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DRAFT - 8/24/98
PETROLEUM HEAT AND POWER CO., INC.
12 1/4% Senior Subordinated Debentures Due 2005
INDENTURE
Dated as of , 1998
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The Chase Manhattan Bank,
Trustee
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TABLE OF CONTENTS
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Page No.
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ARTICLE 1
Definitions and Incorporation by Reference
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SECTION 1.01. Definitions......................................................1
SECTION 1.02. Other Definitions...............................................15
SECTION 1.03. Incorporation by Reference of Trust Indenture Act...............16
SECTION 1.04. Rules of Construction...........................................16
ARTICLE 2
The Debentures
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SECTION 2.01. Form and Dating.................................................17
SECTION 2.02. Execution and Authentication....................................17
SECTION 2.03. Registrar and Paying Agent......................................18
SECTION 2.04. Paying Agent To Hold Money in Trust.............................18
SECTION 2.05. Debentureholder Lists...........................................19
SECTION 2.06. Transfer and Exchange...........................................19
SECTION 2.07. Replacement Debentures..........................................20
SECTION 2.08. Outstanding Debentures..........................................20
SECTION 2.09. Temporary Debentures............................................20
SECTION 2.10. Cancellation....................................................21
SECTION 2.11. Defaulted Interest..............................................21
ARTICLE 3
Redemption
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SECTION 3.01. Notices to Trustee..............................................21
SECTION 3.02. Selection of Debentures To Be Redeemed..........................22
SECTION 3.03. Notice of Redemption............................................22
SECTION 3.04. Effect of Notice of Redemption..................................23
SECTION 3.05. Deposit of Redemption Price.....................................24
SECTION 3.06. Debentures Redeemed in Part.....................................24
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ARTICLE 4
Covenants
SECTION 4.01. Payment of Debentures...........................................24
SECTION 4.02. SEC Reports.....................................................25
SECTION 4.03. Limitation on Funded Debt.......................................25
SECTION 4.04. Limitation on Indebtedness and Preferred Stock of Subsidiaries..26
SECTION 4.05. Limitation on Restricted Payments...............................27
SECTION 4.06. Limitation on Restrictions on Distributions from Subsidiaries...29
SECTION 4.07. Limitation on Transactions with Affiliates......................29
SECTION 4.08. Change of Control...............................................30
SECTION 4.09. Limitation on Liens on Subsidiary Stock.........................32
SECTION 4.10. Compliance Certificate..........................................32
SECTION 4.11. Further Instruments and Acts....................................32
ARTICLE 5
Successor Company
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SECTION 5.01. When Company May Merge or Transfer Assets.......................33
ARTICLE 6
Defaults and Remedies
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SECTION 6.01. Events of Default...............................................34
SECTION 6.02. Acceleration....................................................35
SECTION 6.03. Other Remedies..................................................36
SECTION 6.04. Waiver of Past Defaults.........................................36
SECTION 6.05. Control by Majority.............................................36
SECTION 6.06. Limitation on Suits.............................................37
SECTION 6.07. Rights of Holders To Receive Payment............................37
SECTION 6.08. Collection Suit by Trustee......................................37
SECTION 6.09. Trustee May File Proofs of Claim................................37
SECTION 6.10. Priorities......................................................38
SECTION 6.11. Undertaking for Costs...........................................38
SECTION 6.12. Waiver of Stay or Extension Laws................................38
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ARTICLE 7
Trustee
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SECTION 7.01. Duties of Trustee...............................................39
SECTION 7.02. Rights of Trustee...............................................40
SECTION 7.03. Individual Rights of Trustee....................................41
SECTION 7.04. Trustee's Disclaimer............................................41
SECTION 7.05. Notice of Defaults..............................................41
SECTION 7.06. Reports by Trustee to Holders...................................41
SECTION 7.07. Compensation and Indemnity......................................41
SECTION 7.08. Replacement of Trustee..........................................42
SECTION 7.09. Successor Trustee by Merger.....................................43
SECTION 7.10. Eligibility; Disqualification...................................43
SECTION 7.11. Preferential Collection of Claims Against Company...............44
ARTICLE 8
Discharge of Indenture; Defeasance
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SECTION 8.01. Discharge of Indenture; Defeasance..............................44
SECTION 8.02. Conditions to Defeasance........................................45
SECTION 8.03. Application of Trust Money......................................46
SECTION 8.04. Repayment to Company............................................46
SECTION 8.05. Indemnity for Government Obligations............................47
