TATHAM OFFSHORE INC
SC 13D/A, 1999-08-13
OIL & GAS FIELD EXPLORATION SERVICES
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<PAGE>   1



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               -------------------

                                  SCHEDULE 13D
                                 (RULE 13d-101)

             INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
                     TO RULE 13D-1(a) AND AMENDMENTS THERETO
                        FILED PURSUANT TO RULE 13(d)-2(a)
                                (AMENDMENT NO. 1)

                              TATHAM OFFSHORE, INC.
                                (NAME OF ISSUER)

                          COMMON STOCK, $0.01 PAR VALUE
     SERIES A 12% CONVERTIBLE EXCHANGEABLE PREFERRED STOCK, $0.01 PAR VALUE
      SERIES C 4% CONVERTIBLE EXCHANGEABLE PREFERRED STOCK, $0.01 PAR VALUE
                         (TITLE OF CLASS OF SECURITIES)

                                   876628 10 8
                                 (CUSIP NUMBER)

                                 RICK L. BURDICK
                    AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
                        1900 PENNZOIL PLACE--SOUTH TOWER
                              711 LOUISIANA STREET
                              HOUSTON, TEXAS 77002
                                 (713) 220-5800
                  (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
                AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)


                                 AUGUST 18, 1998
                      (DATE OF EVENT WHICH REQUIRES FILING
                               OF THIS STATEMENT)

      IF THE FILING PERSON HAS PREVIOUSLY FILED A STATEMENT ON SCHEDULE 13G
TO REPORT THE ACQUISITION THAT IS THE SUBJECT OF THIS SCHEDULE 13D, AND IS
FILING THIS SCHEDULE BECAUSE OF RULE 13d-1(e), 13d-1(f) OR 13d-1(g), CHECK THE
FOLLOWING BOX [ ].




                       (Continued on the following pages)



<PAGE>   2

- ----------------------------
   CUSIP NO.   876628 10 8              13D
             ---------------
- ----------------------------

- --------------------------------------------------------------------------------
1         NAMES OF REPORTING PERSONS
          I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)


          Tatham Brothers Securities, LLC, 76-0580395
- --------------------------------------------------------------------------------
2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP               (a) [ ]
                                                                         (b) [X]


- --------------------------------------------------------------------------------
3         SEC USE ONLY



- --------------------------------------------------------------------------------
4         SOURCE OF FUNDS


          AF
- --------------------------------------------------------------------------------
5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
          PURSUANT TO ITEM 2(d) OR 2(e)                                      [ ]


- --------------------------------------------------------------------------------
6         CITIZENSHIP OR PLACE OF ORGANIZATION


          Delaware
- --------------------------------------------------------------------------------
                   7                SOLE VOTING POWER  20,768,011

 NUMBERS OF       --------------------------------------------------------------
   SHARES          8                SHARED VOTING POWER  0
BENEFICIALLY
  OWNED BY        --------------------------------------------------------------
    EACH           9                SOLE DISPOSITIVE POWER 20,768,011
 REPORTING
PERSON WITH       --------------------------------------------------------------
                   10               SHARED DISPOSITIVE POWER  0

- --------------------------------------------------------------------------------
11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

          20,768,011 shares of Common Stock
          3,455,444 shares of Series A 12% Convertible Exchangeable
          Preferred Stock
- --------------------------------------------------------------------------------
12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
          EXCLUDES CERTAIN SHARES                                            [ ]


- --------------------------------------------------------------------------------

13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

          79.6% of Common Stock
          20.4% of Series A 12% Convertible Exchangeable Preferred Stock
- --------------------------------------------------------------------------------
14        TYPE OF REPORTING PERSON


          OO
- --------------------------------------------------------------------------------

                               Page 2 of 18 Pages


<PAGE>   3


- ----------------------------
   CUSIP NO.   876628 10 8              13D
             ---------------
- ----------------------------

- --------------------------------------------------------------------------------
1         NAMES OF REPORTING PERSONS
          I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)


          Tatham Brothers, LLC, 76-0562645
- --------------------------------------------------------------------------------
2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP               (a) [ ]
                                                                         (b) [X]


- --------------------------------------------------------------------------------
3         SEC USE ONLY



- --------------------------------------------------------------------------------
4         SOURCE OF FUNDS


          OO
- --------------------------------------------------------------------------------
5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
          PURSUANT TO ITEM 2(d) OR 2(e)                                      [ ]


- --------------------------------------------------------------------------------
6         CITIZENSHIP OR PLACE OF ORGANIZATION


          Delaware
- --------------------------------------------------------------------------------
                   7                SOLE VOTING POWER  0

 NUMBERS OF       --------------------------------------------------------------
   SHARES          8                SHARED VOTING POWER  0
BENEFICIALLY
  OWNED BY        --------------------------------------------------------------
    EACH           9                SOLE DISPOSITIVE POWER  0
 REPORTING
PERSON WITH       --------------------------------------------------------------
                   10               SHARED DISPOSITIVE POWER  0

- --------------------------------------------------------------------------------
11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON


          0
- --------------------------------------------------------------------------------
12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
          EXCLUDES CERTAIN SHARES                                            [ ]


