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DRAFT - 8/13/98
PETROLEUM HEAT AND POWER CO., INC.
12 1/4% Subordinated Debentures Due 2005 Series B
INDENTURE
Dated as of ________ ___, 1998
The Chase Manhattan Bank,
Trustee
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TABLE OF CONTENTS
Page No.
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ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions......................................................1
SECTION 1.02. Other Definitions...............................................14
SECTION 1.03. Incorporation by Reference of Trust Indenture Act...............15
SECTION 1.04. Rules of Construction...........................................15
ARTICLE 2
The Debentures
SECTION 2.01. Form and Dating.................................................16
SECTION 2.02. Execution and Authentication....................................16
SECTION 2.03. Registrar and Paying Agent......................................17
SECTION 2.04. Paying Agent To Hold Money in Trust.............................17
SECTION 2.05. Debentureholder Lists...........................................17
SECTION 2.06. Transfer and Exchange...........................................18
SECTION 2.07. Replacement Debentures..........................................18
SECTION 2.08. Outstanding Debentures..........................................19
SECTION 2.09. Temporary Debentures............................................19
SECTION 2.10. Cancellation....................................................19
SECTION 2.11. Defaulted Interest..............................................20
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee..............................................20
SECTION 3.02. Selection of Debentures To Be Redeemed..........................20
SECTION 3.03. Notice of Redemption............................................21
SECTION 3.04. Effect of Notice of Redemption..................................22
SECTION 3.05. Deposit of Redemption Price.....................................22
SECTION 3.06. Debentures Redeemed in Part.....................................22
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ARTICLE 4
Covenants
SECTION 4.01. Payment of Debentures...........................................23
SECTION 4.02. SEC Reports.....................................................23
SECTION 4.03. Limitation on Funded Debt.......................................23
SECTION 4.04. Limitation on Indebtedness and Preferred Stock of Subsidiaries..24
SECTION 4.05. Limitation on Restricted Payments...............................25
SECTION 4.06. Limitation on Restrictions on Distributions from Subsidiaries...27
SECTION 4.07. Limitation on Transactions with Affiliates......................27
SECTION 4.08. Change of Control...............................................28
SECTION 4.09. Limitation on Liens on Subsidiary Stock.........................30
SECTION 4.10. Compliance Certificate..........................................30
SECTION 4.11. Further Instruments and Acts....................................30
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets.......................31
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default...............................................31
SECTION 6.02. Acceleration....................................................33
SECTION 6.03. Other Remedies..................................................34
SECTION 6.04. Waiver of Past Defaults.........................................34
SECTION 6.05. Control by Majority.............................................34
SECTION 6.06. Limitation on Suits.............................................34
SECTION 6.07. Rights of Holders To Receive Payment............................35
SECTION 6.08. Collection Suit by Trustee......................................35
SECTION 6.09. Trustee May File Proofs of Claim................................35
SECTION 6.10. Priorities......................................................35
SECTION 6.11. Undertaking for Costs...........................................36
SECTION 6.12. Waiver of Stay or Extension Laws................................36
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee...............................................36
SECTION 7.02. Rights of Trustee...............................................38
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SECTION 7.03. Individual Rights of Trustee....................................38
SECTION 7.04. Trustee's Disclaimer............................................38
SECTION 7.05. Notice of Defaults..............................................38
SECTION 7.06. Reports by Trustee to Holders...................................39
SECTION 7.07. Compensation and Indemnity......................................39
SECTION 7.08. Replacement of Trustee..........................................39
SECTION 7.09. Successor Trustee by Merger.....................................40
SECTION 7.10. Eligibility; Disqualification...................................41
SECTION 7.11. Preferential Collection of Claims Against Company...............41
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Indenture; Defeasance..............................41
SECTION 8.02. Conditions to Defeasance........................................42
SECTION 8.03. Application of Trust Money......................................43
SECTION 8.04. Repayment to Company............................................43
SECTION 8.05. Indemnity for Government Obligations............................44
SECTION 8.06. Reinstatement...................................................44
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders......................................44
SECTION 9.02. With Consent of Holders.........................................45
SECTION 9.03. Compliance with Trust Indenture Act.............................46
SECTION 9.04. Revocation and Effect of Consents and Waivers...................47
SECTION 9.05. Notation On or Exchange of Debentures...........................47
SECTION 9.06. Trustee to Sign Amendments......................................47
SECTION 9.07. Payment for Consent.............................................47
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate.......................................48
SECTION 10.02. Liquidation, Dissolution, Bankruptcy...........................48
SECTION 10.03. Default on Senior Debt.........................................49
SECTION 10.04. Acceleration of Payment of Debentures..........................49
SECTION 10.05. When Distribution Must Be Paid Over............................49
SECTION 10.06. Subrogation....................................................50
SECTION 10.07. Relative Rights................................................50
SECTION 10.08. Subordination May Not Be Impaired by Company...................50
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SECTION 10.09. Rights of Trustee and Paying Agent.............................50
SECTION 10.10. Distribution or Notice to Representative.......................51
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To
Accelerate.....................................................51
SECTION 10.12. Trust Moneys Not Subordinated..................................51
SECTION 10.13. Trustee Entitled To Rely.......................................51
SECTION 10.14. Trustee To Effectuate Subordination............................51
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt...............52
SECTION 10.16. Reliance by Holders of Senior Debt on Subordination
Provisions.....................................................52
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls...................................52
SECTION 11.02. Notices........................................................52
SECTION 11.03. Communication by Holders with Other Holders....................53
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.............53
SECTION 11.05. Statements Required in Certificate or Opinion..................53
SECTION 11.06. When Debentures Disregarded....................................54
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar...................54
SECTION 11.08. Governing Law..................................................54
SECTION 11.09. No Recourse Against Others.....................................54
SECTION 11.10. Successors.....................................................55
SECTION 11.11. Multiple Originals.............................................55
SECTION 11.12. Table of Contents: Headings....................................55
Exhibit A - Form of Debenture
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, as trustee (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 12-1/4%
Subordinated Debentures Due 2005 Series B (the "Debentures"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Affiliate" of any Person specified means (i) any Person directly or
indirectly controlling 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;
(iii) any trust in which any Persons described in clause (i) or (ii) above has a
beneficial interest and (iv) in the case of the Company, any Unrestricted
Subsidiary of the Company. 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 meanings 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 Indebtedness" in respect of a Sale/Leaseback
Transaction means, as of the time of determination, the present value
(discounted at the interest rate borne by the Debentures, 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 Indebtedness 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 Indebtedness 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, interests,
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" of a person for any period means the sum of (i) the
Consolidated Net Income of such person for such period, plus (ii) to the extent
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, plus (iii) to the extent not included in Consolidated Net
Income, the amount of all dividends or other distributions received in cash by
the Company or any of its Wholly Owned Subsidiaries (other than a Wholly Owned
Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income) from, and the amount of any Net Cash Proceeds to the
Company or any of its Wholly Owned Subsidiaries (other than a Wholly Owned
Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income) from the sale of Capital Stock of, an Unrestricted
Subsidiary of the Company, plus (iv) the amount of any cash actually distributed
by any Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income during such period as a dividend or other distribution
to the Company or another Subsidiary of the Company (other than another
Subsidiary described in such clause (b)), plus (v) to the extent excluded in
calculating
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Net Income of such person and its subsidiaries for such period, any gain
realized upon the sale or other disposition of any real property or equipment or
of any Capital Stock of the Company or a Subsidiary owned by such person or any
of its Subsidiaries, plus (vi) to the extent deducted in calculating Net Income
of such person and its Subsidiaries for such period, any non-cash charge
relating to the grant of stock options to executives of the Company, plus (vii)
to the extent deducted in calculating Net Income of such person and its
Subsidiaries for such period, any non-cash expense associated with deferred
compensation plans; provided, however, that (a) Cash Flow shall not include the
amortization of customer lists or other deferred charges or the amortization and
depreciation of capital assets of any person or Subsidiary described in clause
(b) of the exception, or clause (i) of the proviso, to the definition of
Consolidated Net Income, (b) Cash Flow for any period shall be reduced by the
amount that any liability recorded on the books of the Company relating to any
deferred compensation expense referred to in clause (vii) above is reduced
during such period and (c) any amounts included in Section 4.05(b)(iv)(C) hereof
shall be excluded from Cash Flow of the Company.