SECTION 8.06. Reinstatement...................................................47
ARTICLE 9
Amendments
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SECTION 9.01. Without Consent of Holders......................................47
SECTION 9.02. With Consent of Holders.........................................48
SECTION 9.03. Compliance with Trust Indenture Act.............................49
SECTION 9.04. Revocation and Effect of Consents and Waivers...................49
SECTION 9.05. Notation On or Exchange of Debentures...........................50
SECTION 9.06. Trustee to Sign Amendments......................................50
SECTION 9.07. Payment for Consent.............................................50
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ARTICLE 10
Subordination
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SECTION 10.01. Agreement To Subordinate.......................................51
SECTION 10.02. Liquidation, Dissolution, Bankruptcy...........................51
SECTION 10.03. Default on Senior Debt.........................................52
SECTION 10.04. Acceleration of Payment of Debentures..........................52
SECTION 10.05. When Distribution Must Be Paid Over............................52
SECTION 10.06. Subrogation....................................................53
SECTION 10.07. Relative Rights................................................53
SECTION 10.08. Subordination May Not Be Impaired by Company...................53
SECTION 10.09. Rights of Trustee and Paying Agent.............................53
SECTION 10.10. Distribution or Notice to Representative.......................54
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right
To Accelerate.................................................54
SECTION 10.12. Trust Moneys Not Subordinated..................................54
SECTION 10.13. Trustee Entitled To Rely.......................................54
SECTION 10.14. Trustee To Effectuate Subordination............................55
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt...............55
SECTION 10.16. Reliance by Holders of Senior Debt on Subordination
Provisions....................................................55
ARTICLE 11
Miscellaneous
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SECTION 11.01. Trust Indenture Act Controls...................................55
SECTION 11.02. Notices........................................................56
SECTION 11.03. Communication by Holders with Other Holders....................56
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.............56
SECTION 11.05. Statements Required in Certificate or Opinion..................57
SECTION 11.06. When Debentures Disregarded....................................57
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar...................57
SECTION 11.08. Governing Law..................................................58
SECTION 11.09. No Recourse Against Others.....................................58
SECTION 11.10. Successors.....................................................58
SECTION 11.11. Multiple Originals.............................................58
SECTION 11.12. Table of Contents: Headings....................................58
Exhibit A - Form of Debenture
Exhibit B - Press Release
iv
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% Senior Subordinated Debentures Due 2005 (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
2
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 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
3
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 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,
4
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 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.
5
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Debt" means (i) the Bank Debt and (ii) any
other Senior Debt which, at the date of determination, has an aggregate
principal amount outstanding of, or commitments to lend up to at least $10
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Debt as "Designated Senior Debt" for
purposes of this Indenture.
"EBITDA" 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
6
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.
"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
7
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,
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
8
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 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.
9
"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.
"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
10
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;
(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
▇▇▇▇▇▇ 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);
11
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 Indebtedness of the Company represented by its 10 1/8%
Subordinated Notes due 2003 issued under the indenture dated as of April 1,
1993, between the Company and Chemical Bank, as trustee, 9 3/8% Subordinated
Debentures due 2006 issued under the indenture dated as of February 3, 1994,
between the Company and Chemical Bank, as trustee and the 12 1/4% Subordinated
Debentures due 2005 issued under the indenture dated as of February 9, 1995,
between the Company and Chemical Bank, as trustee, (2) any obligation of the
Company to any Subsidiary or other Affiliate of the Company, (3) any liability
for federal, state, local or other taxes owed or owing by the Company, (4) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including guarantees thereof or instruments evidencing such
liabilities) or (5) that portion of any Indebtedness that was incurred in
violation of this Indenture.
"▇▇▇▇▇ Group" means the Estate of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and trusts
created thereunder, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Ean ▇▇▇▇▇ and any trust over which such Persons have sole
voting power.
