DRAFT - 8/24/98
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PETROLEUM HEAT AND POWER CO., INC.
101/8% Senior Subordinated Notes Due 2003
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INDENTURE
Dated as of ______ ___, 1998
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THE CHASE MANHATTAN BANK,
Trustee
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Page
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TABLE OF CONTENTS
ARTICLE 1.
Definitions and Incorporation by Reference
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SECTION 1.1. Definitions.................................................................................1
SECTION 1.2. Other Definitions..........................................................................15
SECTION 1.3. Incorporation by Reference of Trust Indenture Act..........................................15
SECTION 1.4. Rules of Construction......................................................................16
ARTICLE 2.
The Securities
SECTION 2.1. Form and Dating............................................................................16
SECTION 2.2. Execution and Authentication...............................................................17
SECTION 2.3. Registrar and Paying Agent.................................................................17
SECTION 2.4. Paying Agent To Hold Money in Trust........................................................18
SECTION 2.5. Securityholder Lists.......................................................................18
SECTION 2.6. Transfer and Exchange......................................................................18
SECTION 2.7. Replacement Securities.....................................................................19
SECTION 2.8. Outstanding Securities.....................................................................19
SECTION 2.9. Temporary Securities.......................................................................20
SECTION 2.10. Cancellation...............................................................................20
SECTION 2.11. Defaulted Interest.........................................................................20
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ARTICLE 3.
Redemption
SECTION 3.1. Notices to Trustee.........................................................................20
SECTION 3.2. Selection of Securities To Be Redeemed.....................................................21
SECTION 3.3. Notice of Redemption.......................................................................21
SECTION 3.4. Effect of Notice of Redemption.............................................................23
SECTION 3.5. Deposit of Redemption Price................................................................23
SECTION 3.6. Securities Redeemed in Part................................................................23
ARTICLE 4.
Covenants
SECTION 4.1. Payment of Securities......................................................................23
SECTION 4.2. SEC Reports................................................................................24
SECTION 4.3. Limitation on Funded Debt..................................................................24
SECTION 4.4. Limitation on Debt and Preferred Stock of Subsidiaries.....................................25
SECTION 4.5. Limitation on Restricted Payments..........................................................26
SECTION 4.6. Limitation on Restrictions on Distributions from Subsidiaries..............................28
SECTION 4.7. Limitation on Transactions with Affiliates.................................................29
SECTION 4.8. Change of Control..........................................................................30
SECTION 4.9. Limitation on Liens on Subsidiary Stock....................................................31
SECTION 4.10. Compliance Certificate.....................................................................31
SECTION 4.11. Further Instruments and Acts...............................................................31
SECTION 4.12. Refinancing Debt...........................................................................31
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ARTICLE 5.
Successor Company
SECTION 5.1. When Company May Merge or Transfer Assets..................................................32
ARTICLE 6.
Defaults and Remedies
SECTION 6.1. Events of Default..........................................................................33
SECTION 6.2. Acceleration...............................................................................35
SECTION 6.3. Other Remedies.............................................................................35
SECTION 6.4. Waiver of Past Defaults....................................................................35
SECTION 6.5. Control by Majority........................................................................35
SECTION 6.6. Limitation on Suits........................................................................36
SECTION 6.7. Rights of Holders to Receive Payment.......................................................36
SECTION 6.8. Collection Suit by Trustee.................................................................36
SECTION 6.9. Trustee May File Proofs of Claim...........................................................36
SECTION 6.10. Priorities.................................................................................37
SECTION 6.11. Undertaking for Costs......................................................................37
SECTION 6.12. Waiver of Stay or Extension Laws...........................................................37
ARTICLE 7.
Trustee
SECTION 7.1. Duties of Trustee..........................................................................38
SECTION 7.2. Rights of Trustee..........................................................................39
SECTION 7.3. Individual Rights of Trustee...............................................................39
SECTION 7.4. Trustee's Disclaimer.......................................................................40
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SECTION 7.5. Notice of Defaults.........................................................................40
SECTION 7.6. Reports by Trustee to Holders..............................................................40
SECTION 7.7. Compensation and Indemnity.................................................................40
SECTION 7.8. Replacement of Trustee.....................................................................41
SECTION 7.9. Successor Trustee by Merger................................................................42
SECTION 7.10. Eligibility; Disqualification..............................................................42
SECTION 7.11. Preferential Collection of Claims Against Company..........................................42
ARTICLE 8.
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance...........................................43
SECTION 8.2. Conditions of Defeasance...................................................................43
SECTION 8.3. Application of Trust Money.................................................................45
SECTION 8.4. Repayment to Company.......................................................................45
SECTION 8.5. Indemnity for Government Obligations.......................................................45
SECTION 8.6. Reinstatement..............................................................................45
ARTICLE 9.
Amendments
SECTION 9.1. Without Consent of Holders.................................................................46
SECTION 9.2. With Consent of Holders....................................................................47
SECTION 9.3. Compliance with Trust Indenture Act........................................................48
SECTION 9.4. Revocation and Effect of Consents and Waivers..............................................48
SECTION 9.5. Notation on or Exchange of Securities......................................................48
SECTION 9.6. Trustee to Sign Amendments.................................................................48
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SECTION 9.7. Payment for Consent........................................................................49
ARTICLE 10.
Subordination
SECTION 10.1. Agreement To Subordinate...................................................................49
SECTION 10.2. Liquidation, Dissolution, Bankruptcy.......................................................49
SECTION 10.3. Default on Senior Debt.....................................................................50
SECTION 10.4. Acceleration of Payment of Securities......................................................50
SECTION 10.5. When Distribution Must Be Paid Over........................................................51
SECTION 10.6. Subrogation................................................................................51
SECTION 10.7. Relative Rights............................................................................51
SECTION 10.8. Subordination May Not Be Impaired by Company...............................................51
SECTION 10.9. Rights of Trustee and Paying Agent.........................................................51
SECTION 10.10. Distribution or Notice to Representative...................................................52
SECTION 10.11. Article 10 Not to Prevent Events of Default or Limit Right to Accelerate...................52
SECTION 10.12. Trust Moneys Not Subordinated..............................................................52
SECTION 10.13. Trustee Entitled to Rely...................................................................52
SECTION 10.14. Trustee to Effectuate Subordination........................................................53
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt...........................................53
SECTION 10.16. Reliance by Holders of Senior Debt on Subordination Provision..............................53
ARTICLE 11.
Miscellaneous
SECTION 11.1. Trust Indenture Act Controls...............................................................53
SECTION 11.2. Notices....................................................................................53
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SECTION 11.3. Communication by Holders with Other Holders................................................54
SECTION 11.4. Certificate and Opinion as to Conditions Precedent.........................................54
SECTION 11.5. Statements Required in Certificate or Opinion..............................................55
SECTION 11.6. When Securities Disregarded................................................................55
SECTION 11.7. Rules by Trustee, Paying Agent and Registrar...............................................55
SECTION 11.8. Legal Holidays.............................................................................55
SECTION 11.9. Governing Law..............................................................................56
SECTION 11.10. No Recourse Against Others.................................................................56
SECTION 11.11. Successors.................................................................................56
SECTION 11.12. Multiple Originals.........................................................................56
SECTION 11.13. Table of Contents; Headings................................................................56
Exhibit A - Form of Security
Exhibit B - Press Release
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INDENTURE dated as of __________ _____, 1998, between PETROLEUM HEAT
AND POWER CO., INC., a Minnesota corporation (the "Company"), and The Chase
Manhattan Bank, a New York banking corporation (the "Trustee")
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 101/8% Senior
Subordinated Notes Due 2003 (the "Securities"):
ARTICLE 1.
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Affiliate" of any person specified means (i) any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person: (ii) any spouse, immediate family member or
other relative who has the same principal residence as any person described in
clause (i) above; and (iii) any trust in which any persons described in clause
(i) or (ii) above has a beneficial interest. For the purposes of this
definition, "control" when used with respect to any person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, a contract or otherwise; and
the terms "controlling" and "controlled" have meaning correlative to the
foregoing.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Subsidiary (other than directors' qualifying
shares), property or other assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its Subsidiaries
(including any disposition by means of a merger, consolidation or similar
transaction) other than (i) a disposition by a Subsidiary to the Company or by
the Company or a Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of
property or assets at fair market value in the ordinary course of business or
(iii) a disposition of obsolete assets in the ordinary course of business.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as the time of determination, the present value (discounted at the interest rate
borne by the Securities, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"Average Life" means, as of the date of determination, with respect to
any Debt or Preferred Stock, 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 or redemption or
similar payment with respect to such Preferred Stock multiplied by the amount of
such payment by (ii) the sum of all such payments.
"Bank Debt" means any and all amounts payable under or in respect of
the credit Agreement, as amended from time to time, any Refinancing agreement,
any Working Capital Financing agreement or any other loan agreement with a bank,
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company to the extent a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
"Banks" has the meaning specified in the Credit Agreement.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any person means any and all shares, interest,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, including any Preferred
Stock, but excluding any debt securities convertible into or exchangeable for
such equity.
"Cash Flow" for a person for any fiscal year, means the sum of (i) the
Consolidated Net Income of such person for such fiscal year, plus (ii) to the
extent the following deferred charges are deducted in the calculation of such
Consolidated Net Income, the amortization of customer lists and other deferred
charges and the amortization and depreciation of capital assets and the amount
of non-cash expenses associated with key employees' deferred compensation plans
of such person for such fiscal year determined on a consolidated basis in
accordance with generally accepted accounting principles; provided, however,
that to the extent the liability recorded on the books of such person relating
to such expenses is reduced during such period, Cash Flow for such period shall
be reduced by an amount equal to such reduction plus (iii) to the extent not
included in Consolidated Net Income, the amount of any Net Cash Proceeds to the
Company or any of its subsidiaries (other than a subsidiary described in clause
(iii) of the definition of Consolidated Net Income) from the sale of Capital
Stock of an Unrestricted Subsidiary of the Company.
"Change of Control" means the occurrence of the following event:
Permitted Holders cease to beneficially own (as defined in Rules 13d-3 (other
than paragraph (d) thereof)
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and 13d-5 under the Exchange Act; provided that in no event shall a Permitted
Holder be deemed to beneficially own any shares of Voting Stock of the Company
that such Permitted Holder merely has the right to acquire), directly or
indirectly, in the aggregate a majority of the total voting power of the Voting
Stock of the Company, whether as a result of issuance of securities of the
Company, any merger, consolidation, liquidation or dissolution of the Company,
any direct or indirect transfer of securities or otherwise (for the purposes of
this definition, the Permitted Holders shall be deemed to beneficially own any
Voting Stock of a corporation held by any other corporation (the "parent
corporation"), so long as the Permitted Holders "beneficially own" (as so
defined), directly or indirectly, in the aggregate a majority of the total
voting power of the Voting Stock of such parent corporation).
