounts
in a Disbursement Certificate.
SECTION 5.2 Covenants of TEC. TEC shall give prompt written notice to
the Disbursement Agent upon (i) the occurrence of an Event of Default known to
it and (ii) upon cure or waiver of any
9
<PAGE> 11
such Event of Default known to it.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Amendments, Etc. No amendment, modification or waiver of
any provisions of this Agreement may be made except by written agreement of the
parties hereto.
SECTION 6.2 Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be sufficiently
given if made by hand delivery, by telex, by facsimile or registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:
To the Disbursement Agent:
Firstar Bank of Minnesota, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Facsimile: (612) 229-6415
Attention: Frank Leslie
To TEC:
TransAmerican Energy Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Facsimile: (281) 986-8865
Attention: Ed Donahue
with a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Facsimile: (214) 999-4667
Attention: C. Robert Butterfield
To TransTexas:
TransTexas Gas Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Facsimile: (281) 986-8865
Attention: Ed Donahue
10
<PAGE> 12
with a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Facsimile: (214) 999-4667
Attention: C. Robert Butterfield
Any party hereto may by notice to each other party designate such
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to any party 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 faxed; five
calendar days after mailing, if sent by registered or certified mail; and one
business day after mailing, if sent by overnight delivery service (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
SECTION 6.3 No Waiver, Remedies. No failure on the part of the
Disbursement Agent, TEC or any Holder to exercise, and no delay in exercising,
any right under any Security Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.
SECTION 6.4 Indemnity and Expenses.
(a) TransTexas agrees to indemnify the Disbursement Agent and
its officers, directors, employees, agents, attorneys-in-fact and
affiliates (the "Indemnified Parties"), from and against any and all
claims, losses and liabilities directly or indirectly caused by, related
to or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities
resulting from (i) valid claims of TransTexas against such Indemnified
Party arising out of a breach of this Agreement by such Indemnified
Party or (ii) such Indemnified Party's bad faith, gross negligence or
willful misconduct, in either case, as determined by a final judgment of
a court of competent jurisdiction.
(b) TransTexas shall, promptly upon demand but no later than
thirty (30) days after its receipt of an invoice, pay to the
Disbursement Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any
experts and agents, that the Disbursement Agent may incur in connection
with (i) this Agreement, (ii) the exercise or enforcement of any rights
hereunder or (iii) the failure by TransTexas to perform or observe any
of the provisions hereof.
SECTION 6.5 Execution in Counterparts. This Agreement may be executed
in any number of separate counterparts and by different 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. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 6.6 Relationship of Disbursement Agent. The Disbursement Agent
shall not be under any responsibility in respect of the validity or sufficiency
of this Agreement or the execution and delivery hereof or in respect of the
validity or sufficiency of any document or agreement delivered in connection
11
<PAGE> 13
herewith, including, but not limited to, any document or agreement the forms of
which are attached hereto as Exhibits to this Agreement. The Disbursement
Agent shall not be accountable for the use or application of the funds in the
Disbursement Account or for disbursements therefrom, except as set forth in
this Agreement.
SECTION 6.7 Governing Law; Submission to Jurisdiction, Waiver of Jury
Trial; Etc. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF
THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW. EACH OF THE PARTIES HERETO (OTHER THAN
THE DISBURSEMENT AGENT) 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. EACH OF THE PARTIES HERETO (OTHER THAN THE DISBURSEMENT AGENT)
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. EACH OF
THE PARTIES HERETO (OTHER THAN THE DISBURSEMENT AGENT) 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 SUCH PARTY AT THE ADDRESS OF SUCH PARTY SET FORTH HEREIN,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE DISBURSEMENT AGENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE OTHER PARTIES HERETO IN ANY OTHER JURISDICTION.
SECTION 6.8 Certain Rights. None of the Disbursement Agent, TEC, the
Trustee and TransTexas shall have any rights with respect to the Disbursement
Account, except as specifically set forth in the TransTexas Loan Agreement, the
TransTexas Security Agreement and this Agreement. If at any time the
Disbursement Agent shall receive a notice, order or instruction from any
Person, which conflicts with a notice, order or instruction given by the
Trustee, the Trustee's notice, order or instruction shall always prevail. All
provisions of this Agreement are subject to the foregoing sentence.
SECTION 6.9 Confidentiality. The parties agree that they and their
employees have maintained and will maintain, in confidence, all data,
summaries, reports or information of all kinds, whether oral or written,
provided pursuant to this Agreement or acquired or developed in any manner from
any party's personnel or files (the "Confidential Information"), and that they
have not and will not reveal the same to any persons not employed by the party
from whom such information was obtained except: (a) at the written direction of
such party; (b) to the extent necessary to comply with the law, reporting
requirements imposed by the Securities and Exchange Commission or in connection
with any arbitration proceeding,
12
<PAGE> 14
or the valid order of a court of competent jurisdiction, in which event the
disclosing party shall so notify the party from whom such information was
obtained as promptly as practicable (and, if possible, prior to making any
disclosure) and shall seek confidential treatment of such information; (c) as
part of its normal reporting or review procedure to its parent company, its
auditors and its attorneys, and such parent company, auditors and attorneys
agree to be bound by the provisions of this Section; (d) in order to enforce
any of its rights pursuant to, or in any other dispute with respect to, this
Agreement; (e) if, at the time of disclosure to the recipient, the Confidential
Information is in the public domain; (f) if, after disclosure to the recipient,
the Confidential Information becomes part of the public domain by written
publication through no fault of the recipient; or (g) to any one or more
holders of Notes and their representatives and agents.