"▇▇▇▇▇ Note" means the promissory note, dated December 31,
1994, of ▇▇▇▇ ▇. ▇▇▇▇▇ 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 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
12
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 thereafter incurred) which
is subordinate or junior in right of payment to the Debentures, including,
without limitation, any Indebtedness of the Company represented by its 10 1/8%
Subordinated Notes due 2003 issued under the indenture dated as of April 1,
1993, between the Company and Chemical Bank, as trustee, 9 3/8% Subordinated
Debentures due 2006 issued under the indenture dated as of February 3, 1994,
between the Company and Chemical Bank, as trustee and the 12 1/4% Subordinated
Debentures due 2005 issued under the indenture dated as of February 9, 1995,
between the Company and Chemical Bank, as trustee.
"Subsidiary" means a corporation of which a majority of the
Capital Stock having voting power under ordinary circumstances to elect a
majority of the board of directors is owned by (i) the Company, (ii) the Company
and one or more Subsidiaries or (iii) one or more Subsidiaries; provided,
however, that an Unrestricted Subsidiary shall be deemed not to be a Subsidiary
(except as used in the definition thereof).
"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
accounted for by the equity method except to the extent of any cash dividends
received by such person and its Subsidiaries.
13
"TIA" means the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb) as amended and in effect on February 9, 1995.
"▇▇▇▇▇▇ Group" means (i) all the holders of Class C Common
Stock as of February 9, 1995 who are not members of the ▇▇▇▇▇ 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
14
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
15
"Paying Agent"..................................................... 2.03
"Payment Blockage Period".......................................... 10.03
"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;
16
(6) unsecured debt shall not be deemed to be subordinate or
junior to secured debt merely by virtue of its nature as unsecured debt;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that would
be shown on a balance sheet of the issuer dated such date prepared in accordance
with generally accepted accounting principles and accretion of principal on such
security shall be deemed to be the 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
17
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 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.
18
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.
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
19
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 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.
20
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.
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.
21
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:
(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;
22
(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
(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. Notwithstanding the
forgoing, if the Company mails a notice of redemption in connection with a
redemption of Debentures pursuant to the second paragraph of item 5 of the
Debentures and subsequently determines, in good faith, that the Star Gas
Transaction will not be consummated, the Company, in its sole discretion, may
revoke such notice of redemption by notifying the Trustee in writing with the
immediate effect that Debentures called for redemption shall no longer be due
and payable on the redemption date and the Company shall be under no further
obligation to so redeem any Debentures.
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
23
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.
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 Section 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.
24
(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 (1) 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 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
25
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 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
26
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 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
27
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
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
28
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 ▇▇▇▇▇ 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 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 ▇▇▇▇▇ Group and the
▇▇▇▇▇▇ 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 ▇▇▇▇▇
Group and the ▇▇▇▇▇▇ 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
29
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.
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
30
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 Section 314(a)(4).
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.
31
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.
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default" occurs
if:
32
(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:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
33
(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 ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 an acceleration
and its consequences if the rescission would not conflict with any judgment or
34
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;
35
(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;
36
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:
37
(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
(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.
38
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.
(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.
39
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 ▇▇▇▇▇ 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 Section 313(a). The Trustee
also shall comply with TIA Section 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.
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:
40
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring 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
41
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 Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(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 Section 310(b)(l) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
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
42
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.
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;
43
(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 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
44
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 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
45
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 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;
46
(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 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.
47
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 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
48
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 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
49
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.
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
50
(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. 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
51
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
52
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.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention of Treasurer
if to the Trustee:
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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.
53
SECTION 11.03. Communication by Holders with Other Holders.
Debentureholders may communicate pursuant to TIA Section 312(b) with other
Debentureholders with 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 Section 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
54
foregoing, only Debentures outstanding at the time shall be considered in any
such determination.
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.
55
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:
56
EXHIBIT A
(FORM OF FACE OF DEBENTURE)
No. $ _______
12-1/4% Senior Subordinated Debenture Due 2005
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% Senior Subordinated Debenture Due 2005
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.
Sections 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
2
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.
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.
3
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.
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
4
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
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.
5
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.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention of:
Treasurer.
6
--------------------------------------------------------------------------------
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.