"Class B Cash Flow" means the sum of (i) net income of the Company and
its consolidated subsidiaries determined in accordance with generally accepted
accounting principles, provided that (a) the net income of any person other than
a consolidated subsidiary in which the Company or any subsidiary has an interest
shall be included only to the extent of the amount of dividends or other
distributions paid to the Company or a consolidated subsidiary and (b) the net
income of any person acquired in a pooling transaction shall be excluded for any
period prior to the date of acquisition and (ii) depreciation and amortization
of plant and equipment and amortization of customer lists and restrictive
covenants of the Company and its consolidated subsidiaries determined in
accordance with generally accepted accounting principles. Class B Cash Flow with
respect to a fiscal year shall never be less than zero.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Company or any Subsidiary
has incurred any Debt since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated EBITDA Coverage Ratio is an incurrence of Debt, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to (A) such Debt as if such Debt had been incurred
on the first day of such period, (B) the discharge of any other Debt repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new Debt
as if such discharge had occurred on the first day of such period, and (C) the
interest income realized by the Company and its Subsidiaries on the proceeds of
such Debt, to the extent not yet applied at the date of determination, assuming
such proceeds earned interest at the Treasure Rate from the date such proceeds
were received through such date of determination, (2) if since the beginning of
such period the Company or any Subsidiary shall have made any Asset Disposition,
EBITDA for such period shall be reduced by an amount equal to EBITDA (if
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positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to EBITDA (if
negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt of the Company
or any Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Subsidiaries in connection with such
Asset Dispositions for such period (or, if the Capital Stock of any Subsidiary
is sold, the Consolidated Interest Expense for such period directly attributable
to the Debt of such Subsidiary to the extent the Company and its continuing
Subsidiaries are no longer liable for such Debt after such sale) and (3) if
since the beginning of such period the Company or any Subsidiary (by merger or
otherwise) shall have made an Investment in any Subsidiary (or any person which
becomes a Subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction causing a calculation to be
made hereunder, which constitutes all or substantially all an operating unit of
a business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the incurrence of
any Debt) as if such Investment or acquisition occurred on the first day of such
period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto, and the amount of Consolidated Interest Expense associated with any
Debt incurred in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of the
Company; provided, however, that such Officer shall assume (i) the historical
sales and gross profit margins associated with such assets for any consecutive
twelve-month period ended prior to the date of purchase (provided that the first
month of such period shall be no more than 18 months prior to such date of
purchase), less estimated post-acquisition loss of customers (not to be less
than 3%) and (ii) other expenses as if such assets had been owned by the Company
since the first day of such period. If any Debt bears a floating rate of
interest and is being given pro forma effect, the interest on such Debt shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Subsidiaries, determined on a
consolidated basis, including (i) interest expense attributable to capital
leases, (ii) amortization of debt discount, (iii) capitalized interest, (iv)
non-cash interest expense, (v) commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (vi)
interest actually paid by the Company or any such Subsidiary under any guarantee
of Debt or other obligation of any other Person, (vii) net costs associated with
Hedging Obligations (including amortization of fees), (viii) Preferred Stock
dividends in respect of all Preferred Stock of Subsidiaries held by persons
other than the Company or a Wholly Owned Subsidiary, (ix) the cash contributions
to any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
person (other than the Company) in connection with loans incurred by such plan
or trust to purchase newly issued or treasury shares of the Company (but
excluding interest expense associated with the accretion of principal on a
noninterest bearing or other discount security), and (x) to the extent not
already included in Consolidated Interest
4
Expense, the interest expense attributable to Debt of another person
that is guaranteed by the Company or any of its Subsidiaries less interest
income (exclusive of deferred financing fees) of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles; provided, however, that Consolidated Interest
Expense shall include any interest paid by the Company to Star Gas Corporation
on Debt owed to Star Gas Corporation but only to the extent the amount of such
interest paid during any period exceeds the cash dividends or other cash
distributions on the Capital Stock of Star Gas Corporation distributed to the
Company or any Subsidiary during such period.
"Consolidated Net Income" of a person, for any period, means the
aggregate of the Net Income of such person for such period, on a consolidated
basis, determined in accordance with generally accepted accounting principles,
provided that:
(i) the Net Income of any person other than a consolidated subsidiary
in which such person has a joint interest with a third party shall be
included only to the extent of dividends or distributions paid to such
person,
(ii) the Net Income of any person acquired by such person in a pooling
of interests transaction for any period prior to the date of such
acquisition shall be excluded,
(iii) any Net Income of any subsidiary shall be excluded if such
subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such subsidiary,
directly or indirectly, to such person, except that (A) such person's
equity in the Net Income of any such subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such subsidiary during such period to such person
as a dividend or other distribution (subject, in the case of a dividend or
other distribution to another subsidiary, to the limitation contained in
this clause) and (B) such person's equity in a net loss of any such
subsidiary for such period shall be included in determining such
Consolidated Net Income,
(iv) the cumulative effect of a change in accounting principles shall
be excluded; and
(v) notwithstanding the foregoing, Consolidated Net Income of the
Company shall include cash dividends or other cash distributions on the
Capital Stock of Star Gas Corporation distributed to the Company by Star
Gas Corporation but only to the extent such cash dividends or other cash
distributions exceed during any period the amount of any interest paid by
the Company during such period to Star Gas Corporation on Debt owed to Star
Gas Corporation.
"Consolidated Operating Cash Flow", for any period, means,
without duplication, (i) Cash Flow of the Company and its subsidiaries for such
period plus (ii) Cash Flow of all persons (and each of their subsidiaries, if
any, on a consolidated basis) then or theretofore
5
acquired (whether in a purchase or pooling of interests transaction) for such
period and less (iii) Cash Flow of all persons (and each of their subsidiaries,
if any, on a consolidated basis) then or theretofore disposed of for such
period. Cash Flow of such acquired companies shall be determined on a pro forma
basis, assuming (i) historical sales and gross profit margins less estimated
post-acquisition loss of customers and (ii) other expenses as if such business
had been owned by the company for the 12 months immediately preceding the date
of purchase. Cash Flow of any divested persons shall be such person's actual
Cash Flow to the date of disposition. For purposes of the second preceding
sentence, (i) historical sales and gross profit margins shall be determined for
any consecutive twelve-month period ended prior to the date of purchase;
provided, however, that the first month of such period shall be no more than
eighteen months prior to such date of purchase, and (ii) estimated
post-acquisition loss of customers may not be less than 3% of the customers
acquired.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of December 31, 1992, between the Company and Chemical Bank,
as agent.
"Debt" of any person means, without duplication,
(i) the principal of (A) indebtedness of such person for money
borrowed and (B) indebtedness evidence by notes, debentures, bonds or other
similar instruments for the payment of which such person is responsible or
liable;
(ii) all Capital Lease Obligations of such person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such person;
(iii) all obligations of such person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such person
and all obligations of such person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through (iii)
above) entered into in the ordinary course of business of such person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such person of a demand for reimbursement
following payment on the letter of credit);
(v) all obligations of the type referred to in clauses (i) through
(iv) of other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly or
indirectly, or obligor, guarantor or otherwise, including any guarantees of
such obligations and dividends, including by means of any agreement which
has the economic effect of a guarantee; and
6
(vi) all obligations of the type referred to in clauses (i) through
(v) of other persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the
amount of such obligation being deemed to be the lesser of value of such
property or assets or the amount of the obligation so secured.
The amount of Debt of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Designated Senior Debt" means (i) the Bank Debt and (ii) any other
Senior Debt which, at the date of determination, has an aggregate principal
amount outstanding of, or commitments to lend up to, at least $10 million and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Debt as "Designated Senior Debt" for purposes of this Indenture.
"EBITDA" for any period means the Consolidated Net Income for such
period (but without giving effect to adjustments, accruals, deductions or
entries resulting from purchase accounting, extraordinary losses or gains and
any gains or losses from any Asset Dispositions), plus the following to the
extent included in calculating such Consolidated Net Income: (i) income tax
expense, (ii) Consolidated Interest Expense, (iii) depreciation expense, (iv)
amortization expense and (v) all other non-cash expenses.
"Exchange" means the exchange of each Share for 0.13064 Units
substantially in the form described in the Press Release attached hereto as
Exhibit B with such changes therein as shall not materially adversely affect the
rights of any Holder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the Company which
is neither Exchangeable Stock nor Redeemable Stock).
"Funded Debt" as applied to any person, means, without duplication,
(a) any Debt with a Stated Maturity more than one year from the date of
incurrence, (b) any Debt, regardless of its term, if such Debt is renewable or
extendable at the option of the obligor of such Debt pursuant to the terms
thereof to a date more than one year from the date of incurrence; and (c) any
Debt, regardless of its term, which by its terms or the agreement pursuant to
which it is issued may be paid with the proceeds of other Debt which may be
incurred pursuant to the terms of such first-mentioned Debt or of such agreement
which other Debt has a stated maturity more than one year from the date of
incurrence of such first mentioned Debt; provided, however, that Working Capital
Borrowings shall be excluded from Funded Debt except to the extent that Working
Capital Borrowings exceed an amount equal to (i) 100% of the current assets
7
(excluding cash) of such person and its consolidated subsidiaries less (ii) any
excess, if any, of consolidated current liabilities over current assets on such
date).
"guarantee" means any obligation, contingent or otherwise, of any
person directly or indirectly guaranteeing any Debt or other obligation of any
person and any obligation, direct or indirect, contingent or otherwise, of such
person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such person (whether arising by
virtue or partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any person means the obligations of such
person pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such person against changes
in interest rates or foreign exchange rates.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Investment" in any person means any loan or advance to, any guarantee
of, any acquisition of any Capital Stock, equity interest, obligation or other
security of, or capital contribution or other investment in, such person.
Investment shall exclude advances to customers and suppliers in the ordinary
course of business.
"issue" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Debt or Capital Stock of a person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary.
"Lien" means any mortgage, pledge, security interest, conditional sale
or other title retention agreement or other similar lien.
"Maxwhale" means Maxwhale Corp., a Minnesota corporation.
"Maxwhale Notes" means a series of promissory notes in the aggregate
amount of $50 million dated June 1, 1987, issued to Whale Oil Corp. of New
England, Whale Oil Corp. of New Jersey and Whale Oil Corp. of New York.
8
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Net Income" of any person means the net income (loss) of such person,
determined in accordance with generally accepted accounting principles;
excluding, however, from the determination of Net Income any gain (but not loss)
realized upon the sale or other disposition (including, without limitation,
dispositions pursuant to leaseback transactions) of any real property or
equipment of such person, which is not sold or otherwise disposed of in the
ordinary course of business, or of any capital stock of the Company or a
Subsidiary owned by such person.