- --------------------------------------------------------------------------------

13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)


          0%
- --------------------------------------------------------------------------------
14        TYPE OF REPORTING PERSON


          OO
- --------------------------------------------------------------------------------


                               Page 3 of 18 Pages

<PAGE>   4
- ----------------------------
   CUSIP NO.   876628 10 8              13D
             ---------------
- ----------------------------

- --------------------------------------------------------------------------------
1         NAMES OF REPORTING PERSONS
          I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)


          1997 Glenn H. Tatham, III Trust
- --------------------------------------------------------------------------------
2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP               (a) [ ]
                                                                         (b) [X]


- --------------------------------------------------------------------------------
3         SEC USE ONLY



- --------------------------------------------------------------------------------
4         SOURCE OF FUNDS



- --------------------------------------------------------------------------------
5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
          PURSUANT TO ITEM 2(d) OR 2(e)                                      [ ]


- --------------------------------------------------------------------------------
6         CITIZENSHIP OR PLACE OF ORGANIZATION


          Texas
- --------------------------------------------------------------------------------
                   7                SOLE VOTING POWER  0

 NUMBERS OF       --------------------------------------------------------------
   SHARES          8                SHARED VOTING POWER  0*
BENEFICIALLY
  OWNED BY        --------------------------------------------------------------
    EACH           9                SOLE DISPOSITIVE POWER  0
 REPORTING
PERSON WITH       --------------------------------------------------------------
                   10               SHARED DISPOSITIVE POWER  0*

- --------------------------------------------------------------------------------
11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON


          999 shares of Common Stock
- --------------------------------------------------------------------------------
12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
          EXCLUDES CERTAIN SHARES                                            [ ]


- --------------------------------------------------------------------------------

13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)


          Less than 1% of Common Stock
- --------------------------------------------------------------------------------
14        TYPE OF REPORTING PERSON


          OO
- --------------------------------------------------------------------------------


                               Page 4 of 18 Pages



<PAGE>   5
- ----------------------------
   CUSIP NO.   876628 10 8              13D
             ---------------
- ----------------------------

- --------------------------------------------------------------------------------
1         NAMES OF REPORTING PERSONS
          I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)


          Casey Tatham Trust
- --------------------------------------------------------------------------------
2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP               (a) [ ]
                                                                         (b) [X]


- --------------------------------------------------------------------------------
3         SEC USE ONLY



- --------------------------------------------------------------------------------
4         SOURCE OF FUNDS


          OO
- --------------------------------------------------------------------------------
5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
          PURSUANT TO ITEM 2(d) OR 2(e)                                      [ ]


- --------------------------------------------------------------------------------
6         CITIZENSHIP OR PLACE OF ORGANIZATION


          Texas
- --------------------------------------------------------------------------------
                   7                SOLE VOTING POWER  0

 NUMBERS OF       --------------------------------------------------------------
   SHARES          8                SHARED VOTING POWER  0*
BENEFICIALLY
  OWNED BY        --------------------------------------------------------------
    EACH           9                SOLE DISPOSITIVE POWER  0
 REPORTING
PERSON WITH       --------------------------------------------------------------
                   10               SHARED DISPOSITIVE POWER  0*

- --------------------------------------------------------------------------------
11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

          26,500 shares of Common Stock
          341,000 shares of Series A 12% Convertible Exchangeable
          Preferred Stock
- --------------------------------------------------------------------------------
12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
          EXCLUDES CERTAIN SHARES                                            [ ]


- --------------------------------------------------------------------------------

13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)


          Less than 1% of Common Stock
          2% of Series A 12% Convertible Exchangeable Preferred Stock
- --------------------------------------------------------------------------------
14        TYPE OF REPORTING PERSON


          OO
- --------------------------------------------------------------------------------


                               Page 5 of 18 Pages


<PAGE>   6
- ----------------------------
   CUSIP NO.   876628 10 8              13D
             ---------------
- ----------------------------

- --------------------------------------------------------------------------------
1         NAMES OF REPORTING PERSONS
          I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)


          Oak Cliff Breeders, Inc.
- --------------------------------------------------------------------------------
2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP               (a) [ ]
                                                                         (b) [X]


- --------------------------------------------------------------------------------
3         SEC USE ONLY



- --------------------------------------------------------------------------------
4         SOURCE OF FUNDS


          OO
- --------------------------------------------------------------------------------
5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
          PURSUANT TO ITEM 2(d) OR 2(e)                                      [ ]


- --------------------------------------------------------------------------------
6         CITIZENSHIP OR PLACE OF ORGANIZATION


          Texas
- --------------------------------------------------------------------------------
                   7                SOLE VOTING POWER  0

 NUMBERS OF       --------------------------------------------------------------
   SHARES          8                SHARED VOTING POWER  0*
BENEFICIALLY
  OWNED BY        --------------------------------------------------------------
    EACH           9                SOLE DISPOSITIVE POWER  0
 REPORTING
PERSON WITH       --------------------------------------------------------------
                   10               SHARED DISPOSITIVE POWER  0*

- --------------------------------------------------------------------------------
11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON



- --------------------------------------------------------------------------------
12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
          EXCLUDES CERTAIN SHARES                                            [ ]