7
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)
8
Exhibit B
CONTACT:
Star Gas: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President-Finance
▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Jaffoni & ▇▇▇▇▇▇▇ Incorporated
212/835-8500 or ▇▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
------------------
Petro: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Treasurer
203/325-5470
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Vice President and Controller
203/325-5460
FOR IMMEDIATE RELEASE
STAR GAS PARTNERS, L.P. AND PETROLEUM HEAT AND POWER CO., INC.
ANNOUNCE AGREEMENT IN PRINCIPLE TO COMBINE
STAMFORD, CT (August 14, 1998) -- Star Gas Partners, L.P., ("Star" or the
"Partnership") (NYSE:SGU) and Petroleum Heat and Power Co., Inc. ("Petro" or
the "Company") (NASDAQ:HEAT), jointly announced today that they have reached
an agreement in principle to enter into a strategic business combination in
which Petro would become a wholly-owned subsidiary of Star. This transaction
would be effected through Petro shareholders exchanging their approximately
26.6 million shares of Petro Common Stock for approximately 3.6 million Star
master limited partnership units which will be subordinated to the existing
Star Common Units.
Star Gas currently distributes to its partners, on a quarterly basis, all of
its Available Cash, which is generally all of the cash receipts of the
Partnership less all cash disbursements, with a targeted Minimum Quarterly
Distribution ("MQD") of $0.55 per Unit, or $2.20 per Unit on an annualized
basis. In connection with the Petro transaction, the Partnership will
increase the MQD to $.575 per unit or $2.30 per Unit on an annualized basis.
This increase in the MQD reflects the expectation that the transaction will
be accretive to the Partnership. The increase in the MQD will also serve to
raise the threshold needed to end the subordination period.
Of the 3.6 million subordinated Partnership units anticipated to be
distributed to Petro shareholders, 2.8 million will be Senior Subordinated
Units and approximately 857,000 will be Junior Subordinated Units and General
Partnership Interests. The Senior Subordinated Units will be publicly
registered and tradable (they are expected to be listed on the NYSE) and will
be subordinated in distributions to Star's Common Units. The Junior
Subordinated Units and General Partnership Interests will not be registered
nor publicly tradable and will be subordinated to both the Common Units and
the Senior
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Star Gas and Petroleum Heat and Power Announce Agreement to Combine
8/14/98 page 2
Subordinated Units. The Senior Subordinated Units will be exchanged with
holders of Petro's publicly traded Class A common stock and the Junior
Subordinated Units and General Partnership Interests will be exchanged with
individuals that currently own Petro's Class C common stock. Certain holders
of the Company's Class C Common Stock will also exchange their shares for
Senior Subordinated Units.
It is currently contemplated that 21,177,000 shares of Petro Common Stock
will be exchanged for 2,767,000 Star Senior Subordinated Units. 5,386,000
shares of Petro common stock, held by certain individuals who currently own
Petro Class C common stock, including ▇▇▇▇ ▇. ▇▇▇▇▇, 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 subordinated provision, distributions on Star Senior
Subordinated Units may be made only after distributions of Available Cash on
Common Units meet the MQD requirement. Distributions on Star Junior
Subordinated Units and to the General Partner may be made only after
distributions of Available Cash on Common Units and Senior Subordinated Units
meet the MQD requirement. The Subordination Period will extend until the
Partnership earns and pays its MQD for three years. In any event, as a
condition of this transaction, the Partnership agreement will be amended so
that no distribution will be paid on the Senior Subordinated Units, Junior
Subordinated Units, or to the General Partner except to the extent Available
Cash is earned from operations.
Like many other publicly traded master limited partnerships, the Partnership
contains a provision which provides the General Partner with incentive
distributions in excess of certain targeted amounts. This provision will be
modified so that should there be any such incentive distributions, they will
be made pro rata to the Senior Subordinated Units and Junior Subordinated
Units as well as to the General Partner.
In connection with the Transaction, the Senior Subordinated Units, Junior
Subordinated Units and General Partnership Interests can earn, pro rata,
303,000 additional Senior Subordinated Units each year that 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 the Star Gas/Petro Transaction.