"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 Indebtedness 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 Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to (A) such Indebtedness as if such
Indebtedness had been incurred on the first day of such period, (B) the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness 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 Indebtedness, to the
extent not yet applied at the date of determination, assuming such proceeds
earned interest at the Treasury 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 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 Indebtedness 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
3
of any Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable for the Indebtedness of such Subsidiary to the extent the
Company and its continuing Subsidiaries are no longer liable for such
Indebtedness 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 of 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 Indebtedness) 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 Indebtedness 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 12-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 and (ii) other expenses as if such
assets had been owned by the Company since the first day of such period. If any
indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness 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 sum of
(a) the total interest expense of the Company and its Subsidiaries (other than a
Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income), 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 Indebtedness or other
obligation of any other Person, (vii) net costs associated with Hedging
Obligations (including amortization of fees), (viii) 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
non-interest bearing or other discount securities) and (ix) to the extent not
already included in Consolidated Interest Expense, the interest expense
attributable to Indebtedness 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, plus (b)
Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries
(other than a Subsidiary described in clause (b) of the exception to the
4
definition of Consolidated Net Income) held by Persons other than the Company or
a Wholly Owned Subsidiary (other than a Subsidiary described in clause (b) of
the exception to the definition of Consolidated Net Income); provided, however,
that Consolidated Interest Expense shall include any interest paid by the
Company to Star Gas Corporation on Indebtedness 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 and its Subsidiaries (other than (a)
any Subsidiary acquired by such person in pooling of interests transaction for
any period prior to the date of acquisition and (b) any Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions to such person) for such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles, provided that:
(i) the Net Income of any other Person (other than a
Subsidiary) in which such Person has an interest shall be included
only to the extent of dividends or distributions paid to such
Person,
(ii) the cumulative effect of a change in accounting
principles shall be excluded, and
(iii) notwithstanding clause (i), 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 Indebtedness owed to Star Gas Corporation.
"Credit Agreement" means the Third Amended and Restated Credit
Agreement dated as of August 1, 1994 between the Company and Chemical Bank, as
agent, as amended from time to time.
"Debentures" means the Debentures issued under this Indenture.
"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.
5
"EBITDA" of a person for any period means the Consolidated Net
Income of such person 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 (a) to the extent deducted in calculating such Consolidated
Net Income, (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense and (v) non-cash charges
relating to the grant of stock options to executives of the Company, non-cash
charges associated with deferred compensation plans and other non-cash charges
of a similar nature, plus (b) the amount of any cash actually distributed by any
Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income during such period as a dividend or other distribution
to the Company or another Subsidiary of the Company (other than another
Subsidiary described in such clause (b)), minus (c) such person's equity in any
deficit in Subsidiary Cash Flow for such period of any Subsidiary described in
clause (b) of the exception to the definition of Consolidated Net Income;
provided, however, that EBITDA shall not include any income tax expense,
interest expense, depreciation expense, amortization expense or other non-cash
expense of any person or Subsidiary described in clause (b) of the exception, or
clause (i) of the proviso, to the definition of Consolidated Net Income.
"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 Debts" as applied to any Person means, without duplication,
(a) any Indebtedness with a Stated Maturity of more than one year from the date
of incurrence, (b) any Indebtedness. regardless of its term, if such
Indebtedness is renewable or extendible as the option of the obligor of such
Indebtedness pursuant to the terms thereof to a date more than one year from the
date of incurrence; and (c) any Indebtedness, regardless of its term, that by
its terms or by the terms of the agreement pursuant to which it is issued, may
be paid with the proceeds of other Indebtedness that may be incurred pursuant to
the terms of such first-mentioned Indebtedness or by the terms of such
agreement, which other Indebtedness has a Stated Maturity of more than one year
from the date of incurrence of such first-mentioned Indebtedness; 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) l00% of the current assets (excluding cash) of such Person and its
Subsidiaries less (ii) the excess, if any, of current liabilities over current
assets of such Person and its Subsidiaries, in each case determined on a
consolidated basis in accordance with generally accepted accounting principles.
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"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other 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 Indebtedness or other obligation of such other
Person (whether arising by virtue of 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 Indebtedness 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 my 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 "Debentureholder" means the Person in whose name a
Debenture is registered on the Registrar's books.
"Indebtedness" of any Person means, without duplication,
(i) the principal of (A) Indebtedness of such Person for money
borrowed and (B) Indebtedness evidenced 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 Indebtedness in respect of Sale/Leaseback Transactions
entered into by such Person;
(iii) all obligations of such Person incurred 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, as obligor, guarantor or otherwise,
7
including any guarantees of such obligations and dividends, including by
means of any agreement which has the economic effect of a guarantee; and
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons secured by my 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 the value of
such property or assets or the amount of the obligation to secured.
"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. Investments shall exclude advances to customers and suppliers in the
ordinary course of business.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means any mortgage, pledge, security interest, conditional
sale or other title retention agreement or other similar lien.
"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 my 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
8
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 Liens" means (i) Liens existing on February 9, 1995 and
renewals, extensions and refinancings thereof; (ii) rights of banks to set off
deposits against debts owed to said banks; (iii) Purchase Money Indebtedness;
(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 (y) do not extend to any other assets of the
Company or any of its Subsidiaries; and (v) Liens for taxes not yet due.
"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 Indebtedness" means Indebtedness (i) consisting of
the deferred purchase price of property, conditional sale obligations,
obligations under any title retention agreement and other purchase money
obligations, In each case where the maturity of such Indebtedness 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 Indebtedness 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.