          0
- --------------------------------------------------------------------------------

13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)


          0%
- --------------------------------------------------------------------------------
14        TYPE OF REPORTING PERSON


          OO
- --------------------------------------------------------------------------------


                               Page 6 of 18 Pages

<PAGE>   7
- ----------------------------
   CUSIP NO.   876628 10 8              13D
             ---------------
- ----------------------------

- --------------------------------------------------------------------------------
1         NAMES OF REPORTING PERSONS
          I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)


          Thomas P. Tatham
- --------------------------------------------------------------------------------
2         CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP               (a) [ ]
                                                                         (b) [X]


- --------------------------------------------------------------------------------
3         SEC USE ONLY



- --------------------------------------------------------------------------------
4         SOURCE OF FUNDS


          OO
- --------------------------------------------------------------------------------
5         CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
          PURSUANT TO ITEM 2(d) OR 2(e)                                      [ ]


- --------------------------------------------------------------------------------
6         CITIZENSHIP OR PLACE OF ORGANIZATION


          United States
- --------------------------------------------------------------------------------
                   7                SOLE VOTING POWER  0

 NUMBERS OF       --------------------------------------------------------------
   SHARES          8                SHARED VOTING POWER  0
BENEFICIALLY
  OWNED BY        --------------------------------------------------------------
    EACH           9                SOLE DISPOSITIVE POWER  0
 REPORTING
PERSON WITH       --------------------------------------------------------------
                   10               SHARED DISPOSITIVE POWER  0

- --------------------------------------------------------------------------------
11        AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

          178,360 shares of Common Stock
          1,537,600 shares of Series A 12% Convertible Exchangeable Preferred
          Stock 21,000 shares of Series C 4% Convertible Exchangeable Preferred
          Stock
- --------------------------------------------------------------------------------
12        CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
          EXCLUDES CERTAIN SHARES                                            [ ]


- --------------------------------------------------------------------------------

13        PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

          Less than 1% of Common Stock
          9.1% of Series A 12% Convertible Exchangeable Preferred Stock
          6.5% of Series C 4% Convertible Exchangeable Preferred Stock
- --------------------------------------------------------------------------------
14        TYPE OF REPORTING PERSON


          IN
- --------------------------------------------------------------------------------


                               Page 7 of 18 Pages

<PAGE>   8


ITEM 1.  SECURITY AND ISSUER.

         This Amendment No. 1 (the "Amendment") amends the Statement on Schedule
13D previously filed by Tatham Brothers Securities, LLC, Tatham Brothers, LLC,
1997 Glenn H. Tatham Trust, Casey Tatham Trust and Thomas P. Tatham and includes
a new joint filer, Oak Cliff Breeders, Inc. This Amendment relates to the common
stock, par value $0.01 per share ("Common Stock"), the Series A 12% Convertible
Exchangeable Preferred Stock, par value $0.01 per share ("Series A Stock") and
the Series C Convertible Exchangeable Preferred Stock, par value $0.01 per share
("Series C Stock") of Tatham Offshore, Inc. (the "Issuer"), a Delaware
corporation. The address of the principal executive office of the Issuer is 7400
Chase Tower, 600 Travis Street, Houston, Texas 77002.

ITEM 2.  IDENTITY AND BACKGROUND.

         (a) This Statement is being filed by Tatham Brothers Securities, LLC, a
Delaware limited liability company ("TBSL"), Tatham Brothers, LLC, a Delaware
limited liability company ("TBL"), 1997 Glenn H. Tatham, III Trust, formed in
Texas ("GT Trust"), Casey Tatham Trust, formed in Texas ("CT Trust"), Oak Cliff
Breeders, Inc. ("Oak Cliff"), a Texas corporation, and Thomas P. Tatham,
individually ("Mr. Tatham") (each of the foregoing collectively referred to
herein as the "Reporting Persons" and individually as a "Reporting Person"). TBL
is the sole Member of TBSL and GT Trust, CT Trust and Oak Cliff each own a
33 1/3% membership interest in TBL. Mr. Tatham owns 95% of the outstanding
common stock of Oak Cliff.

         Attached as Schedule A hereto and incorporated herein by reference is a
list of all directors, executive officers and/or trustees of each of TBSL, TBL,
GT Trust, CT Trust and Oak Cliff.

         (b) The principal business address of each of the Reporting Persons
except for CT Trust is 7400 Chase Tower, 600 Travis, Houston, Texas 77002. The
principal business address of CT Trust is 3100 Chase Tower, 600 Travis, Houston,
Texas 77002.

         (c) TBSL owns shares of the Issuer's stock and has the authority to
engage in any lawful business for which a limited liability company may be
organized under the Delaware Limited Liability Act (the "Act"). TBL owns all the
membership interest in TBSL and has the authority to engage in any lawful
business for which a limited liability company may be organized under the Act.
GT Trust is an irrevocable long-term trust formed to protect and conserve the
financial resources for the use of the trust's beneficiaries and it owns a
33 1/3% membership interest in TBL. CT Trust is an irrevocable long-term trust
formed to protect and conserve the financial resources for the use of the
trust's beneficiaries and it owns a 33 1/3% membership interest in TBL. Oak
Cliff is a Texas corporation and has the authority to engage in any lawful
business for which a corporation may be organized under Texas Business
Corporations Act. Mr. Tatham serves as Chairman of the Board and Director of the
Issuer. The name, business address, principal occupation or employment and
citizenship of each executive officer, Member and Trustee of TBSL, TBL, GT
Trust, CT Trust and Oak Cliff are listed on Schedule A, attached hereto and
incorporated herein by reference.