This agreement allows
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Petro to redeem its 9 3/8% Subordinated Debentures, 10 1/8% Subordinated
Notes and 12 1/4% Subordinated Debentures at 100%, 100% and 103.5% of
principal amount, respectively, and to redeem its 12 7/8% Preferred Stock at
$23 per share. In consideration for this early redemption right, 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 perference of such securities. Each share of Petro Junior
Convertible Preferred Stock will be exchangeable into .13 of a Star common
Unit at the conclusion of this transaction representing a maximum 104,000 MLP
units. Should the transaction not be consummated, the Junior Preferred Stock
will be converted into a like number of shares of Class A Common Stock.
Petro will offer to the remaining holders of it's publicly traded debt and
preferred stock the same right of early redemption under the same terms and
conditions as agreed to by the consenting holders. This proposal will be
made through an exchange offer that is expected to commence shortly. This
transaction and the associated Petro recapitalization are subject to
receiving an agreement to the early redemption from at least 90% of the
outstanding publicly traded debt and preferred stock.
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 Parnership Interests. The
holders of the Partnership's Common Units (including an estimated 6.4 million
Common Units that will be sold in the Partnerships $140 million public
offering) will own an aggregate approximately 74% equity interest in the
Partnership following the completion of the transaction. The General Partner
of the Partnership will be a newly organized Delaware limited liability
company that will be owned by members of Petro's current control group.
In commenting on the proposed transaction, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President of
Star, "We believe that this strategic combination will have a number of
benefits for the Partnership. Firstly, we are pleased with having achieved
our goal of structuring a transaction which we believe will be immediately
accretive, enabling us to increase the Partnership's MQD to $2.30 annually.
Secondly, we belive this strategic combination will provide an additional
source of attractive acquisition opportunities. Petro is the largest retail
heating oil company in the country and the primary consolidator of that
highly fragmented industry. Over the past nineteen years Petro has acquired
189 distributorships. As such, we belive this combination should provide the
Partnership with a platform to increase its acquisition activities. Thirdly,
over the past two and one-half years, in an effort to take advantage of its
size, Petro has regionalized its operations, accessed developments in
computer and communication technology, and entered into cross-marketing
partnerships. These programs have provided attractive productivity,
operational and marketing results which should continue to benefit the
Partnership Finally, this combination significantly increases the size and
market capitalization of the Partnership."
▇▇▇▇ ▇. ▇▇▇▇▇, CEO of Petro stated, "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
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facilitate the funding of our operational and marketing initiatives. In
addition, the MLP structure should provide a better valuation format for
Petro which is cash flow oriented and which has been the only publicly traded
company in its industry. The transaction should provide our shareholders
with the resumption of annual cash distributions which 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
▇.▇. ▇▇▇▇▇▇▇ & 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 ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 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 ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and the
agreement to early redemption by the holders of 90% of Petro's publicly
traded debt and preferred stock.
Petro and Star will continue to operate as separate business units and this
transaction will not have an impact on the day-to-day operations of either
entity. There will be no reduction in the number of employees as a result of
this transaction.
Petroleum Heat and Power Co., Inc. is the largest retail distributor of home
heating oil in the nations, serving approximately 350,000 customers in the
Northeast and Mid-Atlantic states, including the metropolitan areas of New
York, Boston, Washington, D.C., Baltimore, and Providence. Star Gas Partners
L.P., the eighth largest retail propane distributor services more than
166,000 customers throughout 74 locations in the Midwestern states of Ohio,
Indiana, Michigan, Kentucky, West Virginia and in the Northeast, from Maine
to Southern New Jersey. Star operates under several trademarks and trade
names, including: Star Gas Service, Silgas, Blue Flame L.P. Gas, Maingas,
Arrow Gas, Mid-▇▇▇▇▇▇ Valley Propane, ▇▇▇▇▇▇▇ Gas Service, H&S Gas, ▇▇▇▇▇▇▇▇
▇.▇. Gas, Rural National Gas, Pearl Gas, Bay State-Arrow Gas, ▇▇▇▇▇▇▇ ▇.▇.
Gas and ▇▇▇▇ 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 Star Gas can give no assurance that such
expectations will prove to have been correct. Investors and prospective
investors should read this Press Release in conjunction with Petro and Star
Gas' Forms 10-K and 10-Q which include additional information that could
affect Petro and Star Gas' financial results.