9
"principal" of a Debenture means the principal of the Debenture plus
the premium, if any, payable on the Debenture 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 Debentures 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 Debentures.
"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 holder, 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 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.
"Senior Debt" means the following obligations, whether outstanding
on February 9, 1995 or thereafter issued:
(i) all obligations consisting of 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;
10
(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 Debentures; provided, however, that Senior Debt shall
not include (1) any obligation of the Company to any Subsidiary or other
Affiliate of the Company, (2) any liability for federal, state, local or other
taxes owed or owing by the Company, (3) 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 (4) that
portion of any Indebtedness that was incurred in violation of this Indenture.
"Xxxxx Group" means the Estate of Xxxxxx X. Xxxxx and trusts created
thereunder, Xxxxxx X. Xxxxx, Xxxx X. Xxxxx, Xxxxxx X. Xxxxxxx, Xxxxxx 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, 1994, of
Xxxx X. Xxxxx to the Company in a principal amount of $1,640,060 and due on
December 31, 1995, 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
11
date of the Company's most recent quarterly consolidated statement of income
which constituted at least 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 6.01 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 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 Indebtedness, the date
specified in such Indebtedness, or in any agreement pursuant to which such
Indebtedness was incurred, as the fixed date on which the principal of such
Indebtedness is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
Indebtedness 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 February 9, 1995 or hereafter incurred) which is
subordinate or junior in right of payment to the Debentures.
"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).
"Subsidiary Cash Flow" of a person for any period means the Net
Income of such person and its Subsidiaries determined on a consolidated basis
for such period, plus, to the extent deducted in determining such Net Income,
depreciation, amortization, non-cash charges relating to the grant of stock
options to executives of the Company, non-cash charges associated with deferred
compensation plans and other non-cash charges of a similar nature, less accrued
preferred stock dividends (excluding preferred stock dividends paid or payable
in additional shares of preferred stock and preferred stock dividends payable to
the Company or any of its Subsidiaries (other than a Subsidiary described in
clause (b) of the exception to the definition of Consolidated Net Income) until
actually paid), excluding Net Income derived from investments
12
accounted for by the equity method except to the extent of any cash dividends
received by such person and its Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. xx.xx.
77aaa-77bbbb) as amended and in effect on February 9, 1995.
"Xxxxxx Group" means (i) all the holders of Class C Common Stock as
of February 9, 1995 who are not members 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 February 9, 1995, 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 or vice-chairman of the board of
directors, the chairman or vice-chairman of the executive committee of the board
of directors, the president, any vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller and any
assistant controller 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
Indebtedness 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
13
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 "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 or 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" means, on any date of determination,
all Indebtedness of the Company and its Subsidiaries on a consolidated basis
incurred to finance current assets.
"Working Capital Financing Agreement" means any agreement entered
into after February 9, 1995 by the Company and bank lenders pursuant to which
the Company issues Working Capital Borrowings.
"1989 Preferred Stock" means the preference stock of the Company
designated as "1989 Preferred Stock, Par Value $0.10."
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction"........................................ 4.07
"Bankruptcy Law"............................................... 6.01
"Change of Control"............................................ 4.08
"covenant defeasance option"................................... 8.01(b)
"Custodian".................................................... 6.01
"Event of Default"............................................. 6.01
"fair value"................................................... 10.02
"incur"........................................................ 4.03
"legal defeasance option"...................................... 8.01(b)
"pay the Debentures"........................................... 10.03
"Paying Agent"................................................. 2.03
"Payment Blockage Period"...................................... 10.03
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"Payment in Full............................................... 10.02
"Payment Notice"............................................... 10.03
"Registrar".................................................... 2.03
"Restricted Payment"........................................... 4.05
SECTION 1.03. 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 this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Debentures.
"indenture security holder" means a Debentureholder.
"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 Debentures.
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 1.04. 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 February 9, 1995 and all accounting calculations shall 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;
15
(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 incurrence of Indebtedness; 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 Debentures
SECTION 2.01. Form and Dating. The Debentures 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
Debentures 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 Debenture shall be dated the date of its authentication.
The terms of the Debentures set forth in Exhibit A are part of the terms of this
Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall sign
the Debentures for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Debentures and
may be in facsimile form.
If an Officer whose signature is on a Debenture no longer holds that
office at the time the Trustee authenticates the Debenture, the Debenture shall
be valid nevertheless.
A Debenture shall not be valid until an authorized officer of the
Trustee manually signs the certificate of authentication on the Debenture. The
signature shall be conclusive evidence that the Debenture has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver Debentures for original
issue in an aggregate principal amount of up to $125,000,000, upon a written
order of the Company signed by up to 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 Debentures to be authenticated and the date on which
the original issue of Debentures is to be authenticated. The aggregate principal
amount of Debentures outstanding at any tune may not exceed that amount except
as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Debentures. Unless limited by the
terms of such appointment, an
16
authenticating agent may authenticate Debentures 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 2.03. Registrar and Paying Agent. The Company shall maintain
an office or Agency in the Borough of Manhattan, City of New York 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 Paying Agent initially shall be the
Trustee. The Company may change the Registrar or Paying Agent without prior
notice to Holders and the Company or any Subsidiary may act in such capacity.
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 7.07. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
SECTION 2.04. Paying Agent To Hold Money in Trust. On or prior to
each due date of the principal and interest on any Debenture, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when to 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 Debentureholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Debentures 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 2.05. Debentureholder Lists. The Trustee shall preserve in
as current a form as it reasonably practicable the most recent list available to
is of the names and addresses of Debentureholders. 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 reasonably require of the names and addresses of Debentureholders.
17
SECTION 2.06. Transfer and Exchange. The Debentures shall be issued
in registered form and shall be transferable only upon the surrender of a
Debenture for registration of transfer. When a Debenture 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 Debentures are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Debentures 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 Debentures 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 Debentures selected
for redemption (except, in the case of Debentures to be redeemed in part, the
portion thereof not to be redeemed) for a period of 15 days before a selection
of Debentures to be redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of any
Debenture, the Company, Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the Person in whose a Debenture is registered as
the absolute owner of such Debenture for the purpose of receiving payment of
principal of and interest o such Debenture and for all other purposes
whatsoever, whether or not such Debenture 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.
All Debentures issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be entitled to
the same benefits under this Indenture as the Debentures surrendered upon such
transfer or exchange.
SECTION 2.07. Replacement Debentures. If a mutilated Debenture is
surrendered to the Registrar or if the Holder of a Debenture claims that the
Debenture has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Debenture if the requirements
of Section 8-405 of 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 Debenture is replaced. The Company and the Trustee may charge
the Holder for their expenses in replacing a Debenture.
Every replacement Debenture is an additional obligation of the
Company.
SECTION 2.08. Outstanding Debentures. Debentures outstanding at any
time are all Debentures 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
18
Debenture does not cease to be outstanding because the Company or an Affiliate
of the Company holds the Debenture.