"New Preferred Stock" means the Company's 1998 junior convertible
preferred stock as described in the certificate of designation filed with the
Secretary of State of Minnesota on August 11, 1998.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any non-convertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into non-convertible common
stock of such corporation; provided, however, that Non-Convertible Capital Stock
shall not include any Redeemable Stock or Exchangeable Stock.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary of
the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Partnership" means Star Gas Partners, L.P.
"Permitted Holders" means the Xxxxx Group and the Xxxxxx Group,
collectively.
"Permitted Liens" shall mean, (i) Liens existing on April 1, 1993 and
renewals, extensions and refinancings thereof; (ii) rights of banks to set off
deposits against debts owed to said banks; (iii) Purchase Money Debt; (iv) Liens
on the property of any entity existing at the time such property is acquired by
the Company or any of its Subsidiaries and renewals, extensions and refinancings
thereof, whether by merger, consolidation, purchase of assets or otherwise;
provided, however, that in the case of this clause (iv) that such Liens (x) are
not created, incurred or assumed in contemplation of such assets being acquired
by the Company and
9
(y) do not extend to any other assets of the Company or any
of its Subsidiaries; (v) Liens for taxes not yet due; and (vi) Liens granted to
holders of Senior Debt of the Company.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which 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; provided, however, that Preferred Stock shall not include the
Company's Class B Common Stock.
"Purchase Money Debt" means Debt (i) consisting of the deferred
purchase price of property, conditional sale obligations, obligation under any
title retention agreement and other purchase money obligations, in each case
where the maturity of such Debt does not exceed the anticipated useful life of
the asset being financed, and (ii) incurred to finance the acquisition by the
Company or a Subsidiary of such asset, including additions and improvements;
provided, however, that any Lien arising in connection with any such Debt shall
be limited to the specified asset being financed or, in the case of real
property or fixtures, including additions and improvements, the real property on
which such asset is attached.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time.
"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of the
Stated Maturity of the Securities or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated Maturity
of the Securities.
"Refinancing Agreement" means any credit agreement or other agreement
between the Company and bank lenders pursuant to which the Company refinances
borrowings under the Credit Agreement or another Refinancing Agreement.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Debt.
"Restricted Investment" means any Investment in an Unrestricted
Subsidiary. At the time any Subsidiary of the Company is designated by the Board
of Directors of the Company as an Unrestricted Subsidiary, the Company shall be
deemed to have made a Restricted Investment in an amount equal to the fair
market value as of such time of the Company's interest in such Unrestricted
Subsidiary, as determined in good faith by the Board of Directors and set forth
in a Board Resolution; provided, however, that all amounts which the Company is
deemed to have invested in Star Gas Corporation by reason of the designation of
Star Gas Corporation as
10
an Unrestricted Subsidiary by the Board of Directors of the Company shall not be
included in the definition of Restricted Investment.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Subsidiary transfers
such property to a person and the Company or a Subsidiary leases it from such
person.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities issued under this Indenture.
"Senior Debt" means the following obligations, whether outstanding
April 1, 1993 or thereafter issued:
(i) all obligations consisting of the Bank Debt;
(ii) all obligations consisting of the principal of and premium, if
any, and accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization
relating to the Company to the extent post-filing interest is allowed in
such proceeding) in respect of (A) indebtedness of the company for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which the Company is
responsible or liable;
(iii) all Capital Lease Obligations of the Company;
(iv) all obligations of the Company (A) for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (B) under interest rate swaps, caps, collars, options and
similar arrangements and foreign currency xxxxxx entered into in respect of
any obligations described in clauses (i), (ii) and (iii) or (C) issued or
assumed as the deferred purchase price of property and all conditional sale
obligations of the Company and all obligations of the Company under any
title retention agreement;
(v) all obligations of other persons of the type referred to in
clauses (ii), (iii) and (iv) and all dividends of other persons for the
payment of which, in any case, the Company is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including
guarantees of such obligations and dividends; and
(vi) all obligations of the Company consisting of modifications,
renewals, extensions, replacements and refundings of any obligations
described in clauses (i), (ii), (iii), (iv) or (v);
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such obligations, are not superior
in right of payment to the
11
Debentures; provided, however, that Senior Debt shall not include (1) any
Indebtedness of the Company represented by its 10 1/8% Subordinated Notes due
2003 issued under the indenture dated as of April 1, 1993, between the Company
and Chemical Bank, as trustee, 9 3/8% Subordinated Debentures due 2006 issued
under the indenture dated as of February 3, 1994, between the Company and
Chemical Bank, as trustee and the 12 1/4% Subordinated Debentures due 2005
issued under the indenture dated as of February 9, 1995, between the Company and
Chemical Bank, as trustee, (2) any obligation of the Company to any Subsidiary
or other Affiliate of the Company, (3) any liability for federal, state, local
or other taxes owed or owing by the Company, (4) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities) or (5)
that portion of any Indebtedness that was incurred in violation of this
Indenture.
"Xxxxx Group" shall mean Estate of Xxxxxx X. Xxxxx and trusts created
thereunder, Xxxxxx X. Xxxxx, Xxxx X. Xxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxxx Xxxxxx
and Xxxxxxx Ean Xxxxx and any trust over which such persons have sole voting
power.
"Xxxxx Note" means the promissory note, dated December 31, 1992, of
Xxxx X. Xxxxx to the Company in a principal amount of $1,499,378 and due on
December 31, 1993, as the same may be extended (but not otherwise amended) on a
year-by-year basis in accordance with the Company's past practices and the
principal amount of which may not be increased in any one year by more than the
amount of accrued and unpaid interest during the immediately preceding year.
"Shares" means the shares of New Preferred Stock issued by the
Company.
"Significant Subsidiary" means (i) any Subsidiary of the Company which
at the time of determination either (A) had assets which, as of the date of the
Company's most recent quarterly consolidated balance sheet, constituted at least
3% of the Company's total assets on a consolidated basis as of such date, or (B)
had revenues for the 12-month period ending on the date of the Company's most
recent quarterly consolidated statement of income which constituted at lease 3%
of the Company's total revenues on a consolidated basis for such period, or (ii)
any Subsidiary of the Company which, if merged with all Defaulting Subsidiaries
of the Company, would at the time of determination either (A) have had assets
which, as of the date of the Company's most recent quarterly consolidated
balance sheet, would have constituted at least 10% of the Company's total assets
on a consolidated basis as of such date or (B) have had revenues for the
12-month period ending on the date of the Company's most recent quarterly
consolidated statement of income which would have constituted at least 10% of
the Company's total revenues on a consolidated basis for such period (each such
determination being made in accordance with generally accepted accounting
principles). "Defaulting Subsidiary" means any Subsidiary of the Company with
respect to which an event described under clause (4), (5), (6) or (7) of Section
6.1 has occurred and is continuing..
"Star Gas Transaction" means a business combination transaction
between the Company and the Partnership substantially in the form described in
the Press Release attached
12
hereto as Exhibit B with such changes therein as shall not materially adversely
affect the rights or any Holder.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligations" means any Indebtedness of the Company
(whether outstanding on April 1, 1993 or thereafter incurred) which is
subordinate or junior in right of payment to the Debentures, including, without
limitation, any Indebtedness of the Company represented by its 10 1/8%
Subordinated Notes due 2003 issued under the indenture dated as of April 1,
1993, between the Company and Chemical Bank, as trustee, 9 3/8% Subordinated
Debentures due 2006 issued under the indenture dated as of February 3, 1994,
between the Company and Chemical Bank, as trustee and the 12 1/4% Subordinated
Debentures due 2005 issued under the indenture dated as of February 9, 1995,
between the Company and Chemical Bank, as trustee.
"Subsidiary" means a corporation of which a majority of the Capital
Stock having voting power under ordinary circumstances to elect a majority of
the board of directors is owned by (i) the Company, (ii) the Company and one or
more Subsidiaries or (iii) one or more Subsidiaries; provided, however, that an
Unrestricted Subsidiary shall be deemed not to be a Subsidiary (except as used
in the definition thereof)..
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa
-77bbbb) as amended and in effect on April 1, 1993.
"Xxxxxx Group" shall mean (i) all the holders of Class C Common Stock
as of April 1, 1993 who are not member of the Xxxxx Group, (ii) any person who
receives shares from persons described in clause (i) without such transfer of
shares being subject to the first refusal right referred to in the shareholders
agreement among the holders of Class C Common Stock dated November 25, 1986, as
amended through April 1, 1993, and (iii) any trust over which persons described
in clause (i) or (ii) have sole voting power.
"Treasury Rate" as of any date of determination means the yield to
maturity at the time of computation of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15(519) which has become publicly available at least two
business days prior to such date of determination (or, if such Statistical
Release is no longer published, any publicly available source of similar market
data) of five years.
"Trust Officer" means the Chairman of the Board, the Chairman or vice
Chairman of the executive committee of the Board, the President, any Vice
President, the Secretary, any
13
Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any
Assistant Cashier, the Trust Officer, any Assistant Trust Officer, the
Comptroller, any Assistant Comptroller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Units" means the common units of limited partnership in the
Partnership issued pursuant to the Star Gas Transaction.
"Unrestricted Subsidiary" means a Subsidiary of the Company, and each
Subsidiary of such Subsidiary, designated by the Board of Directors of the
Company as an Unrestricted Subsidiary pursuant to a Board Resolution set forth
in an Officers' Certificate and delivered to the Trustee, (a) no portion of the
Debt or any other obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any other Subsidiary of the Company, (ii) is
recourse to or obligates the Company or any other Subsidiary of the Company in
any way or (iii) subjects any property or assets of the Company or any other
Subsidiary of the Company, directly or indirectly, contingently or otherwise, to
the satisfaction thereof and (b) with which neither the Company nor any other
Subsidiary of the Company has any obligation (i) to subscribe for additional
shares of Capital Stock or other equity interests therein or (ii) to maintain or
preserve such Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results. An Unrestricted Subsidiary may be
so designated a Subsidiary, provided that (A) no Default or Event of Default
shall have occurred and be continuing and (B) immediately after giving effect to
such designation, the Company would be able to issue an additional $1.00 of
Funded Debt pursuant to the first paragraph of Section 4.3 "Limitation on Funded
Debt."
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency of instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares) is owned by the Company or
another Wholly Owned Subsidiary.
"Working Capital Borrowings" shall mean, on any date of determination,
all Debt of the Company and its Subsidiaries on a consolidated basis incurred to
finance current assets.
14
"Working Capital Financing Agreement" means any agreement entered into
after April 1, 1993 by the Company and bank lenders pursuant to which the
Company issues working Capital Borrowings.
"1989 Preferred Stock" shall mean the preference stock of the Company
designated as "1989 Preferred Stock, Par Value $.10".
SECTION 1.2. Other Definitions.