                               Page 8 of 18 Pages

<PAGE>   9

         (d) - (e) During the last five years, neither of the Reporting Persons
nor, to the best of any of their knowledge, any of the persons listed on
Schedule A attached hereto, has been (i) convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or (ii) a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or state securities laws or finding any violation
with respect to such laws.

         (f) TBSL is a limited liability company organized under the laws of the
state of Delaware. TBL is a limited liability company organized under the laws
of the state of Delaware. GT Trust is an irrevocable long-term trust formed in
the State of Texas. CT Trust is an irrevocable long-term trust formed in the
State of Texas. Oak Cliff is a corporation organized under the laws of Texas.
Mr. Tatham, Chairman and Director of the Board of the Issuer, is a United States
citizen.

ITEM 3.  SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

         On August 18, 1998, TBSL purchased from the Issuer an aggregate of
20,768,011 shares of Common Stock and 3,455,444 shares of Series A Stock of the
Issuer for $2.80 per share for Common Stock and $1.86 per share for Series A
Stock in a private placement. TBSL effected the acquisition of such shares with
funds from a capital contribution of its sole Member, TBL.

ITEM 4.  PURPOSE OF TRANSACTION.

         The Reporting Persons acquired the Common Stock and the Series A Stock
described in Item 3 as an investment.

ITEM 5.  INTEREST IN SECURITIES OF ISSUER.

         (a) As of August 18, 1998 and through the present, TBSL beneficially
owns 20,768,011 shares of Common Stock and 3,455,444 shares of Series A Stock,
representing 79.6% of the outstanding shares of Common Stock and 20.4% of Series
A Stock, calculated in accordance with Rule 13d-3 under the Exchange Act (based
upon 26,074,321 shares of Common Stock and 16,904,133 shares of Series A Stock
issued and outstanding as of August 13, 1999).

         As of August 18, 1998 and through the present, TBL, as the sole Member
of TBSL, may be deemed to beneficially own all of the shares of Common Stock
owned by TBL, which in the aggregate would consist of 20,768,011 shares of
Common Stock and 3,455,444 shares of Series A Stock, representing 79.6% of the
outstanding shares of Common Stock and 20.4% of Series A Stock, calculated in
accordance with Rule 13d-3 under the Exchange Act (based upon 26,074,321 shares
of Common Stock and 16,904,133 shares of Series A Stock issued and outstanding
as of August 13, 1999).

         As of August 18, 1998 and through the present, GT Trust, as a Member of
TBL, may be deemed to beneficially own all of the shares of Common Stock owned
by TBL, in addition to the 999 shares of Common Stock it previously acquired,
which in the aggregate would consist of

                               Page 9 of 18 Pages

<PAGE>   10

20,769,010 shares of Common Stock and 3,455,444 shares of Series A Stock,
representing 79.7% of the outstanding shares of Common Stock and 20.4% of Series
A Stock, calculated in accordance with Rule 13d-3 under the Exchange Act (based
upon 26,074,321 shares of Common Stock and 16,904,133 shares of Series A Stock
issued and outstanding as of August 13, 1999).

         As of August 18, 1998 and through the present, CT Trust, as a Member of
TBL, may be deemed to beneficially own all of the shares of Common Stock owned
by TBL, in addition to the 26,500 shares of Common Stock and 341,000 shares of
Series A Stock it previously acquired, which in the aggregate would consist of
20,794,511 shares of Common Stock and 3,796,444 shares of Series A Stock,
representing 79.8% of the outstanding shares of Common Stock and 22.5% of Series
A Stock, calculated in accordance with Rule 13d-3 under the Exchange Act (based
upon 26,074,321 shares of Common Stock and 16,904,133 shares of Series A Stock
issued and outstanding as of August 13, 1999).

         As of August 18, 1998 and through the present, Oak Cliff, as a Member
of TBL, may be deemed to beneficially own all of the shares of Common Stock
owned by TBL, which in the aggregate would consist of 20,794,511 shares of
Common Stock and 3,796,444 shares of Series A Stock, representing 79.8% of the
outstanding shares of Common Stock and 22.5% of Series A Stock, calculated in
accordance with Rule 13d-3 under the Exchange Act (based upon 26,074,321 shares
of Common Stock and 16,904,133 shares of Series A Stock issued and outstanding
as of August 13, 1999).