If a Debenture is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Debenture 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
Debentures (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
Debentureholders on that date pursuant to the terms of this Indenture, then on
and after that date such Debentures (or portions thereof) cease to be
outstanding and interest on them ceases to accrue; provided, however, that if
the Debentures 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 2.09. Temporary Debentures. Until definitive Debentures are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Debentures. Temporary Debentures shall be substantially in the form of
definitive Debentures but may have variations that the Company considers
appropriate for temporary Debentures. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Debentures and
deliver them in exchange for temporary Debentures.
SECTION 2.10. Cancellation. The Company at any time may deliver
Debentures to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Debentures surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record mention requirements of the Exchange Act) all
Debentures 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 Debentures to the Company.
The Company may not issue new Debentures to replace Debentures 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 Debentures, 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
Debentureholders 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
Debentureholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
19
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Debentures pursuant to item 5 of the
Debentures, it shall notify the Trustee in writing of the redemption date, the
principal amount of Debentures to be redeemed and the paragraph of the
Debentures 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
Debentures 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 3.02. Selection of Debentures To Be Redeemed. If fewer than
all the Debentures are to be redeemed, the Trustee shall select the Debentures
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 Debentures not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Debentures that have denominations larger than $1,000. Debentures and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Debentures called for
redemption also apply to portions of Debentures called for redemption. The
Trustee shall notify the Company promptly of the Debentures or portions of
Debentures to be redeemed.
SECTION 3.03. Notice of Redemption. If the Company elects to redeem
Debentures pursuant to the first paragraph of item 5 of the Debentures, at least
30 days but not more than 60 days before a date for redemption of Debentures,
the Company shall mail a notice of redemption by first-class mail to each Holder
of Debentures to be redeemed and to the Trustee. If the Company elects to redeem
Debentures pursuant to the second paragraph of item 5 of the Debentures, at
least 3 days but not more than 10 days before a date for redemption of
Debentures, the Company shall mail a notice of redemption by first-class mail to
each Holder of Debentures to be redeemed.
If the Company elects to redeem Debentures pursuant to the first
paragraph of item 5 of the Debentures, the notice shall identify the Debentures
to be redeemed and shall state:
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(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Debentures called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Debentures are to be redeemed,
the identification and principal amounts of the particular Debentures to
be redeemed;
(6) 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 Debentures (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Debentures pursuant to which the Debentures
called for redemption are being redeemed; and
(8) 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
Debentures.
If the Company elects to redeem Debentures pursuant to the second
paragraph of item 5 of the Debentures, the notice shall identify the Debentures
to be redeemed and shall state:
(1) the redemption date;
(2) the name and address of the Paying Agent;
(3) that Debentures called for redemption must be surrendered to the
Paying 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 Debentures (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date;
(6) the paragraph of the Debentures pursuant to which the Debentures
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
Debentures; and
21
(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 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Debentures 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 Debentures 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.
SECTION 3.05. Deposit of Redemption Price. 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 Debentures
to be redeemed on that date other than Debentures or portions of Debentures
called for redemption which have been delivered by the Company to the Trustee
for cancellation. If the Company elects to redeem Debentures pursuant to the
second paragraph of item 5 of the Debentures, 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.
SECTION 3.06. Debentures Redeemed in Part. Upon surrender of a
Debenture that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Debenture
equal in principal amount to the unredeemed portion of the Debenture
surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Debentures. The Company shall promptly pay
the principal of and interest on the Debentures on the dates and in the manner
provided in the Debentures 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 Debentureholders on that
date pursuant to the terms of this Indenture.
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The Company shall pay interest on overdue principal at the rate
specified therefor in the Debentures, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Whether or not required by the rules and
regulations of the SEC, so long as any Debentures are outstanding, the Company
shall furnish to the Holders of Debentures all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants. In addition, whether or not
required by the rules and regulations of the SEC, the Company shall file a copy
of all such information with the SEC for public availability and make such
information available to investors who request it in writing. The Company also
shall comply with the provisions of ss.314(a) of the TIA.
SECTION 4.03. Limitation on Funded Debt. (a) The Company shall 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 4.03(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) shall be deemed, in each case, to constitute
the incurrence of such Funded Debt by the Company; (ii) the Debentures 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 (i) the principal amount of the Funded Debt to incurred shall not exceed
the principal amount of the Funded Debt so exchanged, refunded or refinanced and
(2) the Funded Debt so incurred (A) shall not mature prior to the Stated
Maturity of the Funded Debt so exchanged, refunded or refinanced and (B) shall
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 on
February 9, 1995 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 4.03(a); provided, however, that (1) the principal amount of
the Funded Debt so incurred shall not exceed the principal amount of the Funded
Debt so exchanged, refunded or refinanced, (2) the Funded Debt so incurred (A)
shall not mature prior to the Stated Maturity of the Funded Debt so exchanged
refunded or refinanced and (B) shall 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 shall be subordinated to
the Debentures; and (iv) additional Funded Debt 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
23
Company is permitted to incur Funded Debt pursuant to the Consolidated EBITDA
Coverage Ratio test contained in Section 4.03(a), the Company may elect that
amount of Funded Debt Incurred pursuant to this clause (iv) be deemed to have
been incurred pursuant to Section 4.03(a) and be deemed not to have been
incurred pursuant to this clause (iv).
(c) The Company shall not create, incur, assume or permit to exist
any Lien (other than Permitted Liens) upon or with respect to any of the
property of the Company or any Subsidiary to secure Funded Debt that is not
Senior Debt unless contemporaneously therewith effective provision is made to
secure the Debentures equally and ratably with such Funded Debt for so long as
such Funded Debt is secured by a Lien.
SECTION 4.04. Limitation on Indebtedness and Preferred Stock of
Subsidiaries. The Company shall not permit any Subsidiary to incur any
Indebtedness or issue any Preferred Stock except: (i) Indebtedness 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 Indebtedness 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 Indebtedness or the issuance of
such Preferred Stock, as the case may be, by the issuer thereof; (ii)
Indebtedness 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 Indebtedness incurred or Preferred Stock issued in contemplation of,
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), provided that at the time such Subsidiary is acquired
by the Company, after giving effect to such Indebtedness or Preferred Stock of
such Subsidiary, the Company's Consolidated EBITDA Coverage Ratio exceeds 2.0 to
1; (iii) Indebtedness or Preferred Stock (other than indebtedness or Preferred
Stock described in clause (i), (ii), (iv) or (vi) of this Section 4.04) incurred
or issued and outstanding on or prior to February 9, 1995; (iv) Indebtedness of
a Subsidiary consisting of guarantees issued by such Subsidiary and outstanding
on February 9, 1995 and Indebtedness of a Subsidiary consisting of guarantees
issued subsequent to February 9, 1995, in each case, to the extent such
guarantee guarantees Bank Debt; (v) Indebtedness of a Subsidiary (other than
Indebtedness described in clause (iv) above) consisting of guarantees of Funded
Debt of the Company permitted by Section 4.03(a), provided that
contemporaneously with the incurrence of such Indebtedness by such Subsidiary,
such Subsidiary issues a guarantee for the pro rata benefit of the Holders of
the Debentures that is subordinated to such indebtedness of such Subsidiary to
the same extent as the Debentures are subordinated to such Funded Debt of the
Company; and (vi) Indebtedness or Preferred Stock issued in exchange for, or the
proceeds of which are used to refund or refinance, Indebtedness or Preferred
Stock referred to in the foregoing clause (ii) or (iii); provided, however, that
(1) the principal amount of such Indebtedness or Preferred Stock so Incurred or
Issued (the "Refinancing Indebtedness") shall not exceed the principal amount of
the Indebtedness or Preferred Stock so refinanced (the "Refinanced
Indebtedness"), provided that if any such Refined Indebtedness was incurred
under a revolving credit or similar working capital
24
facility, the principal amount of the Refinancing Indebtedness may be in an
amount up to the aggregate amount available under the facility under which the
Refinanced Indebtedness was incurred (A) at the time the Subsidiary that
incurred such Indebtedness was acquired by the Company (in the case of
Indebtedness described in the foregoing clause (ii)) or (B) on February 9, 1995
(in the case of Indebtedness described in the foregoing clause (iii)), and (2)
the Refinancing Indebtedness (other than revolving credit or similar working
capital facilities) shall (A) have a Stated Maturity of the Refinanced
Indebtedness and (B) shall have an Average Life equal to or greater than the
remaining Average Life of the Refinanced Indebtedness.