Term Defined in
---- Section
----------
"Bankruptcy Law"..................................................................... 6.1
"covenant defeasance option"......................................................... 8.1 (b)
"Custodian".......................................................................... 6.1
"Event of Default"................................................................... 6.1
"issue".............................................................................. 4.3
"legal defeasance option"............................................................ 8.1 (b)
"Legal Holiday"...................................................................... 11.8
"pay the Securities"................................................................. 10.3
"Paying Agent"....................................................................... 2.3
"Payment Blockage Period"............................................................ 10.3
"Payment Notice"..................................................................... 10.3
"Registrar".......................................................................... 2.3
"Restricted Payment"................................................................. 4.5
SECTION 1.3. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in the Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
15
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 have the
meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect on April 1, 1993 and all accounting calculations will be determined
in accordance with such principles;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured debt shall not be deemed to be subordinate or junior to
secured debt merely by virtue of its nature as unsecured debt;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with generally accepted accounting principles and accretion of
principal on such security shall be deemed to be the issuance of Debt; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2.
The Securities
SECTION 2.1. Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of
this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which
the Company is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms
of the Securities set forth in Exhibit A are part of the terms of this
Indenture.
16
SECTION 2.2. Execution and Authentication. Two Officers shall sign
the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on
the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized officer of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate principal amount of $100,000,000, upon a written order of
the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall specify the
amount of the Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed that amount except as provided
in Section 2.7.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Securities. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.3. Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee 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 and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
17
SECTION 2.4. Paying Agent To Hold Money in Trust. On or prior to each
due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent, and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonable require of the xxxxx and addresses of Securityholders.
SECTION 2.6. Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer. When a Security is presented to the Registrar or a
co-registrar with a request to register a transfer, the Registrar shall register
the transfer as requested if the requirements of Section 8-401 (1) of the
Uniform Commercial Code are met. When Securities are presented to the Registrar
or a co-registrar with a request to exchange them for an equal principal amount
of Securities of other denominations, the Registrar shall make the exchange as
requested if the same requirements are met. To permit registration of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Securities at the Registrar's or co-registrar's request. The Company may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges in connection with any transfer or exchange pursuant to this Section.
The Company shall not be required to make and the Registrar need not register
transfers or exchanges of Securities selected for redemption (except, in the
case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any securities for a period of 15 days before a selection or
Securities to be redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company
,the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
18
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitles to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.7. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 or the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated and delivered by the Trustee except for
those canceled by it, those delivered to it for cancellation and those described
in this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or portions thereof) cease to be outstanding and interest on
them ceases to accrue provided that if the Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture, or provision
thereof satisfactory to the Trustee has been made.
SECTION 2.9. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.
19
SECTION 2.10. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee and Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date, which date shall be at
least five Business Days prior to the payment date. The Company shall fix or
cause to be fixed any such special record date and payment date, and, at least
15 days before any such special record date, the Company shall mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
ARTICLE 3.
Redemption
SECTION 3.1. Notices to Trustee. If the Company elects to redeem
Securities pursuant to item 5 of the Securities, it shall notify the Trustee in
writing of the redemption date, the principal amount of Securities to be
redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not less than 15 days after the date of notice to the Trustee.
SECTION 3.2. Selection of Securities To Be Redeemed. If fewer than all
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed pro rata or by lot or by a method that complies with applicable legal
and securities exchange requirements, if any, and that the Trustee considers
fair and appropriate and in accordance with methods generally used at the time
of selection by fiduciaries in similar circumstances. The Trustee shall make the
selection from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities that
have denominations larger than $1,000. Securities and portions of them the
Trustee selects shall be in amounts of
20
$1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.3. Notice of Redemption. If the Company elects to redeem
Notes pursuant to the first paragraph of item 5 of the Notes, at least
30 days but not more than 60 days before a date for redemption of Notes,
the Company shall mail a notice of redemption by first-class mail to
each Holder of Notes to be redeemed and to the Trustee. If the Company
elects to redeem Notes pursuant to the second paragraph of item 5 of the
Notes, at least 3 days but not more than 10 days before a date for
redemption of Notes, the Company shall mail a notice of redemption by
first-class mail to each Holder of Notes to be redeemed.
If the Company elects to redeem Notes pursuant to the first paragraph
of item 5 of the Notes, the notice shall identify the Notes to be redeemed and
shall state:
(9) the redemption date;
(10) the redemption price;
(11) the name and address of the Paying Agent;
(12) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(13) if fewer than all the outstanding Notes are to be redeemed,
the identification and principal amounts of the particular Notes to be
redeemed;
(14) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Notes (or portion
thereof) called for redemption ceases to accrue on and after the
redemption date;
(15) the paragraph of the Notes pursuant to which the Notes
called for redemption are being redeemed; and
(16) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes.
If the Company elects to redeem Notes pursuant to the second paragraph
of item 5 of the Notes, the notice shall identify the Notes to be redeemed and
shall state:
(1) the redemption date;
(2) the name and address of the Paying Agent;
(3) that Notes called for redemption must be surrendered to the
Paying
21
Agent to collect the redemption price;
(4) that the certificates for the Shares must be surrendered to
the Paying Agent in order to effect the Exchange;
(5) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Notes (or portion
thereof) called for redemption ceases to accrue on and after the
redemption date;
(6) the paragraph of the Notes pursuant to which the Notes called
for redemption are being redeemed;
(7) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes; and
(8) a representation that the Star Gas Transaction shall have
been consummated simultaneously with the redemption.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.4. Effect of Notice of Redemption. Once notice of redemption
is mailed, Securities called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price
stated in the notice, plus accrued interest to the redemption date. Failure to
give notice or any defect in the notice to any Holder shall not affect the
validity of the notice to any other Holder. Notwithstanding the forgoing, if the
Company mails a notice of redemption in connection with a redemption of Notes
pursuant to the second paragraph of item 5 of the Notes and subsequently
determines, in good faith, that the Star Gas Transaction will not be
consummated, the Company, in its sole discretion, may revoke such notice of
redemption by notifying the Trustee in writing with the immediate effect that
Notes called for redemption shall no longer be due and payable on the redemption
date and the Company shall be under no further obligation to so redeem any
Notes.
SECTION 3.5. Deposit of Redemption Price. On or prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for cancellation.. If the Company elects to redeem Notes pursuant to the
second paragraph of item 5 of the Notes, prior to the redemption date, the
Company shall also deposit with the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) an aggregate
number of Units sufficient to effect the Exchange.
22
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate for the Holder (at the Company's expense) a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4.
Covenants
SECTION 4.1. Payment of Securities. The Company shall promptly pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.2. SEC Reports. The Company shall file with the Trustee and
provide Securityholders, within 15 days after it files them with the SEC, copies
of its annual report and the information, documents and other reports (or copies
of such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 of 15(d) of the Exchange Act. Notwithstanding that the Company may
not be required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall continued to file with the SEC and
provide the Trustee and Securityholders with such annual reports and such
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which are
specified in Sections 13 and 15(d) of the Exchange Act. The Company also shall
comply with the other provisions of TIA Section 314(a).
SECTION 4.3. Limitation on Funded Debt. (a) The Company will not,
directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable with respect to (collectively, "incur") any
Funded Debt unless, after giving effect thereto, the Company's Consolidated
EBITDA Coverage Ratio exceeds 2.0 to 1.
(b) Notwithstanding Section 4.3(a), the Company may incur the
following Funded Debt:. (i) Funded Debt owed to and held by a Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of any
Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of such Funded Debt (other
than to a Wholly Owned Subsidiary) will be deemed, in each case, to
23
constitute the incurrence of such Funded Debt by the Company; (ii) the Notes
issued on April 1, 1993 and Funded Debt issued in exchange for, or the proceeds
of which are used to refund or refinance, any Funded Debt permitted by this
Clause (ii); provided, however, that (1) the principal amount of the Funded Debt
so incurred will not exceed the principal amount of the Funded Debt so
exchanged, refunded or refinanced and (2) the Funded Debt so incurred (A) will
not mature prior to the Stated Maturity of the Funded Debt so exchanged,
refunded or refinanced and (B) will have an Average Life equal to or greater
than the remaining Average Life of the Funded Debt so exchanged, refunded or
refinanced; (iii) Funded Debt (other than Funded Debt described in clause (i) or
(ii) of this paragraph) outstanding as of December 4, 1996, any Refinancing Debt
(as defined in Section 4.12) incurred thereafter and Funded Debt issued in
exchange for, or the proceeds of which are used to refund or refinance, any
Funded Debt permitted by this clause (iii) or by Section 4.3(a); provided,
however, that (1) the principal amount of the Funded Debt so incurred will not
exceed the principal amount of the Funded Debt so exchanged, refunded or
refinanced, (2) the Funded Debt so incurred (A) will not mature prior to the
Stated Maturity of the Funded Debt so exchanged, refunded or refinanced and (B)
will have an Average Life equal to or greater than the remaining Average Life of
the Funded Debt so exchanged, refunded or refinanced and (3) if the Funded Debt
so exchanged, refunded or refinanced is a Subordinated Obligation, the Funded
Debt so incurred will be subordinated to the Notes; (iv) additional Funded Debt
incurred subsequent to December 4, 1996 in an aggregate amount not to exceed $50
million at any one time outstanding; provided, however, that at any time and to
the extent the Company is permitted to incur Funded Debt pursuant to the
Consolidated EBITDA Coverage Ratio test contained in Section 4.3(a), the Company
may elect that amounts of Funded Debt incurred pursuant to this clause (iv) be
deemed to have been incurred pursuant to Section 4.3(a) and be deemed not to
have been incurred pursuant to this clause (iv); and further provided that in
the event of the disposition by the Company of its shares of Star Gas
Corporation ("Star Gas") or the disposition by Star Gas of its general and
limited partner interests in Star Gas Partners L.P., any portion of the
Borrowing (as defined in Section 4.12) then or thereafter outstanding shall be
deemed to have been incurred pursuant to this clause (iv).
SECTION 4.4. Limitation on Debt and Preferred Stock of Subsidiaries.