SECTION 6.10 Termination. This Agreement shall terminate automatically
thirty (30) days following disbursement of all funds remaining in the
Disbursement Account.
SECTION 6.11 Invalidity. If, for any reason whatsoever, any one or
more of the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid in a particular case or in all cases, it
is the intent of the parties hereto that such circumstances shall not have the
effect of rendering any of the other provisions of this Agreement inoperative,
unenforceable or invalid, and the inoperative, unenforceable or invalid
provisions shall be construed as if it were written so as to effectuate to the
maximum extent possible, the intent of the parties hereto.
SECTION 6.12 Assignment. This Agreement is personal to the parties
hereto, and the rights and duties hereunder of any party hereto shall not be
assignable, except with the prior written consent of the other parties hereto
or as described in Section 2.3; provided, however, that the rights and
obligations of TEC hereunder may be assigned to the Trustee in accordance with
the provisions of the TEC Security Agreement. In any event, this Agreement
shall inure to and be binding upon the parties and their successors and
permitted assigns.
SECTION 6.13 Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings and commitments,
whether oral or written. This Agreement may only be amended as provided
herein.
SECTION 6.14 Captions. Captions in this Agreement are for convenience
only and shall not be considered or referenced in resolving questions of
interpretation of this Agreement.
13
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
TRANSTEXAS GAS 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:
----------------------------
14
<PAGE> 16
Exhibit A
[Form of TEC Certificate]
[Date]
Firstar Bank of Minnesota, N.A.,
as Disbursement Agent under the Disbursement
Agreement referenced below
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie
TransTexas Gas Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Ladies and Gentlemen:
We refer to (i) the Disbursement Agreement dated as of June 13,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Disbursement Agreement") among TransTexas Gas Corporation, a Delaware
corporation ("TransTexas"), TransAmerican Energy Corporation, a Delaware
corporation ("TEC"), Firstar Bank of Minnesota, N.A., as Trustee, and Firstar
Bank of Minnesota, N.A., as Disbursement Agent, and (ii) the Loan Agreement
dated as of June 13, 1997 (as amended, supplemented or otherwise modified from
time to time, the "TransTexas Loan Agreement") between TEC and TransTexas.
Capitalized terms used but not defined herein have the respective meanings
given to such terms in the Disbursement Agreement and the TransTexas Loan
Agreement.
TEC hereby requests that the Disbursement Agent disburse funds
from the Disbursement Account in an aggregate amount equal to $______________,
on ______________ (the "Date of Disbursement"). In connection with the
requested disbursement of funds, TEC hereby represents, warrants and certifies
that such funds will be applied promptly to the satisfaction of TransTexas's
obligations under the TransTexas Intercompany Loan Documents. Such
disbursement is to be made by liquidating investments in the Disbursement
Account and making payment to TEC in accordance with the following procedures
and instructions:
[Insert procedures and instructions]
TRANSAMERICAN ENERGY CORPORATION
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
A-1
<PAGE> 17
Exhibit B
[Form of Disbursement Certificate]
DISBURSEMENT CERTIFICATE NO. ___
[Date]
Firstar Bank of Minnesota, N.A.,
as Disbursement Agent under the Disbursement
Agreement referenced below
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie
TransAmerican Energy Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue
Ladies and Gentlemen:
We refer to (i) the Disbursement Agreement dated as of June 13,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Disbursement Agreement") among TransTexas Gas Corporation, a Delaware
corporation ("TransTexas"), TransAmerican Energy Corporation, a Delaware
corporation ("TEC"), Firstar Bank of Minnesota, N.A., as Trustee, and Firstar
Bank of Minnesota, N.A., as Disbursement Agent, and (ii) the Loan Agreement
dated as of June 13, 1997 (as amended, supplemented or otherwise modified from
time to time, the "TransTexas Loan Agreement") between TEC and TransTexas.
Capitalized terms used but not defined herein have the respective meanings
given to such terms in the Disbursement Agreement and the TransTexas Loan
Agreement.
TransTexas hereby requests that the Disbursement Agent disburse,
funds from the Disbursement Account in an aggregate amount equal to
$__________, on ________ __, ____ (the "Date of Disbursement"). Such funds
will be used within five (5) business days solely in connection with the
TransTexas Dividend/Share Repurchase Program or redeposited into the
Disbursement Account.
The undersigned hereby certifies that all conditions to this
disbursement have been met in accordance with the terms of the Disbursement
Agreement.
TRANSTEXAS GAS CORPORATION
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
B-1