SECTION 4.05. 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 in
accordance with their ownership interest in such Subsidiary), (ii) purchase,
redeem or otherwise acquire 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 so 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 subsequent
to December 31, 1994 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) subsequent to December 31, 1994, to the end of the most
recent fiscal quarter ending as 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), minus 100% of any deficit in Subsidiary Cash Flow for such period
of any Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income; (B) the aggregate Net Cash Proceeds received by the
Company from the issue or sale of its Capital Stock subsequent to December 31,
1994 (other than an issuance or sale to 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); (C)
the amount by which Indebtedness of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a Subsidiary)
subsequent to December 31, 1994, of any Indebtedness of the Company convertible
or exchangeable for Capital Stock of the Company (less the amount of any
25
cash, or other property, distributed by the Company upon such conversion or
exchange); and (D) $30 million.
(b) The provisions of Section 4.05(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 an 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 4.05(a); (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 4.05; 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) dividends on, and mandatory and optional redemptions and
exchanges of, the 1989 Preferred Stock outstanding on February 9, 1995;
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 (iv) Restricted Investments in an
aggregate amount exceed the sum of (A) $30 million, plus (B) $5 million on each
February 9, 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
to 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 February 9, 1995; provided, however, that
Restricted Investments permitted by this clause (iv) shall be excluded in the
calculation of the amount of Restricted Payments.
SECTION 4.06. Limitation on Restrictions on Distributions from
Subsidiaries. The Company shall not, and shall not permit any Subsidiary so,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to: (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness 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 on February 9,
1995; (2) any encumbrance or restriction with respect to a Subsidiary pursuant
to an agreement relating to any Indebtedness issued by such Subsidiary on or
prior to the date on which such Subsidiary was acquired by the Company (other
than Indebtedness issued in contemplation of, as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
26
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 Indebtedness issued pursuant to an agreement referred to in the
foregoing clause (1) or (2) or contained in any amendment to an agreement
referred to in the foregoing clause (1) or (2); provided, however, that the
encumbrances and restrictions contained in any such refinancing agreement or
amendment are no less favorable to Holders of the Debentures than the
encumbrances and restrictions contained in such agreements; (4) any such
encumbrance or restriction consisting of customary non-assignment 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 Indebtedness 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 4.07. Limitation on Transactions with Affiliates. 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 (any such business,
transaction or series of similar transactions, an "Affiliate Transaction")
unless the terms of such Affiliate Transaction are: (i) set forth in writing,
(ii) fair to the Company and its Subsidiaries from a financial point of view (as
determined by the Board of Directors), (iii) in the case of any Affiliate
Transaction (other than an Affiliate Transaction with an Unrestricted Subsidiary
of the Company) in an aggregate 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 and (iv) in the case of any
Affiliate Transaction involving an Unrestricted Subsidiary of the Company in an
aggregate amount in excess of $2.0 million, the members of the Board of
Directors have determined in good faith that the criteria set forth in clause
(ii) are satisfied. This covenant shall not prohibit: (i) any Restricted Payment
permitted under Section 4.05, (ii) any Issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant so, 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 4.08. Change of Control. (a) Upon the occurrence of a Change
of Control each Holder of Debentures shall have the right to require the Company
to repurchase all or any part of such Holder's Debentures as a repurchase price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of repurchase (subject to the
27
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date). A "Change of Control" will be deemed to
occur if (i) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than the members of the Xxxxx Group and the
Xxxxxx Group, becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to be the
beneficial owner of all shares that such Person has the right to acquire,
regardless of whether such right is exercisable immediately or after the passage
of time), directly or indirectly, of 50% or more of the total voting power of
all classes of the Voting Stock of the Company and the members of the Xxxxx
Group and the Xxxxxx Group cease to have the right to appoint at least a
majority of the members of the Board of Directors of the Company, (ii) the
holders of the 10 1/2 % Notes have the right to require the Company to purchase
any such 10 1/2% Notes pursuant to Section 4.08 of the Indenture, dated as of
April 1, 1993, between the Company and Chemical Bank, as trustee, relating
thereto, (iii) any holder of the 11.85% Notes, the 12.17% Notes or the 12.18%
Notes exercises its right to declare any such notes to be due and payable
pursuant to Section 2.1 of the Note Agreement, dated as of September 1, 1988,
relating thereto (the "1988 Note Agreement"), (iv) any holder of the 14.10%
Notes exercises its right to declare any such notes to be due and payable
pursuant to Section 5.2(a) of the Note Agreement, dated as of January 15, 1991,
relating thereto (the "1991 Note Agreement") or (v) any holder of 11.85% Notes,
12.17% Notes, 12.18% Notes or 14.10% Notes shall have received any consideration
(whether in the form of cash, a change in the rate of interest relating to such
notes, a change in any other provision of the terms of such notes, or otherwise)
to amend, modify, waive or otherwise give up its right to declare any such notes
to be due and payable upon "Change of Ownership," as defined in the 1988 Note
Agreement or the 1991 Note Agreement, as the case may be; provided, however,
that an amendment to or waiver or other modification of Section 2.1 of the 1988
Note Agreement or Section 5.2(A) of the 1991 Note Agreement shall not, in the
absence of any consideration, constitute a Change of Control under this
Indenture.
(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 has occurred and that such Holder has
the right to require the Company to purchase such Holder's Debentures 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 (subject to
the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date);
(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 nor
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 Debentures
purchased.