The Company shall not permit any Subsidiary to incur any Debt or issue any
Preferred Stock except:
(1) Debt or Preferred Stock issued to and held by the Company or a
Wholly Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Debt or Preferred Stock (other than to the Company or a
Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the
incurrence of such Debt or the issuance of such Preferred Stock, as the
case may be, by the issuer thereof;
(2) Debt incurred or Preferred Stock of a Subsidiary issued and
outstanding on or prior to the date on which such Subsidiary was acquired
by the Company (other than Debt incurred or Preferred Stock issued in
contemplation of, as consideration in, or to
24
provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Subsidiary became a Subsidiary or was acquired by the Company);
provided, that at the time such Subsidiary is acquired by the Company,
after giving effect to such Debt or Preferred Stock of such Subsidiary, the
ratio of the Company's consolidated EBITDA Coverage Ratio exceeds 2.0 to 1;
(3) Debt or Preferred Stock (other than Debt or Preferred Stock
described in clause (1), (2), (4) or (6) of this Section) incurred or
issued and outstanding on or prior to April 1, 1993;
(4) Debt of a Subsidiary consisting of guarantees issued by such
Subsidiary and outstanding on April 1, 1993 and Debt of a Subsidiary
consisting of guarantees issued subsequent to April 1, 1993, in each case,
to the extent such guarantee guarantees Bank Debt;
(5) Debt of a Subsidiary (other than Debt described in clause (4)
above) consisting of guarantees of Funded Debt of the Company permitted by
Section 4.3(a); provided, that contemporaneously with the incurrence of
such Debt by such Subsidiary, such Subsidiary issues a guarantee for the
pro rata benefit of the holders of the Securities which is subordinated to
such Debt of such Subsidiary to the same extent as the Securities are
subordinated to such Funded Debt of the Company; and
(6) Debt of Preferred Stock issued in exchange for, or the proceeds of
which are used to refund or refinance, Debt or Preferred Stock referred to
in the forgoing clause (2) or (3) above; provided, however, that (i) the
principal amount of such Debt or Preferred Stock so incurred or issued
shall not exceed the principal amount of the Debt or Preferred Stock so
exchanged or refinanced and (ii) the Debt or Preferred Stock so incurred or
issued (A) shall have a Stated Maturity later than the Stated Maturity of
the Debt or Preferred Stock being exchanged or refinanced and (B) shall
have an Average Life equal to or greater than the remaining Average Life of
the Debt or Preferred Stock so exchanged, refunded or refinanced.
SECTION 4.5. Limitation on Restricted Payments. (a) The Company shall
not, and shall not permit any Subsidiary, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders
of its Capital Stock (except (x) dividends or distributions payable solely
in its Non-Convertible Capital Stock or in options, warrants or other
rights to purchase its Non-Convertible Capital Stock and (y) dividends or
distributions payable to the Company or a Subsidiary, and, if a Subsidiary
is not wholly owned, to the other shareholders of such Subsidiary on a pro
rata basis), (ii) purchase, redeem or otherwise acquire
25
or retire for value any Capital Stock of the Company or of any direct or
indirect parent of the Company, (iii) purchase, repurchase, redeem, defease
or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition) or (iv) make any Restricted
Investment (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition or retirement, or any such
Restricted Investment, being herein referred to as a "Restricted Payment")
if at the time the Company or such Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom); or
(2) the aggregate amount of such Restricted Payment and all other
Restricted Payments since December 31, 1992 would exceed the sum of:
(a) 50% of the Cash Flow of the Company and its Subsidiaries accrued
during the period (treated as one accounting period) from December 31,
1992, to the end of the most recent fiscal quarter ending at least 45 days
prior to the date of such Restricted Payment (or, in case such Cash Flow
shall be a deficit, minus 100% of such deficit);
(b) the aggregate Net Cash Proceeds received by the Company from the
issue or sale of its Capital Stock subsequent to December 31, 1992 (other
than an issuance or sale to a Subsidiary or an employee stock ownership
plan or other trust established by the Company or any Subsidiary);
(c) the amount by which indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than a
Subsidiary) subsequent to December 31, 1992, of any Debt of the Company
convertible or exchangeable for Capital Stock of the Company (less the
amount of any cash, or other property, distributed by the Company upon such
conversion or exchange); and
(d) $20,000,000.
(b) The provisions of Section 4.5(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Capital Stock of the Company (other
than Capital Stock issued or sold to a Subsidiary or any employee stock
ownership plan or other trust established by the Company or any
Subsidiary); provided, however, that (A) such purchase or redemption shall
be excluded in the calculation of the amount of Restricted Payments and (B)
the Net Cash Proceeds from such sale shall be excluded from clause (2)(b)
of Section 4.5(a);
26
(ii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this Section; provided, however, that at the time of payment of such
dividend, no other Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such dividend shall be included
in the calculation of the amount of Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Debt of the Company which is permitted to be issued
pursuant to Section 4.3; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments;
(iv) dividends declared and paid in respect of the Company's Class B
Common Stock in an amount in respect of any fiscal year not to exceed 1.50%
of the Company's Class B Cash Flow for the immediately preceding fiscal
year (provided that no dividend shall theretofore have been declared on the
Class A Common Stock or Class C Common Stock in the same fiscal year);
provided, however, that at the time of such dividend, redemption or
exchange, no Default shall have occurred or be continuing; provided,
further, however, that any such dividends, redemptions and exchanges shall
be included in the calculation of Restricted Payments;
(v) dividends on, and mandatory and optional redemptions and exchanges
of, the 1989 Preferred Stock; provided, however, that at the time of such
dividend, redemption or exchange, no Default shall have occurred or be
continuing; provided further, however, that any such dividends, redemptions
and exchanges shall be excluded in the calculation of Restricted Payments;
or
(vi) Restricted Investments in an aggregate amount not to exceed the
sum of (A) $30 million, plus (B) $5 million on each November 22 plus (C)
the amount of all dividends or other distributions received in cash by the
Company or any of its Wholly Owned Subsidiaries from, and the amount of any
Net Cash Proceeds to the Company or any of its Wholly Owned Subsidiaries
from the sale of Capital Stock (other than a sale of Capital Stock of the
Company, a Subsidiary or Unrestricted Subsidiary of the Company or an
employee stock ownership plan or other trust established by the Company or
any Subsidiary or Unrestricted Subsidiary of the Company) of, an
Unrestricted Subsidiary of the Company, to the extent that the aggregate
amount of such dividends, distributions and Net Cash Proceeds referred to
in this clause (C) do not exceed the aggregate amount of Restricted
Investments made by the Company in such Unrestricted Subsidiary since
November 22, 1995; provided, however, that Restricted Investments permitted
by this clause (iv) shall be excluded in the calculation of the amount of
Restricted Payments.
SECTION 4.6. Limitation on Restrictions on Distributions from
Subsidiaries. The Company shall not, and shall not permit any Subsidiary to,
create of otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of
27
any Subsidiary to (i) pay dividends or make any other distributions on its
Capital Stock or pay any Debt owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on April 1, 1993;
(2) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Debt issued by such Subsidiary on
or prior to the date on which such Subsidiary was acquired by the Company
(other than Debt issued as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company) and
outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement effecting
a refinancing of Debt issued pursuant to an agreement referred to in clause
(1) or (2) of this Section or contained in any amendment to an agreement
referred to in clause (1) or (2) of this Section; provided, however, that
the encumbrances and restrictions contained in any such refinancing
agreement or amendment are no less favorable to the Securityholders than
the encumbrances and restrictions contained in such agreements;
(4) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease;
(5) in the case of clause (iii) above, restrictions contained in
security agreements securing Debt of a Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements; and
(6) any restriction with respect to a Subsidiary imposed pursuant to
an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary pending
the closing of such sale or disposition.
SECTION 4.7. Limitation on Transactions with Affiliates. (a) The
Company shall not, and shall not permit any Subsidiary to, conduct any business
or enter into any transaction or series of similar transactions in an aggregate
amount in excess of $100,000 (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with any Affiliate of the Company
or any legal or beneficial owner of 5% or more of any class of Capital Stock of
the Company or with an Affiliate of any such owner unless the terms of such
business, transaction or series of transactions are (i) set forth in writing,
(ii) as favorable to the Company or such Subsidiary as terms that would be
obtainable at the time for a comparable transaction or series of similar
transactions in arm's-length dealings with an unrelated third person and (iii)
in the case of any transaction or series or similar transactions in an aggregate
28
amount in excess of $500,000, the disinterested members of the Board of
Directors have determined in good faith that the criteria set forth in clause
(ii) are satisfied.
(b) The provisions of Section 4.7(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.5, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii)
loans or advances to employees in the ordinary course of business; (iv) the
payment of reasonable fees to directors of the Company and its subsidiaries who
are not employees of the Company or its subsidiaries, (v) any transaction
between the Company and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries or (vi) the Investment represented by the Xxxxx Note.
SECTION 4.8. Change of Control. (a) Upon a Change of Control, each
Holder shall have the right to require that the Company purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase, in
accordance with the terms contemplated in Section 4.8(b). If, at the time of
such Change of Control, the Company is prohibited by the terms of the Band Debt
from purchasing all Securities that may be tendered by Holders at the purchase
price described above as a result of such Change of Control, then prior to the
mailing of the notice to Holders provided for in Section 4.8(b) below but in any
event within 30 days following any Change of Control, the Company covenants to
(i) repay in full all Bank Debt or to offer to repay in full all Bank Debt and
to repay the Bank Debt of each lender who has accepted such offer or (ii) obtain
the requisite consent under the Bank Debt to permit the repurchase of the
Securities as provided for in Section 4.8(b) below.
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control have occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase;
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
(3) the purchase date (which shall be no earlier than 30 days not
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
Section, that a Holder must follow in order to have its Securities
purchased.
29
(c) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the Company
at the address specified in the notice at least 10 Business Days prior to the
purchase date. Holders will be entitled to withdraw their election if the
Trustee or the Company receives not later than three Business Days prior to the
purchase date, a facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security which was delivered for purchase by
the Holder and a statement that such Xxxxxx is withdrawing his election to have
such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Trustee for cancellation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the purchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.9. Limitation on Liens on Subsidiary Stock. The Company
shall not directly or indirectly create, assume or suffer to exist, any Lien on
any Capital Stock of any of its Subsidiaries.
SECTION 4.10. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate, one signer of which shall be the principal financial
officer, principal executive officer or principal accounting officer, stating
that in the course of the performance by the signers of their duties at Officers
of the Company they would normally have knowledge of any Default by the Company
and whether or not the signers know of any Default that occurred during such
period. If they do, the certificate shall describe the Default, its status and
what action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with TIA Section 314(a)(4).
SECTION 4.11. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonable necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.12. Refinancing Debt. Notwithstanding anything in this
Indenture as amended to the contrary, the Company may incur up to $125 million
of Indebtedness (the "Refinancing Debt"): (A) to refinance (whether by
repurchase, redemption, defeasance, exchange, amendment or otherwise) (i) $30
million in aggregate principal amount of Senior Notes due 1998 and $30 million
in aggregate principal amount of Subordinated Notes due 1998 (collectively the
"1998 Notes"), (ii) $5.2 million in aggregate principal amount of Senior Notes
due 2001 and $5.2 million in aggregate principal amount of Subordinated Notes
due 2001
30
(collectively the "2001 Notes") (together with the 1998 Notes, the
"Private Notes"), and (iii) $12.5 million in 1989 Preferred Stock (the "Private
Notes" and the "1989 Preferred Stock" are hereinafter referred to collectively
as the "Private Securities"); (B) to pay for the cost and fees (including
without limitation any redemption premiums) incurred in connection with
refinancing the Private Securities; and (C) to incur Indebtedness for general
corporate purposes (any Indebtedness incurred pursuant to this clause (C) shall
be referred to herein as the "Borrowing"); provided, however, that at no time
shall the outstanding aggregate principal amount of Private Securities and
Refinancing Debt exceed $125 million; and, provided, further, that the
Refinancing Debt shall have a longer Average Life than the Private Securities.