         As of August 18, 1998 and through the present, Mr. Tatham, as owner of
95% of the outstanding common stock of Oak Cliff, in addition to the 178,360
shares of Common Stock, 1,537,600 shares of Series A Stock and 21,000 shares of
Series C Stock previously acquired, may be deemed to beneficially own 20,946,371
shares of Common Stock, 4,993,044 shares of Series A Stock and 21,000 shares of
Series C Stock, representing 80.3% of the outstanding shares of Common Stock,
29.5% of the outstanding shares of Series A Stock and 6.5% of the outstanding
shares of Series C Stock, calculated in accordance with Rule 13d-3 under the
Exchange Act (based upon 26,074,321 shares of Common Stock, 16,904,133 shares of
Series A Stock and 321,204 shares of Series C Stock issued and outstanding as of
August 13, 1999).

         (b) TBSL has sole voting and dispostive power of the 20,768,011 shares
of Common Stock beneficially owned by TBL, GT Trust, CT Trust, Oak Cliff and Mr.
Tatham.

         (c) Within the last 60 days, the Reporting Persons have effected the
following transactions:

                  TBSL - none
                  TBL - none
                  GT Trust - none
                  CT Trust - none
                  Mr. Tatham - none

         (d)      Not applicable.

                               Page 10 of 18 Pages

<PAGE>   11

         (e)      Not applicable.

ITEM 6.  CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
         TO SECURITIES OF THE ISSUER.

         TBL has pledged all of its membership interest in TBSL to Mr. Tatham to
secure a loan.

ITEM 7.  MATERIAL TO BE FILED AS EXHIBITS.

Exhibit 1:        Repayment  Agreement dated February 27, 1998 by and between
                  Tatham Brothers, LLC and Thomas P. Tatham.




                               Page 11 of 18 Pages

<PAGE>   12

                                    SIGNATURE

         After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.



Dated:  August 13, 1999                  Tatham Brothers Securities, LLC

                                         By:  Tatham Brothers, LLC,
                                                   its Sole Member

                                         By: /s/ KEN HAMILTON
                                            ------------------------------------
                                              Ken Hamilton
                                              Senior Vice President


Dated:  August 13, 1999                  Tatham Brothers, LLC


                                         By: /s/ KEN HAMILTON
                                            ------------------------------------
                                              Ken Hamilton
                                              Senior Vice President


Dated:  August 13, 1999                  1997 Glenn H. Tatham, III Trust

                                         By:  /s/ RICK L. BURDICK
                                            ------------------------------------
                                             Rick L. Burdick
                                             Co-Trustee

                                         By:  /s/ GLENN HUNTER TATHAM, III
                                            ------------------------------------
                                             Glenn Hunter Tatham, III
                                             Co-Trustee


Dated:  August 13, 1999                  Casey Tatham Trust


                                         By:  /s/ BEN T. MORRIS
                                            ------------------------------------
                                             Ben T. Morris
                                             Trustee


                               Page 12 of 18 Pages

<PAGE>   13

Dated August 13, 1999                    Oak Cliff Breeders, Inc.


                                         By:/s/ THOMAS P. TATHAM
                                            ------------------------------------
                                              Thomas P. Tatham
                                              Chief Executive Officer


Dated:  August 13, 1999                  Thomas P. Tatham


                                         By:  /s/ THOMAS P. TATHAM
                                            ------------------------------------
                                         Thomas P. Tatham

                               Page 13 of 18 Pages

<PAGE>   14

                                   SCHEDULE A

                         EXECUTIVE OFFICERS AND MEMBERS
                                       OF
                         TATHAM BROTHERS SECURITIES, LLC


NAME & CAPACITY WITH       PRINCIPAL OCCUPATION
TATHAM BROTHERS                    AND                    PRINCIPAL
SECURITIES, LLC                CITIZENSHIP             BUSINESS ADDRESS
- ---------------            --------------------        ----------------

Tatham Brothers, LLC       Member                      7400 Chase Tower
Sole Member                Delaware                    600 Travis
                                                       Houston,Texas 77002


Thomas P. Tatham           Businessman                 7400 Chase Tower
President                  United States               600 Travis
                                                       Houston, Texas  77002


Dennis A. Kunetka          Businessman                 7400 Chase Tower Senior
Vice-President,            United States               600 Travis
Secretary and Assistant                                Houston, Texas  77002
Treasurer

Ken Hamilton               Businessman                 7400 Chase Tower
Senior Vice-President,     United States               600 Travis
Treasurer and Assistant                                Houston, Texas 77002
Secretary


                               Page 14 of 18 Pages

<PAGE>   15

                         EXECUTIVE OFFICERS AND MEMBERS
                                       OF
                              TATHAM BROTHERS, LLC


                                 PRINCIPAL OCCUPATION
NAME & CAPACITY WITH                     AND               PRINCIPAL
TATHAM BROTHERS, L.L.C.               CITIZENSHIP      BUSINESS ADDRESS
- -----------------------          --------------------  ----------------

1997 Glenn H. Tatham, III Trust  Member                7400 Chase Tower
Member                                                 600 Travis
                                                       Houston,Texas 77002

Casey Tatham Trust               Member                7400 Chase Tower
Member                                                 600 Travis
                                                       Houston, Texas  77002

Oak Cliff Breeders, Inc          Member                7400 Chase Tower
                                                       600 Travis
                                                       Houston, Texas  77002

Thomas P. Tatham                 Businessman           7400 Chase Tower
President & Secretary            United States         600 Travis
                                                       Houston, Texas  77002