28
If, at the time of a Change of Control, the Company is prohibited by the terms
of the Bank Debt from purchasing Debentures 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 described in this paragraph but in
any event within 30 days following any Change of Control, the Company shall (i)
repay in full all Bank Debt or offer to repay in full all Bank Debt and 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 purchase of the Debentures
as described above. The Company shall first comply with the covenant described
in the preceding sentence before it shall be required to purchase Debentures in
the event of a Change of Control, provided that the Company's failure to comply
with the covenant described in the preceding sentence shall constitute a Default
described in clause 3 of Section 6.01.
(c) Holders electing to have a Debenture purchased shall be required
to surrender the Debenture, 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 shall 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 Debenture which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Debenture purchased.
(d) On the purchase date, all Debentures 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 Debentures 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 4.09. 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, other than Liens securing Seller
Debt.
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
(which, at the date of this Indenture, ends on December 31) one 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 as 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 propose to take with respect thereto. The
Company also shall comply with TIA ss. 314(a)(4).
29
SECTION 4.11. Further Instruments and Acts. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE 5
Successor Company
SECTION 5.01. 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, any 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 Debentures and this
Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the resulting,
surviving or transferee Person or any Subsidiary as a result of 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 51.00 of Funded Debt pursuant to Section 4.03(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.
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 Debentures.
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ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Debenture
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
Debenture 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 Debentures when required pursuant to this Indenture or the
Debentures, 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
Debentures 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, or if no such notice is given, 30 days after the Trustee gives
notice of such failure;
(4) Indebtedness 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 Indebtedness 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;
(6) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
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(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 or 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 any 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, or no such notice is given, 30 days
after the Trustee gives notice of such failure.
The foregoing shall 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 Xxxxx 00, Xxxxxx Xxxxxx 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.
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 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(5) or (6) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Debentures by notice to the
Company and the Trustee, may declare the principal of and accrued interest on
all the Debentures 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 6.01(5) or (6) with respect to the Company occurs,
the principal of and interest on all the Debentures shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Debentureholders. The Holders of a majority in principal
amount of the Debentures by notice to the Trustee may rescind
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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 6.03. 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 Debentures or to enforce the performance of
any provision of the Debentures or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Debentures or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Debentureholder 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 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Debentures 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 Debenture or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Debentureholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the Debentures 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 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Debentureholders 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 6.06. Limitation on Suits. A Debentureholder may not pursue
any remedy with respect to this Indenture or the Debentures unless:
(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
Debentures make a written request to the Trustee to pursue the remedy;
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(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 Debentures
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Debentureholder may not use this Indenture to prejudice the rights
of another Debentureholder or to obtain a preference or priority over another
Debentureholder.
SECTION 6.07. 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 Debentures held by such Holder, on
or after the respective due dates expressed in the Debentures, 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 6.08. Collection Suit by Trustee. If an Event of Default in
payment of interest or principal specified in Section 6.01(1) or (2) occurs and
is continuing, the Trustee may recover judgment in its own name and 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 7.07.
SECTION 6.09. 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 Debentureholders
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, disbursement and advances of the Trustee, its
agents and its counsel, and any other amounts due the Trustee under Section
7.07.
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 7.07;
SECOND: to holders of Senior Debt to the extent required by Article
10;
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THIRD: to Debentureholders for amounts due and unpaid on the
Debentures for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Debentures for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment
to Debentureholders pursuant to this Section. As least 15 days before such
record date, the Company shall mail to each Debentureholder 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 attorneys' 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 6.07 or a suit by Holders of
more than 10% in principal amount of the Debentures.
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 plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenant or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. 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 of 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
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(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 6.05.
(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 7.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by is 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.
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(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 sakes 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
Debentures 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 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Debentures
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 7.04. 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 Debentures, it shall not be accountable for the Company's
use of the proceeds from the Debentures, 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 Debentures or in the Debentures other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Debentureholder 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 Debenture
(including payments pursuant to the mandatory redemption provisions of such
Debenture), 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 Debentureholders.
SECTION 7.06. 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 xxxxx prior to July 15 in each year, the Trustee
shall mail to each Debentureholder a brief report dated as of May 15 that
complies with, and to the extent required under, TIA ss. 313(a). The Trustee
also shall comply with TIA ss. 313(b), to the extent applicable.
A copy of each report at the time of its mailing to Debentureholders
shall be filed with the SEC and each stock exchange (if any) on which the
Debentures are listed. The Company agrees to notify promptly the Trustee
whenever the Debentures become listed on any stock exchange and of any delisting
thereof.
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SECTION 7.07. 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 Debentures 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 Debentures.
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 6.01(5) or (6) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. 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 Debentures 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.
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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 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 Debentureholders. The retiring Trustee shall promptly infer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
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 Debentures 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
Debentureholder 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 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assess to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case as the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Debentures 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 Debentures so
authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee may authenticate such
Debentures 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 Debentures 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 ss. 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
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(l) any indenture or indentures under which other Debentures or
certificates of interest or participation in other Debentures of the Company are
outstanding, including but not limited to the Indenture, dated as of April 6,
1993, between the Company and the Trustee, as amended, relating to the Company's
10.125% Notes due 2003 and the Indenture dated as of February 3, 1994, between
the Company and the Trustee relating to the Company's 9.375% Subordinated
Debentures due 2006, if the requirements for such exclusion set forth in TIA ss.
310(b)(l) are met.
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SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Indenture; Defeasance. (a) When (i) the
Company delivers to the Trustee all outstanding Debentures (other than
Debentures replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Debentures have become due and payable and the Company irrevocably
deposits with the Trustee funds sufficient to pay at maturity all outstanding
Debentures, including interest thereon (other than Debentures replaced pursuant
to Section 2.07), and if in either case the Company pays all other sums payable
hereunder by the Company, then this Indenture shall, subject to Sections 8.01(c)
and 8.06 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 8.01(c), 8.02 and 8.06, the Company at any
time may terminate (i) all its obligations under the Debentures and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09 and 5.01(iii) and the operation of
Sections 6.01(3), 6.01(4), 6.01(5) and (6) (in the case of clauses (5) and (6),
only with respect to Significant Subsidiaries) and 6.01(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
Debentures may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Debentures may not be
accelerated because of an Event of Default specified in 6.01(3), 6.01(4),
6.01(5) and (6) (with respect to Significant Subsidiaries) and 6.01(7) or
because of the failure of the Company to comply with Article 4 of this Agreement
(other than Sections 4.01, 4.02, 4.10 and 4.11) or with clause (iii) of Section
5.01.
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 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and
8.06 shall survive until the Debentures have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
40
SECTION 8.02. Conditions to 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 Debentures 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 Debentures to maturity or redemption, as the case may be;
(3) unless a notice of redemption shall have been mailed pursuant to
Section 3.03 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 6.01(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 February 9, 1995 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 Debentureholders 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
Debentureholders 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
41
the same manner and at 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 Debentures 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 Debentures as a future date in
accordance with Article 3.
SECTION 8.03. 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 Debentures. Money and Debentures
to held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
Debentures 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, Debentureholders 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 shall be repaid to the Company.