Without limiting the generality of the foregoing, the incurrence of the
Refinancing Debt and the use of proceeds therefrom as provided in the preceding
sentence shall not be (A) subject to the limitations on Funded Debt set forth in
Section 4.3 or (B) subject to the limitations on Restricted Payments set forth
in Section 4.5 and shall be excluded in the calculation of the amount of
Restricted Payments, and such Refinancing Debt may be incurred as Senior Debt or
Designated Senior Debt.
ARTICLE 5.
Successor Company
SECTION 5.1. When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any person, unless:
(i) the resulting, surviving or transferee person (if not the Company)
shall be a person organized and existing under the laws of the United
States of America, and State thereof or the District of Columbia and such
person shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Debt which becomes an obligation of the resulting, surviving or
transferee person or any Subsidiary as a result or such transaction as
having been issued by such person or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
resulting, surviving or transferee person would be able to incur an
additional $1.00 of Debt pursuant to Section 4.3(a); and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
31
The resulting, surviving or transferee person shall be the successor
Company and shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture, but the predecessor
Company in the case of a conveyance, transfer or lease shall not be released
from the obligation to pay the principal of and interest on the Securities.
ARTICLE 6.
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall be
prohibited by Article 10, and such default continues for a period of 30
days;
(2) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise, whether or not such payment
shall be prohibited by Article 10 or (ii) fails to redeem or purchase
Securities when required pursuant to this Indenture or the Securities,
whether or not such redemption or purchase shall be prohibited by Article
10;
(3) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (1) or (2)
above) and such failure continues for 30 days after the notice specified
below;
(4) Debt of the Company or any Significant Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default, the total amount of such Debt
unpaid or accelerated exceeds $1,000,000 or its foreign currency
equivalent;
(5) the Company or any Significant 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 any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors; or
takes any comparable action under any foreign laws relating to insolvency;
32
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant Subsidiary in
an involuntary case;
(B) appoints a Custodian of the Company or any Significant Subsidiary
or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or decree
remains unstayed and in effect for 60 days; or
(7) any judgment or decree for the payment of money in excess of
$1,000,000 is entered against the Company of any Significant Subsidiary and
is not discharged and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or the execution
thereof stayed and, in the case of (B), such default continues for 10 days
after the notice specified below.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected 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.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (3) or (7) (B) is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the Securities
notify the Company of the Default and the Company does not cure such Default
within the time specified after receipt of such Notice. Such Notice must specify
the Default, demand that it be remedied and state that such notice is a "Notice
of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (3) or (7), its status and what action the Company
is taking or proposes to take with respect thereto.
SECTION 6.2. Acceleration. If an Event of Default (other than an Event
of Default specified in Section 6.1(5) or (6) with respect to the Company)
occurs and is continuing,
33
the Trustee by notice to the Company, or the Holders of at least 25% in
principal amount of the Securities by notice to the Company and the Trustee, may
declare the principal of and accrued interest on all the Securities to be due
and payable. Upon such a declaration, such principal and interest shall be due
and payable immediately. If an Event of Default specified in Section 6.1(5) or
(6) with respect to the Company occurs, the principal of and interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or and Securityholders.
The Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities of this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.2 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but not
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.5. Control by Majority. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.1, that the Trustee determines is unduly prejudicial to the
rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.6. Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
34
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights or
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of and interest on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default in
payment of interest or principal specified in Section 6.1(1) or (2) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid (together with interest on such unpaid interest to the
extent lawful) and the amounts provided for in Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make 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 its counsel, and any other amounts due the Trustee under Section
7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
35
SECOND: to holders of Senior Debt to the extent required by Article
10;
THIRD: to Securityholders for amounts due and unpaid on the Securities
for principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorney's fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more
than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company )to the
extent it may lawfully do so) shall not at any time insist upon, or please, or
in any manner whatsoever claim or take the benefit or advantage or, any stay or
extension lay wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company to
the extent that it may lawfully do so) hereby expressly waives all benefit of
advantage of any such law, and shall not hinder, delay or impede the execution
of any poser herein granted to the Trustee, but shall suffer and permit the
execution of ever such power as though no such law had been enacted.
ARTICLE 7.
Trustee
SECTION 7.1. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise 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 or such person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
36
(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;
(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; and
(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 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur 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 to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. (a) The Trustee may rely 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 require an
Officers' Certificate and/or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
37
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the Default within 90 days after it occurs. Except in the case of a
Default in payment of principal of or interest on any Security (including
payments pursuant to the mandatory redemption provisions of such Security), the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As promptly as practicable
after each May 15 beginning with the May 15 following the date of this
Indenture, and in any event prior to July 15 in each year, the Trustee shall
mail to each Securityholder a brief report dated as of May 15 that complies with
TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
38
SECTION 7.7. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services. 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 out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim and the Trustee may have separate counsel and the Company shall pay the
fees and expenses of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee through
the Trustee's own willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.1(5) or (6) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) The Trustee otherwise 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 Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring
39
Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Securityholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for the Section 7.7.
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
Holders of a majority in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Xxxxxx. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by the
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in
its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding, including
but not limited to the Indenture, dated as of July 1, 1984, between the
Company and the Trustee, as amended, relating to the Company's 11.4%
Subordinated Notes due 1993 and the Indenture, dated as of October 1, 1985,
between the Company and the Trustee, as amended, relating to the Company's
14.275% Subordinated Notes due 1995, if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
40
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA ss. 311 (a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8.
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.7) for cancellation or (ii) all
outstanding Securities have become due and payable and the Company irrevocably
deposits with the Trustee funds sufficient to pay at maturity all outstanding
Securities, including interest thereon (other than Securities replaced pursuant
of Section 2.7), and if in either case the Company pays all other sums payable
hereunder by the Company, then this Indenture shall, subject to Sections 8.1(c)
and 8.6, cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.1(c), 8.2 and 8.6, the Company at any time
may terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.3, 4.4,
4.5, 4.6, 4.7, 4.8 and 5.1 (iii) and the operation of Sections 6.1(3), 6.1(4),
6.1(5) and (6) (with respect to Significant Subsidiaries) and 6.1(7) ("covenant
defeasance option"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in 6.1(3), 6.1(4), 6.1(5)
and (6) (with respect to Significant Subsidiaries) and 6.1(7) or because of the
failure of the Company to comply with Article 4 of this Agreement (other than
Sections 4.1, 4.2, 4.10 and 4.11) or with clause (iii) of Section 5.1.
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5, and 8.6
shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.7, 8.4 and 8.5 shall survive.
41
SECTION 8.2. Conditions of Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal and interest on
the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) unless a notice of redemption shall have been mailed pursuant to
Section 3.3 and other arrangements satisfactory to the Trustee for such
redemption shall have been made, 123 days pass after the deposit is made
and during the 123-day period no Default specified in Section 6.1(5) or (6)
with respect to the Company occurs which is continuing at the end of the
period;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(5) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(6) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(7) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since April 1, 1993 there has been a change in
the applicable Federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred;
(8) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at
42
the same times as would have been the case if such covenant defeasance had
not occurred; and
(9) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities. Money and securities
so held in trust are not subject to Article 10.
SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
paying agent thereof in the event that the Company shall at such time be serving
as the paying agent, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make such repayment, may at the
expense of the Company mail to each such Holder notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such mailing, any unclaimed balance of such money
remaining will be repaid to the Company.
SECTION 8.5. Indemnity for Government Obligations. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited U.S. Government Obligations or the principal
and interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article 8 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 and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8;
43
provided, however, that, if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE 9.
Amendments
SECTION 9.1. Without Consent of Holders. The Company when authorized
by a resolution of the Board of Directors of the Company and the Trustee may
amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Internal Code;
(4) to make any change in Article 10 that would limit or terminate the
benefits available to any holder of Senior Debt (or Representatives
therefor) under Article 10;
(5) to add guarantees with respect to the Securities or to secure the
Securities;
(6) 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;
(7) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA; or
(8) to make any change that does not adversely affect the rights of
any Securityholder.
An amendment under this Section may not make any change that adversely
affects the rights under Article 10 of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
44
SECTION 9.2. With Consent of Holders. The Company when authorized by a
resolution of the Board of Directors of the Company and the Trustee may amend
this Indenture or the Securities without notice to any Securityholder but with
the written consent of the Holders of at lease a majority in principal amount of
the Securities; provided, however, that no amendment may be made to Section 4.8
without the written consent of the Holders of at least 66 2/3% in principal
amount of the Securities. However, without the consent of each Securityholder
affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) impair the right of any Holder to receive payment of principal of
and interest on such Xxxxxx's Securities on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect
to such Xxxxxx's Securities;
(7) make any change in Article 10 that adversely affects the rights of
any Securityholder under Article 10; or
(8) make any change in Section 6.4 or 6.7 or the second sentence of
this Section.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that adversely
affects the rights under Article 10 of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
45
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
this Indenture of the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A consent
to an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Trustee receives the notice of revocation
before the date the amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those persons who were Securityholders at such
record date (or their duly designated proxies), and only those persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee to Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
SECTION 9.7. Payment for Consent. Neither the Company, any Affiliate
of the Company nor any Subsidiary shall, directly or indirectly, pay or cause to
be paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of the
terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid or agreed to be paid to all Holders which so
consent, waive or agree to amend in the time frame set for in solicitation
documents relating to such consent, waiver or agreement.
46
ARTICLE 10.
Subordination
SECTION 10.1. Agreement To Subordinate. The Company agrees, and each
Securityholder by accepting a Security agrees, that the indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article 10, to the prior payment of all Senior Debt and
that the subordination is for the benefit of and enforceable by the holders of
Senior Debt. Only indebtedness of the Company which is Senior Debt shall rank
senior to the Securities in accordance with the provisions set forth herein. All
provisions of this Article 10 shall be subject to Section 10.12.
SECTION 10.2. Liquidation, Dissolution, Bankruptcy. Upon any payment
or distribution of the assets of the Company to creditors upon a total or
partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Debt shall be entitled to receive payment in
full of the Senior Debt before Securityholders shall be entitled to receive
any payment of principal of, or premium, if any, or interest on the
Securities; and
(2) until the Senior Debt is paid in full, any distribution to which
Securityholders would be entitled but for this Article 10 shall be made to
holders of Senior Debt as their interests may appear, except that
Securityholders may receive shares of stock and any debt securities that
are subordinated to Senior Debt to at least the same extent as the
Securities.