Dennis A. Kunetka                Businessman           7400 Chase Tower Senior
Vice-President,                  United States         600 Travis
Assistant Secretary and                                Houston, Texas  77002
Assistant Treasurer

Ken Hamilton                     Businessman           7400 Chase Tower
Senior Vice-President,           United States         600 Travis
Treasurer and Assistant                                Houston, Texas 77002
Secretary



                               Page 15 of 18 Pages

<PAGE>   16

                                    TRUSTEES
                                       OF
                         1997 GLENN H. TATHAM, III TRUST


NAME & CAPACITY WITH             PRINCIPAL OCCUPATION
1997 GLENN H. TATHAM,                    AND               PRINCIPAL
III, TRUST                           CITIZENSHIP       BUSINESS ADDRESS
- ---------------------            --------------------  ----------------

Rick L. Burdick                  Attorney              1900 Pennzoil Place-
Trustee                          United States         South Tower
                                                       711 Louisiana Street
Houston,Texas 77002


Glenn Hunter Tatham, III         Businessman           270 Park Avenue
Trustee                          United States         21st Floor
                                                       New York, New York 10017



                                      TRUSTEE
                                         OF
                                 CASEY TATHAM TRUST


NAME & CAPACITY WITH             PRINCIPAL OCCUPATION
CASEY TATHAM                             AND              PRINCIPAL
TRUST                                CITIZENSHIP       BUSINESS ADDRESS
- --------------------             --------------------  ----------------

Ben T. Morris                    Businessman           3100 Chase Tower
Trustee                          United States         600 Travis Street
                                                       Houston,Texas 77002


                               Page 16 of 18 Pages

<PAGE>   17

                        EXECUTIVE OFFICERS AND DIRECTORS
                                       OF
                            OAK CLIFF BREEDERS, INC.


                                 PRINCIPAL OCCUPATION
NAME & CAPACITY WITH                     AND           PRINCIPAL
OAK CLIFF BREEDERS, INC.             CITIZENSHIP       BUSINESS ADDRESS
- ------------------------         --------------------  ----------------
Thomas P. Tatham                 Businessman           7400 Chase Tower
Director, CEO, and               United States         600 Travis
95% Owner                                              Houston, Texas  77002

Glenn H. Tatham, III             Businessman           7400 Chase Tower
Director, President, and         United States         600 Travis
Secretary                                              Houston, Texas  77002

Rick L. Burdick                  Businessman           1900 Pennzoil Place
Assistant Secretary              United States         South Tower
                                                       711 Louisiana
                                                       Houston, Texas  77002

                               Page 17 of 18 Pages

<PAGE>   18

                               INDEX TO EXHIBITS


     NUMBER                         EXHIBIT
     ------                         -------
       1.*       Repayment Agreement dated February 27, 1998 by and between
                 Tatham Brothers, LLC, Tatham Brothers and Thomas P. Tatham.



- -------------------------------------------
* Filed herewith.






                               Page 18 of 18 Pages



<PAGE>   1

                               REPAYMENT AGREEMENT

         This Repayment Agreement dated as of February 27, 1998 (this
"Agreement") is, by and between Tatham Brothers, LLC, a Delaware limited
liability company (the "Obligor"), and Thomas P. Tatham ("Obligee"). Obligor and
Obligee may be referred to herein collectively as the "Parties" or individually
as a "Party."

                                    RECITALS


         WHEREAS, DeepTech International Inc. ("DeepTech"), El Paso Natural Gas
Company ("El Paso") and El Paso Acquisition Company ("EPAC") have entered into
an Agreement and Plan of Merger (the "Merger Agreement"), dated as of even date
herewith, pursuant to which it is contemplated that DeepTech shall be merged
with either El Paso or EPAC;

         WHEREAS, in connection with the transactions contemplated by the Merger
Agreement, Tatham Offshore, Inc. ("Offshore"), DeepTech, DeepFlex Production
Services, Inc. and El Paso have entered into a Contribution and Distribution
Agreement (the "Contribution Agreement"), dated as of even date herewith,
pursuant to which DeepTech will distribute on a pro rata basis to the holders of
DeepTech common stock, rights to purchase all of the Offshore Shares (as defined
in the Contribution Agreement) held by DeepTech (the "Rights Offering");

         WHEREAS, pursuant to a Standby Agreement (the "Standby Agreement"),
dated as of even date herewith, by and between Obligee, DeepTech, Obligor,
Offshore and El Paso, Obligor has committed to purchase from DeepTech all of the
remaining Offshore that have not been subscribed and paid for by the DeepTech
stockholders in the Rights Offering (the "Acquisition"), and Obligee has
guaranteed certain of Obligor's performance with respect to the Standby
Agreement and the Acquisition (the "Guarantee");

         WHEREAS, in connection with the Standby Agreement and in support of the
Guarantee, a letter of credit, in the account party name of Obligee, in the
amount of $75,000,000 (the "Letter of Credit") has been issued as of the date
hereof by NationsBank, N.A., in favor of DeepTech; and