SECTION 8.05. 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 8.06. 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 Debentures 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; provided, however, that, if the
Company has made any payment of interest on or
42
principal of any Debentures because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Debentures to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. 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 Debentures without notice to or consent
of any Debentureholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Debentures in addition to or in
place of certificate Debentures; provided, however, that the
uncertificated Debentures are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Debentures are described in Section 163(f)(2)(B) of the 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 Debentures or to secure
the Debentures;
(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 Debentureholder.
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 Debentureholders a notice briefly describing such amendment. The
failure to give such
43
notice to all Debentureholders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section.
SECTION 9.02. 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 Debentures without notice to any Debentureholder but
with the written consent of the Holders of at least a majority in principal
amount of the Debentures; provided, however, that no amendment may be made to
Section 4.08 without the written consent of the Holders of at least 66 2/3% in
principal amount of the Debentures. However, without the consent of each
Debentureholder affected, an amendment may not:
(1) reduce the amount of Debentures whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Debenture;
(3) reduce the principal of or extend the Stated Maturity of any
Debenture;
(4) reduce the premium payable upon the redemption of any Debenture
or change the time at which any Debenture may be redeemed in accordance
with Article 3;
(5) make any Debenture payable in money other than that stated in
the Debenture;
(6) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Debentures on or after the due dates
therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Debentures;
(7) make any change in Article 10 that adversely affects the rights
of any Debentureholder under Article 10; or
(8) make any change in Section 6.04 or 6.07 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 Debentureholders a notice briefly describing such amendment. The
failure to give such
44
notice to all Debentureholders, or any defect therein, affect the validity of an
amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Debentures shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Debenture shall bind the
Holder and every subsequent Holder of that Debenture or portion of the Debenture
that evidences the same debt as the consenting Holder's Debenture, even if
notation of the consent or waiver is not made on the Debenture. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Debenture or portion of the Debenture if the Trustee receives the
notice of revocation before the date the amendment or waiver becomes effective.
After an amendment or waiver becomes effective, is shall bind every
Debentureholder.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Debentureholders 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
Debentureholders 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 9.05. Notation On or Exchange of Debentures. If an amendment
changes the terms of a Debenture, the Trustee may require the Holder of the
Debenture to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Debenture 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 Debenture shall issue and the Trustee shall authenticate a
new Debenture that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Debenture shall not affect the validity of such
amendment.
SECTION 9.06. 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 7.01) 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 9.07. Payment for Consent. Neither the Company, any
Affiliate of the Company nor any Subsidiary shall, directly or indirectly, pay
or cairn 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 Debentures
unless such consideration is offered to be paid or agreed to be paid
45
to all Holders which to consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver or agreement.
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Debentureholder by accepting a Debenture agrees, that the Indebtedness
evidenced by the Debentures 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 Debentures in accordance with the provisions set
forth herein. All provisions of this Article 10 shall be subject to Section
10.12.
SECTION 10.02. 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 Debentureholders shall be entitled to
receive any payment of principal of, or premium, if any, or interest on
the Debentures; and
(2) until the Senior Debt is paid in full, any distribution to which
Debentureholders would be entitled bus for this Article 10 shall be made
to holders of Senior Debt as their interests may appear, except that
Debentureholders may receive shares of stock and any debt securities that
are subordinated to Senior Debt to at least the same extent as the
Debentures.
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
Debentureholders 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 10.03. Default on Senior Debt. The Company may not pay the
principal of, premium, if any, or interest on, the Debentures or make any
deposit pursuant to
46
Section 8.01 and may not repurchase, redeem or otherwise retire any Debentures
(collectively, "pay the Debentures") if (i) any Designated Senior Debt is not
paid when due or (ii) any other default on Designated Senior Debt occurs and the
maturity of such Designated 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 been rescinded or (y) such Designated Senior Debt has been
paid in full; provided, however, that the Company may pay the Debentures 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 than a default
described in clause (i) or (ii) of the preceding sentence) with respect to any
Designated 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 Debentures 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 to effect a Payment
Blockage Period (a "Payment Blockage 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
Blockage Notice, (ii) by repayment in full of such Designated Senior Debt or
(iii) because the default specified in such Payment Blockage 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 Designated Senior Debt or
the Representative of such holders shall have accelerated the maturity of such
Designated Senior Debt, the Company may resume payments on the Debentures after
the end of such Payment Blockage Period. Not more than one Payment Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Debt during such period.
SECTION 10.04. Acceleration of Payment of Debentures. If payment of
the Debentures 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 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Debentureholders that because of this Article 10 should
not have been made to them, the Debentureholders who receive the distribution
shall hold is in trust for holders of Senior Debt and pay it over to them as
their interests may appear.
SECTION 10.06. Subrogation. After all Senior Debt is paid in full
and until the Debentures are paid in full, Debentureholders 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 Debentureholders is not, as between the
Company and Debentureholders, a payment by the Company on Senior Debt.
47
SECTION 10.07. Relative Rights. This Article 10 defines the relative
rights of Debentureholders and holders of Senior Debt. Nothing in this Indenture
shall:
(1) impair, as between the Company and Debentureholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of, premium, if any, and interest on the Debentures in
accordance with their terms; or
(2) prevent the Trustee or any Debentureholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Debt to receive distributions otherwise payable to
Debentureholders.
SECTION 10.08. 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 Debentures shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Debentures 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 7.07.
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 Debentures by
reason of any provision 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 Debentureholders or the Trustee to accelerate the maturity of
the Debentures.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S.
48
Government Obligations held in trust under Article 8 by the Trustee for the
payment of principal of and interest on the Debentures 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 Debentureholders 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 of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Debentureholders
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 10.02
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
Debentureholders 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 7.01 and 7.02
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
Debentureholder by accepting a Debenture 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 Debentureholders 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 Debentureholders 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
Provisions. Each Debentureholder by accepting a Debenture 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
Debentures, to acquire and continue to hold, or to continue to hold, such Senior
Debt and such holder of Senior Debt shall be deemed conclusively
49
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Debt.
ARTICLE 11
Miscellaneous
SECTION 11.01. 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 11.02. 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.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention of ________________
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 Debentureholder shall be
mailed first class to the Debentureholder at the Debentureholder'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 Debentureholder or
any defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders.
Debentureholders may communicate pursuant to TIA ss. 312(b) with other
Debentureholders with
50
respect to their rights under this Indenture or the Debentures. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or 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 11.05. 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 11.06. When Debentures Disregarded. In determining whether
the Holders of the required principal amount of Debentures have concurred in any
direction, waiver or consent, Debentures 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
Debentures which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Debentures outstanding at the time shall be
considered in any such determination.
51
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of
Debentureholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 11.08. Governing Law. This Indenture and the Debentures
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 11.09. 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 Debentures or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Debenture, each Debentureholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Debentures.
SECTION 11.10. Successors. All agreements of the Company in this
Indenture and the Debentures shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.11. 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 11.12. 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.