For purposes of this Section "payment in full", as used with respect to Senior
Debt, means the receipt of cash or securities (taken at their fair value at the
time of receipt, determined as hereinafter provided) of the principal amount of
the Senior Debt and premium, if any, and interest thereon to the date of such
payment. "Fair value" means (a) if the securities are quoted on a nationally
recognized securities exchange, the closing price on the day such securities are
received or, if there are no sales reported on that day, the reported closing
bid price on that day, and (b) if the securities are not so quoted, a price
determined by a nationally recognized investment banking house selected by the
Securityholders and the holders of Senior Debt receiving such securities, such
price to be determined as of the date of receipt of such securities by the
holders of Senior Debt.
SECTION 10.3. Default on Senior Debt. The Company may not pay the
principal of, premium, if any, or interest on, the Securities or make any
deposit pursuant to Section 8.1 and may not repurchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if (i) any Senior
Debt is not paid when due or (ii) any other default on Senior Debt occurs and
the maturity of such Senior Debt is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has
47
been rescinded or (y) such Senior Debt has been paid in full; provided, however,
that the Company may pay the Securities without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
Representative of each issue of Designated Senior Debt. During the continuance
of any default (other that a default described in clause (i) or (ii) of the
preceding sentence) with respect to any Senior Debt pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
such notice as may be required to effect such acceleration) or the expiration of
any applicable grace periods, the Company may not pay the Securities for a
period (a "Payment Blockage Period") commencing upon the receipt by the Company
and the Trustee of written notice of such default from the Representative of the
Bank Debt or a Representative of the holders of any Designated Senior Debt
specifying an election of effect a Payment Blockage Period (a "Payment Notice")
and ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the
Representative which gave such Payment Notice, (ii) by repayment in full of such
Senior Debt or (iii) because the default specified in such Payment Notice is no
longer continuing). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this Section), unless the holders of such Senior Debt or the
Representative of such holders shall have accelerated the maturity of such
Senior Debt, the Company may resume payments on the Securities after the end of
such Payment Blockage Period. Not more than one Payment Notice may be given in
any consecutive 360-day period, irrespective of the number of defaults with
respect to Senior Debt during such period.
SECTION 10.4. Acceleration of Payment of Securities. If payment of the
Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Debt or their
Representatives of the acceleration.
SECTION 10.5. When Distribution Must Be Paid Over. If a distribution
is made to Securityholders that because of this Article 10 should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Debt and pay it over to them as their interests may
appear.
SECTION 10.6. Subrogation. After all Senior Debt is paid in full and
until the Securities are paid in full, Securityholders shall be subrogated to
the rights of holders of Senior Debt to receive distributions applicable to
Senior Debt. A distribution made under this Article 10 to holders of Senior Debt
which otherwise would have been made to Securityholders is not, as between the
Company and Securityholders, a payment by the Company on Senior Debt.
SECTION 10.7. Relative Rights. This Article 10 defines the relative
rights of Securityholders and holders of Senior Debt. Nothing in this Indenture
shall:
(1) impair, as between the Company and Securityholders, the obligation
of the Company, which is absolute and unconditional, to pay principal of,
premium, if any, and interest on the Securities in accordance with their
terms; or
48
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Debt to receive distributions otherwise payable to Securityholders.
SECTION 10.8. Subordination May Not Be Impaired by Company. No right
of any holder of Senior Debt to enforce the subordination of the indebtedness
evidenced by the Securities shall be impaired by any act or failure to act by
the Company or by its failure to comply with this Indenture.
SECTION 10.9. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.3, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Debt may give the notice; provided,
however, that, if an issue of Senior Debt has a Representative, only the
Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. The Registrar
and co-registrar and the Paying Agent may do the same with like rights. The
Trustee shall be entitled to all the rights set forth in this Article 10 with
respect to any Senior Debt which may at any time be held by it, to the same
extent as any other holder of Senior Debt, and nothing in Article 7 shall
deprive the Trustee of any of its rights as such holder. Nothing in this Article
10 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.7.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to their Representative (if any).
SECTION 10.11. Article 10 Not to Prevent Events of Default or Limit
Right to Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provisions in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect on
the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article 8 by the Trustee for the
payment of principal of and interest on the Securities shall not be subordinated
to the prior payment of any Senior Debt or subject to the restrictions set forth
in this Article 10, and none of the Securityholders shall be obligated to pay
over any such amount to the Company or any holder of Senior Debt of the Company
or any other creditor to the Company.
49
SECTION 10.13. Trustee Entitled to Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior Debt
for the purpose of ascertaining the persons entitled to participate in such
payment or distribution, the holders of the Senior Debt and other indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article 10. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article 10, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such person, the extent to which such person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such person
under this Article 10, and, if such evidence is not furnished, the Trustee may
defer any payment to such person pending judicial determination as to the right
of such person to receive such payment. The provisions of Sections 7.1 and 7.2
shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article 10.
SECTION 10.14. Trustee to Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Debt as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt and shall not be liable to any such holders if it shall mistakenly pay over
or distribute to Securityholders or the Company or any other person, money or
assets to which any holders of Senior Debt shall be entitled by virtue of this
Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Debt on Subordination
Provision. Each Securityholder by accepting a Security acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Debt and such holder of Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Debt.
50
ARTICLE 11.
Miscellaneous
SECTION 11.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.2. Notices. Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail addressed as follows:
if to the Company:
Petroleum Heat and Power Co., Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention of Treasurer
if to the Trustee:
The Chase Manhattan Bank
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention of Corporate Trust Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.3. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
51
SECTION 11.4. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take of refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
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 whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such covenant or condition has been complied with.
SECTION 11.6. When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 11.7. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
53
SECTION 11.8. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 11.9. Governing Law. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason or such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 11.13. Table of Contents; Headings. The table of contents and
headings of the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
53
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
PETROLEUM HEAT AND POWER CO.,
INC.,
by
-----------------------------------
Title:
The Chase Manhattan Bank, as Trustee,
by
-----------------------------------
Title:
54
EXHIBIT A
[FORM OF FACE OF SECURITY]
No. $
10-1/8% Senior Subordinated Note Due 2003
Petroleum Heat and Power Co., Inc., a Minnesota corporation, promises
to pay to __________, or registered assigns, the principal sum of __________
Dollars on __________.
Interest Payment Dates: April 1 and October 1.
Record Dates: March 15 and September 15.
Additional provisions of this Security are set forth on the other side
of this Security.
Dated:
PETROLEUM HEAT AND POWER
CO., INC.,
by
-----------------------------
Chief Executive Officer:
[Seal]
-----------------------------
Secretary
TRUSTEE'S CERTIFICATION OF
AUTHENTICATION
The Chase Manhattan Bank
as Trustee, certifies
that this is one of
the Securities referred
to in the within mentioned
Indenture.
by
-------------------------------
Authorized Officer
[FORM OF REVERSE SIDE OF SECURITY]
10-1/8% Senior Subordinated Note Due 2003
1. Interest
Petroleum Heat and Power Co., Inc., a Minnesota corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually in arrears on April 1 and October 1 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from ________ _____,
1998. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the persons who are registered holders of Securities at the close
of business on the March 15 or September 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal and interest by
check payable in such money. It may mail an interest check to a Holder's
registered address.
3. Paying Agent and Registrar
Initially, The Chase Manhattan Bank, a New York banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
_________ ___, 1998 ("Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb) as amended and in effect on the date of the
Indenture (the "Act"). Capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture
and the Act for a statement of those terms.
2
The Securities are general unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount (subject to Section 2.7 of
the Indenture). The Indenture imposes certain limitations on the issuance of
debt by the Company, the issuance of debt and preferred stock by the
Subsidiaries, the creation of liens on the Capital Stock of any Subsidiary, the
payment of dividends and other distributions and acquisitions or retirements of
the Company's Capital Stock and Subordinated Obligations, and transactions with
Affiliates. In addition, the Indenture limits the ability of the Company and the
Subsidiaries to restrict distributions and dividends from Subsidiaries.
5. Optional Redemption
The Securities may not be redeemed prior to April 1, 1998. On and
after that date, the Company may redeem the Securities in whole at any time or
in part from time to time at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest to the redemption date:
If redeemed during the 12-month period beginning April 1,
Year Price
---- -----
1998...................................................................................... 105.063
1999...................................................................................... 103.797
2000...................................................................................... 102.531
2001...................................................................................... 101.266
2002...................................................................................... 100.000%
In addition, at any time prior to 5:00 p.m. eastern standard time on
April 1, 1999, the Company may redeem any portion of the Notes issued under the
Indenture at a redemption price of 100.0% of the principal amount thereof, plus
accrued and unpaid interest thereon, provided that (i) the Company shall
substantially simultaneously consummate the Star Gas Transaction, and (ii) in
connection with the Star Gas Transaction, each Share shall be converted into
0.13064 Units.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may be
redeemed in part by only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued interest on all Securities (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
3
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the right
to cause the Company to repurchase all or any part of the Securities of such
Holder at a repurchase price equal to 101% of the principal amount of the
Securities to be repurchased plus accrued interest to the date of repurchase as
provided in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Debt, as defined in this
Indenture. To the extent provided in the Indenture, Senior Debt must be paid
before the Securities may be paid. The Company agrees, and each Holder by
accepting a Security agrees, to the subordination provisions contained in the
Indenture and authorizes the Trustee to give it effect and appoints the Trustee
as attorney-in-fact for such purposes.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities selected
for redemption (except, in the case of a Security to be redeemed in part, the
portion of the Security not to be redeemed) or any Securities for a period of 15
days before a selection of Securities to be redeemed or 15 days before an
interest payment date.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the owner of
it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
4
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder, the Company and the Trustee may amend the
Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add covenants for the benefit of Holders or surrender rights and powers
conferred on the Company, or to comply with any requirements of the SEC in
connection with qualifying the Indenture under the Act, or to make certain
changes in the subordination provisions, or to make any change that does not
adversely affect the rights of any Holder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon declaration or otherwise, or failure by the Company to purchase
Securities when required; (iii) failure by the Company to comply with other
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other Debt of the Company or
any Significant Subsidiary if the amount accelerated (or so unpaid) exceeds
$1,000,000; (v) certain events of bankruptcy or insolvency with respect to the
Company or any Significant Subsidiary; and (vi) certain judgments or decrees for
the payment of money in excess of $1,000,000. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Event of Default.
Securityholders may not enforce the Indenture of the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Securities
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Securityholders notice of any continuing Default (except a Default
in payment of principal or interest) if it determines that withholding notice is
in their interest.
15. Trustee Dealings with the Company
5
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its affiliates and may otherwise deal with the Company
or its affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized officer of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
6
----------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ____________________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
----------------------------------------------------------
Date: ___________________ Your signature: ____________________
----------------------------------------------------------
Sign exactly as your name appears on the other side of this
Security.