         WHEREAS, Obligor and Obligee desire to enter into this Agreement to
provide consideration to Obligee, including the grant by Obligor of certain
rights to Obligee (including the right to make certain loans to Obligor), in
exchange for Obligee's guarantee, and to set forth the repayment terms and
conditions under which Obligor shall repay such loans from Obligee;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein and other good and valuable
consideration (the receipt and sufficiency of which are hereby confirmed and
acknowledged), the Parties hereto hereby stipulate and agree as follows:

<PAGE>   2

                  1.       Membership Interest Option.

                           a. Units, Price and Term. Obligor hereby
unconditionally and irrevocably grants to Obligee the right (the "Option") to
require Obligor to issue up to 50 Membership Units (herein defined), adjusted
for Dilutive Events (herein defined), in exchange for Obligee paying Obligor
$20, adjusted for Dilutive Events, for each such issued Membership Unit. Obligee
may exercise the Option from time to time at any time prior to 5:00 p.m.
(Eastern Time) on December 31, 2001 by delivering to Obligor a written notice
stating (i) the number of Membership Units to be acquired, (ii) the aggregate
consideration due, (iii) the date on which the acquisition shall be made, which
date shall not be later than ten (10) business days after delivery of the
notice, and (iv) that Obligee irrevocably agrees to pay such consideration on
such date. For purposes of this Agreement, the following terms have the meanings
hereinafter ascribed: "Dilutive Event" means (i) the payment in cash, other
property, debt or equity of any dividend or distribution, (ii) any split or
other recapitalization, (iii) the redemption or repayment of or other payment in
respect of any membership interest or (iv) the issuance of any membership
interest to any individual or entity other than Obligee. "Membership Unit" means
membership interests in Obligor with rights and privileges equal to or greater
than those applicable to the membership interests outstanding on the date
hereof.

                           b. Obligor Covenants. During the term of the Option,
Obligor agrees not to cause or permit to exist any Dilutive Event or to issue
any membership or other equity interest or make any payments (in cash or
property) of any kind in respect of or in redemption or repayment of any such
interest.

                           c. Security. Obligor's obligations to Obligee under
this Agreement and any other Transaction Document (herein defined) to which
Obligee is a party shall be secured in accordance with the Security Documents
(herein defined). The following terms have the following meanings: (i) "Security
Documents" means (a) the Guaranty, dated as of even date herewith, executed by
the 1997 Glenn Hunter Tatham, III Trust in favor of Obligee, (b) the Guaranty,
dated as of even date herewith, executed by the Casey Tatham Trust in favor of
Obligee, (c) the Pledge Agreement, dated as of even date herewith, executed by
the 1997 Glenn Hunter Tatham, III Trust in favor of Obligee, (d) the Pledge
Agreement, dated as of even date herewith, executed by the Casey Tatham Trust in
favor of Obligee, and (e) the Pledge Agreement, dated as of even date herewith,
executed by Obligor in favor of Obligee; (ii) "Transaction Documents" means the
Security Documents, this Agreement, the Purchase Commitment Agreement and the
Standby Agreement.

                  2.       Financing of the Acquisition.

                           a. Commitment to Borrow. Regardless of the nature,
amount and cost of other funds (internal or external) available to Obligor,
Obligor agrees to fund the Acquisition with amounts borrowed pursuant to this
Agreement and the Note (defined below).

                           b. Commitment to Lend. Obligee shall have the right,
but not the obligation, to lend to Obligor, under such terms and conditions as
set forth in Section 3 of this

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<PAGE>   3

Agreement, all such sums necessary for Obligor to fulfill its obligations under
the Standby Agreement. Any such loan to Obligor from Obligee shall be evidenced
by the Promissory Note (the "Note") attached hereto as Exhibit A, which shall be
executed by the Parties concurrent with the making of the loan.

                  3.       Payment and Computations.

                           a. Repayment. Obligor promises to pay interest on any
outstanding principal of the Note to Obligee in monthly installments. The first
installment of interest shall be due and payable on the last day of the calendar
month immediately following the calendar month during which the Note is executed
and a like installment shall be due and payable on the last day of each
succeeding calendar month thereafter; provided, however, that on the last day of
the calendar month containing the fifth anniversary of the execution of the
Note, the final maturity of the Note, all principal and accrued interest then
unpaid shall be finally due and payable.

                           b. Interest Rate. Obligor shall pay interest on the
outstanding principal of the Note at a rate of 8% per annum, compounded daily
based on the actual number of days during the applicable year.

                           c. No Prepayment. Obligor shall not have the right to
prepay, in full or in part, the then unpaid outstanding principal balance on the
Note.

                           d. Place of Repayment. The Obligor shall make each
payment hereunder not later than 12:00 noon (central time) on the date when due
as described in Section 3.(a) above, in lawful money of the United States of
America (i) any time that Obligee's rights under this Agreement have been
pledged to NationsBank, N.A., to NationsBank, N.A. at its address at 767 Fifth
Avenue, 6th Floor, New York, New York 10153, or (ii) at all other times to
Obligee at the address as specified in Section 9.(i) in immediately available
funds. Whenever any payment to be made hereunder shall be due on a day other
than a business day, such payment shall be made on the next succeeding business
day, and such extension of time shall in such case be included in the
computation of payment of interest or fee, as the case may be.