52
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:
--------------------------------------
Name:
Title:
The Chase Manhattan Bank, as Trustee,
By:
--------------------------------------
Name:
Title:
53
EXHIBIT A
(FORM OF FACE OF DEBENTURE)
No. $ _______
12-1/4% Subordinated Debenture Due 2005 Series B
Petroleum Heat and Power Co., Inc., a Minnesota corporation,
promises to pay to __________________________ or registered assigns, the
principal sum of ________________ Dollars on February 1, 2005.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Additional Provisions of this Debenture are set forth on the other
side of this Debenture.
Dated:
PETROLEUM HEAT AND POWER CO., INC.,
by
-----------------------------------------
Chief Executive Officer
[Seal]
-----------------------------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Debentures referred to in the within mentioned
Indenture.
The Chase Manhattan Bank
by
---------------------------
Authorized Officer
[FORM OF REVERSE SIDE OF DEBENTURE]
12-1/4% Subordinated Debenture Due 2005 Series B
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 Debenture at the rate per annum shown above. The
Company shall pay interest semiannually in arrears on February 1 and August 1 of
each year, commencing February 1, 1999. Interest on the Debentures shall accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from __________ ____, 1998. Interest shall 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 Debentures 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 shall pay interest on the Debentures (except defaulted
interest) to the Persons who are registered Holders of Debentures at the close
of business on the January 15 or July 15 next preceding the interest payment
date even if Debentures are canceled after the record date and on or before the
interest payment date. Holders must surrender Debentures to a Paying Agent to
collect principal payments. The Company shall 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"), shall 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 Debentures under an Indenture dated as of
_________ ___, 1998 ("Indenture"), between the Company and the Trustee. The
terms of the Debentures 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.
xx.xx. 77aaa-77bbbb) as amended and in effect on February 9, 1995 (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Debentures are subject to all such terms, and
Debentureholders are referred to the Indenture and the Act for a statement of
those terms.
The Debentures are general unsecured obligations of the Company
limited to $125,000,000 aggregate principal amount (subject to Section 2.07 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 Indebtedness, certain investments
and certain 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 Debentures will be redeemable for cash on or after February 1,
2000 at the option of the Company, in whole or from time to time in part, at the
redemption prices set forth herein, together with interest accrued to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date). The
redemption prices (expressed as percentages of principal amount) are as follows
for Debentures redeemed during the twelve month period beginning February 1 of
the years indicated:
Year Percentage
---- ----------
2000...................................... 104.594%
2001...................................... 103.063
2002...................................... 101.531
2003 and thereafter....................... 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 Debentures issued under
the Indenture at a redemption price of 103.5% 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 shall be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Debentures to be
redeemed at his registered address. Debentures in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Debentures
(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
Debentures (or such portions thereof) called for redemption.
2
7. Offer to Purchase Upon a Change of Control
Upon the occurrence of a Change of Control, as defined in the
Indenture, each Holder of Debentures shall have the right to require the Company
to repurchase all or any part of such Holder's Debentures at a repurchase price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of repurchase pursuant to Section 4.08 of the Indenture.
8. Subordination
The Debentures are subordinated to Senior Debt, as defined in the
Indenture. To the extent provided in the Indenture, Senior Debt must be paid
before the Debentures may be paid. The Company agrees, and each Holder by
accepting a Debenture 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 purpose.
9. Denominations; Transfer; Exchange
The Debentures are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Debentures 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
Debentures selected for redemption (except, in the case of a Debenture to be
redeemed in part, the portion of the Debenture not to be redeemed) or any
Debentures for a period of 15 days before a selection of Debentures to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Debenture 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 Debentures 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 Debentures to redemption or maturity,
as the case may be.
3
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Debentures may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Debentures
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 Debentures. 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 Debentures to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Debentures in addition to or in place of certificated Debentures,
or to add guarantees with respect to the Debentures or to secure the Debentures,
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 at any Holder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) details for 30
days in payment of interest on the Debentures; (ii) default in payment of
principal on the Debentures at maturity, upon redemption pursuant to paragraph 5
hereof, upon declaration or otherwise, or failure by the Company to purchase
Debentures when required; (iii) failure by the Company to comply with other
agreements in the Indenture or the Debentures, 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 Debentures may declare all the Debentures to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which shall
result in the Debentures being due and payable immediately upon the occurrence
of such Events of Default.
Debentureholders may not enforce the Indenture or the Debentures
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Debentures unless its receives reasonable indemnity or
security. Subject to certain limitations, Holders of a majority in principal
amount of the Debentures may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Debentureholders 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
4
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 Debentures 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 Debentures or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Debenture, each Debentureholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Debentures.
17. Authentication
This Debenture 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 Debenture.
18. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Debenture Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Debentures and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Debentureholders. No representation is
made as to the accuracy of such numbers either as printed on the Debentures or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company shall furnish to any Debentureholder upon written
request and without charge to the Debentureholder a copy of the Indenture which
has in it the text of this Debenture in larger type. Requests may be made to:
Petroleum Heat and Power Co., Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention of:
________________________.
5
================================================================================
ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
I or we assign and transfer this Debenture to
(Print or type assignee's, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Debenture on the books of the Company. The agent may substitute mother to act
for him.
================================================================================
Date:_____________________ Your Signature:_____________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Debenture.
6
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 4.08 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Debenture purchased
by the Company pursuant to Section 4.08 of the indenture, state the amount: $
Date:_____________________ Your Signature:________________________________
(Sign exactly as your appears on
the other side of the Debenture)
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed by a member firm of the New
York Stock Exchange or a commercial bank or trust company)
7
Exhibit B
STAR GAS PARTNERS L.P. AND
PETROLEUM HEAT AND POWER CO., INC. ANNOUNCES
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 Subordinated Units.
The Senior Subordinated Units will be exchanged with holders of Petro's publicly
traded Class A common stock and the Junior Subordinated Units and General
Partnership Interest 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 Petro, 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 subordination 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 Petro 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, Petro also intends to restructure
$66.2 million of privately held notes.
Petro 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 of the Star Gas/Petro Transaction.
This agreement allows 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, Petro
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
preference 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.
Petro will offer to the remaining holders of its 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 is subject to receiving an agreement
to the early redemption from at least 90% of the outstanding publicly traded
debt and preferred stock.
Petro 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 Partnership 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 Petro's
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 Partnerships MQD to $2.30 annually. Secondly, we
believe 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 Petro has acquired 189 distributorships.
As such, we believe this combination should provide the Partnership with a
platform to increase it's 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 Petro stated that "we believe the proposed transaction
will enable Petro to achieve its stated objective of accessing equity to
recapitalize and delever. This should permit us to continue our historically
active acquisition program and 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 Petro 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 of 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 nation, 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 serves 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 Natural 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 Petro and Star Gas believe that the
expectations reflected in such forward-looking statements are reasonable, Petro
and tar 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 Petro and Star Gas' Forms 10-K and 10-Q which include
additional information that could affect Petro and Star Gas' financial results.