7
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.8 of the Indenture, check the box:
//
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.8 of the Indenture, state the amount:
$
Date: Your Signature:
------------------------ --------------------------
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee:
----------------------------------------------
(Signature must be guaranteed by a member firm
of the New York Stock Exchange or a commercial
bank or trust company)
8
Exhibit B
CONTACT:
Star Gas: Xxxxxxx X. Xxxxxx
Vice President-Finance
000-000-0000
Xxxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxx
Jaffoni & Xxxxxxx Incorporated
212/835-8500 or xxxxxxxxx@xxxx.xxx
------------------
Xxxxx: Xxxxxx Xxxxxxxxx
Treasurer
203/325-5470
Xxx Xxxxxxxxxxx
Vice President and Controller
203/325-5460
FOR IMMEDIATE RELEASE
STAR GAS PARTNERS, L.P. AND PETROLEUM HEAT AND POWER CO., INC.
ANNOUNCE AGREEMENT IN PRINCIPLE TO COMBINE
STAMFORD, CT (August 14, 1998) -- Star Gas Partners, L.P., ("Star" or the
"Partnership") (NYSE:SGU) and Petroleum Heat and Power Co., Inc. ("Petro" or
the "Company") (NASDAQ:HEAT), jointly announced today that they have reached
an agreement in principle to enter into a strategic business combination in
which Petro would become a wholly-owned subsidiary of Star. This transaction
would be effected through Petro shareholders exchanging their approximately
26.6 million shares of Petro Common Stock for approximately 3.6 million Star
master limited partnership units which will be subordinated to the existing
Star Common Units.
Star Gas currently distributes to its partners, on a quarterly basis, all of
its Available Cash, which is generally all of the cash receipts of the
Partnership less all cash disbursements, with a targeted Minimum Quarterly
Distribution ("MQD") of $0.55 per Unit, or $2.20 per Unit on an annualized
basis. In connection with the Petro transaction, the Partnership will
increase the MQD to $.575 per unit or $2.30 per Unit on an annualized basis.
This increase in the MQD reflects the expectation that the transaction will
be accretive to the Partnership. The increase in the MQD will also serve to
raise the threshold needed to end the subordination period.
Of the 3.6 million subordinated Partnership units anticipated to be
distributed to Petro shareholders, 2.8 million will be Senior Subordinated
Units and approximately 857,000 will be Junior Subordinated Units and General
Partnership Interests. The Senior Subordinated Units will be publicly
registered and tradable (they are expected to be listed on the NYSE) and will
be subordinated in distributions to Star's Common Units. The Junior
Subordinated Units and General Partnership Interests will not be registered
nor publicly tradable and will be subordinated to both the Common Units and
the Senior
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Star Gas and Petroleum Heat and Power Announce Agreement to Combine
8/14/98 page 2
Subordinated Units. The Senior Subordinated Units will be exchanged with
holders of Xxxxx'x publicly traded Class A common stock and the Junior
Subordinated Units and General Partnership Interests will be exchanged with
individuals that currently own Petro's Class C common stock. Certain holders
of the Company's Class C Common Stock will also exchange their shares for
Senior Subordinated Units.
It is currently contemplated that 21,177,000 shares of Petro Common Stock
will be exchanged for 2,767,000 Star Senior Subordinated Units. 5,386,000
shares of Petro common stock, held by certain individuals who currently own
Petro Class C common stock, including Xxxx X. Xxxxx, Chairman of Petro and
Star and other members of a group that currently controls Xxxxx, will be
exchanged for 579,000 Junior Subordinated Units and General Partnership
Interests which are economically equivalent to 279,000 Junior Subordinated
Units.
Under the partnership subordinated provision, distributions on Star Senior
Subordinated Units may be made only after distributions of Available Cash on
Common Units meet the MQD requirement. Distributions on Star Junior
Subordinated Units and to the General Partner may be made only after
distributions of Available Cash on Common Units and Senior Subordinated Units
meet the MQD requirement. The Subordination Period will extend until the
Partnership earns and pays its MQD for three years. In any event, as a
condition of this transaction, the Partnership agreement will be amended so
that no distribution will be paid on the Senior Subordinated Units, Junior
Subordinated Units, or to the General Partner except to the extent Available
Cash is earned from operations.
Like many other publicly traded master limited partnerships, the Partnership
contains a provision which provides the General Partner with incentive
distributions in excess of certain targeted amounts. This provision will be
modified so that should there be any such incentive distributions, they will
be made pro rata to the Senior Subordinated Units and Junior Subordinated
Units as well as to the General Partner.
In connection with the Transaction, the Senior Subordinated Units, Junior
Subordinated Units and General Partnership Interests can earn, pro rata,
303,000 additional Senior Subordinated Units each year that Xxxxx provides
$.50 per unit accretion to Star to a maximum of 909,000 additional Senior
Subordinated Units.
In connection with the transaction, Star intends to raise approximately $140
million through a public offering of Common Units and $120 million through a
public or private offering of debt securities. The net proceeds from these
offerings will be used primarily to redeem approximately $240 million in
Petro public and private debt and preferred stock. Any such offering will be
made only by means of a prospectus or in transactions not requiring
registration under securities laws. This announcement does not constitute an
offer to sell any securities. As part of this recapitalization, Xxxxx also
intends to restructure $66.2 million of privately held notes.
Xxxxx has reached an agreement with institutional holders of an aggregate of
$149 million or 63.1% of such public debt and preferred stock to permit the
redemption of such securities at the closing the Star Gas/Petro Transaction.
This agreement allows
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Petro to redeem its 9 3/8% Subordinated Debentures, 10 1/8% Subordinated
Notes and 12 1/4% Subordinated Debentures at 100%, 100% and 103.5% of
principal amount, respectively, and to redeem its 12 7/8% Preferred Stock at
$23 per share. In consideration for this early redemption right, Xxxxx has
agreed to issue to such holders 3.37 shares of newly issued Petro Junior
Convertible Preferred Stock for each $1,000 in principal amount or
liquidation perference of such securities. Each share of Petro Junior
Convertible Preferred Stock will be exchangeable into .13 of a Star common
Unit at the conclusion of this transaction representing a maximum 104,000 MLP
units. Should the transaction not be consummated, the Junior Preferred Stock
will be converted into a like number of shares of Class A Common Stock.
Xxxxx will offer to the remaining holders of it's publicly traded debt and
preferred stock the same right of early redemption under the same terms and
conditions as agreed to by the consenting holders. This proposal will be
made through an exchange offer that is expected to commence shortly. This
transaction and the associated Petro recapitalization are subject to
receiving an agreement to the early redemption from at least 90% of the
outstanding publicly traded debt and preferred stock.
Xxxxx currently has a 40.7% equity interest in the Partnership and a
subsidiary of Petro is its general partner. After completion of the
transaction, the Petro shareholders will own approximately 26% of Star's
equity through Subordinated Units and General Parnership Interests. The
holders of the Partnership's Common Units (including an estimated 6.4 million
Common Units that will be sold in the Partnerships $140 million public
offering) will own an aggregate approximately 74% equity interest in the
Partnership following the completion of the transaction. The General Partner
of the Partnership will be a newly organized Delaware limited liability
company that will be owned by members of Xxxxx'x current control group.
In commenting on the proposed transaction, Xxxxxx Xxxxxxxxx, President of
Star, "We believe that this strategic combination will have a number of
benefits for the Partnership. Firstly, we are pleased with having achieved
our goal of structuring a transaction which we believe will be immediately
accretive, enabling us to increase the Partnership's MQD to $2.30 annually.
Secondly, we belive this strategic combination will provide an additional
source of attractive acquisition opportunities. Petro is the largest retail
heating oil company in the country and the primary consolidator of that
highly fragmented industry. Over the past nineteen years Xxxxx has acquired
189 distributorships. As such, we belive this combination should provide the
Partnership with a platform to increase its acquisition activities. Thirdly,
over the past two and one-half years, in an effort to take advantage of its
size, Petro has regionalized its operations, accessed developments in
computer and communication technology, and entered into cross-marketing
partnerships. These programs have provided attractive productivity,
operational and marketing results which should continue to benefit the
Partnership Finally, this combination significantly increases the size and
market capitalization of the Partnership."
Xxxx X. Xxxxx, CEO of Xxxxx stated, "We believe the proposed transaction will
enable Xxxxx to achieve its stated objective of accessing equity to
recapitalize and delever. This should permit us to continue our historically
active acquisition program and
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facilitate the funding of our operational and marketing initiatives. In
addition, the MLP structure should provide a better valuation format for
Petro which is cash flow oriented and which has been the only publicly traded
company in its industry. The transaction should provide our shareholders
with the resumption of annual cash distributions which Xxxxx had historically
made."
The Board of Directors of Star has appointed an independent committee of
directors to represent Star Gas in this matter. This committee has retained
X.X. Xxxxxxx & Sons, Inc. to act as its financial advisor and to determine
the fairness of this transaction to the Star Common Unit holders. The Board
of Directors of Petro has retained PaineWebber Incorporated as its financial
advisor and Xxxx Xxxxxxxx Xxxxxxx to render an opinion as to the fairness to
Petro of this transaction.
The completion of the Transaction is subject to the negotiation and execution
of definitive agreements, the receipt of regulatory approvals, the approval
of Star's nonaffiliated common unit holders and Petro's nonaffiliated common
shareholders, other necessary partnership and corporate approvals, fairness
opinions from X.X. Xxxxxxx & Sons, Inc. and Xxxx Xxxxxxxx Xxxxxxx, and the
agreement to early redemption by the holders of 90% of Petro's publicly
traded debt and preferred stock.
Petro and Star will continue to operate as separate business units and this
transaction will not have an impact on the day-to-day operations of either
entity. There will be no reduction in the number of employees as a result of
this transaction.
Petroleum Heat and Power Co., Inc. is the largest retail distributor of home
heating oil in the nations, serving approximately 350,000 customers in the
Northeast and Mid-Atlantic states, including the metropolitan areas of New
York, Boston, Washington, D.C., Baltimore, and Providence. Star Gas Partners
L.P., the eighth largest retail propane distributor services more than
166,000 customers throughout 74 locations in the Midwestern states of Ohio,
Indiana, Michigan, Kentucky, West Virginia and in the Northeast, from Maine
to Southern New Jersey. Star operates under several trademarks and trade
names, including: Star Gas Service, Silgas, Blue Flame L.P. Gas, Maingas,
Arrow Gas, Mid-Xxxxxx Valley Propane, Xxxxxxx Gas Service, H&S Gas, Xxxxxxxx
X.X. Gas, Rural National Gas, Pearl Gas, Bay State-Arrow Gas, Xxxxxxx X.X.
Gas and Xxxx Bros & Dad.
This Press Release includes "forward-looking statements," within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act,
which represent Petro and Star's expectations or beliefs concerning future
events that involve risks and uncertainties. Although Xxxxx and Star Gas
believe that the expectations reflected in such forward-looking statements
are reasonable, Xxxxx and Star Gas can give no assurance that such
expectations will prove to have been correct. Investors and prospective
investors should read this Press Release in conjunction with Xxxxx and Star
Gas' Forms 10-K and 10-Q which include additional information that could
affect Petro and Star Gas' financial results.