                  4.       Representations and Warranties. The Obligor hereby
represents and warrants to Obligee that (a) the Obligor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its organization as set forth in the first paragraph hereof; (b)
the Obligor has duly executed and delivered the Transaction Documents to which
it is a party; (c) each Transaction Document to which Obligor is a party
constitutes the legal, valid and binding obligation of the Obligor enforceable
against Obligor in accordance with its terms; (d) no authorization or approval
or other action by, and no notice to or filing or registration with, any
governmental authority or regulatory body is required for the due execution,
delivery and performance by the Obligor of each Transaction Document to which it
is a party; and (e) the execution, delivery and performance of each Transaction
Document to which Obligor is a party (i) are within the Obligor's power and
authority and have been duly authorized by all necessary corporate proceedings,
(ii) do not and will not violate or conflict with the Obligor's limited
liability company agreement, and (iii) do not and will not conflict with, or


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<PAGE>   4

constitute a default under or result in a violation of, or require consent under
any agreement, instrument, judgment or law to which the Obligor or its assets
are subject.

                  5.       Obligations Absolute. The obligations of the Obligor
under this Agreement shall be absolute, unconditional and irrevocable, and shall
be paid strictly in accordance with the terms hereof under all circumstances,
including, without limitation: (i) any lack of validity or enforceability of the
Transaction Documents or any other agreement, instrument or other document
executed in connection with any of the foregoing; (ii) any amendment or waiver
of, or any consent to departure from, any document; (iii) the existence of any
claim, set-off, defense or other right which the Obligor may have at any time
against Obligee, or any other person or entity, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction; or
(iv) any other circumstances or happening whatsoever, whether or not similar to
any of the foregoing.

                  6.       Covenants. So long as the Obligor shall have any
obligation to Obligee under any Transaction Document, Obligor will, unless
Obligee shall otherwise consent in writing:

                           a. Not incur or allow to exist any obligation to pay
money or any other indebtedness to any individual or entity other than Obligee
or any of his affiliates.

                           b. Comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property except
to the extent contested in good faith.

                           c. Maintain and preserve its existence, rights and
privileges, and obtain, maintain and preserve all permits, licenses,
authorizations and approvals that are necessary in the proper conduct of its
business.

                           d. Not wind up, liquidate or dissolve itself, or
merge or consolidate with, or sell or otherwise dispose of any of its property
or assets, or purchase, lease or otherwise acquire all or any part of the
property or assets of, any person or entity.

                           e. Not sell, convey, transfer, lease or dispose of
(whether in one transaction or in a series of transactions) any of its assets to
any person or entity, or abandon any of its assets.

                           f. Not create, incur, assume or suffer to exist any
lien, security interest or other charge or encumbrance upon any of its property,
assets or revenues, whether now owned or hereafter acquired, except for liens
and security interests created hereunder.

                           g. Not contract, create, incur, assume or suffer to
exist any indebtedness or liabilities, except the obligations under the
Transaction Documents.


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<PAGE>   5

                           h. Not enter into any agreement, instrument or
document by which it or its property is bound other than the Transaction
Documents.

                           i. Not create, acquire or suffer to exist any
subsidiary.

                           j. Not amend its certificate of formation or limited
liability company agreement.

                           k. Not conduct, transact or otherwise engage in, or
commit to conduct, transact or otherwise engage in, any transactions, business
or operation, other than the execution, delivery and performance of the
Transaction Documents and the ownership of the Offshore Shares.

                           l. Not declare or pay any dividends or return any
capital to its Members or authorize or make any other distribution, payment or
delivery of property or cash to its Members, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for any consideration, any of its
equity or debt now or hereafter outstanding, or set aside any funds for any of
the foregoing purposes.

                  8.       Default.

                           a. Events of Default. An event of default ("Event of
Default") shall occur if (i) the Obligor shall fail to timely pay or observe,
keep or perform any term, covenant, agreement, condition, obligation or
liability to Obligee (the "Obligations") when due in accordance with the
Transaction Documents, or in any other agreement between Obligor and Obligee
(the "Party Documents") (ii) any representation or warranty made by the Obligor
in any Party Document, or in connection with any Party Document shall have been
untrue or incorrect in any material respect when made; or (iii) Obligor shall be
generally not paying its debts as they become due or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any petition shall be filed by or against Obligor under
the federal bankruptcy laws, or any other proceeding shall be instituted by or
against Obligor seeking to adjudicate Obligor as bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment or a receiver, trustee or other
similar official for it or for any substantial part of its property, or Obligor
shall take any action to authorize any of the actions set forth in this Section
8(a)(iii); or (iv) any judgment or order for the payment of money in excess of
$10,000 shall be rendered against Obligor and either (y) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order or (z)
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or (v) any provision of any Party Document
shall at any time for any reason be declared to be null and void, or the
validity or enforceability thereof shall be contested by Obligor, or a
proceeding shall be commenced by Obligor, or by any governmental authority or
other regulatory body having jurisdiction over the Obligor, seeking to establish
the invalidity or unenforceability thereof, the


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<PAGE>   6

Obligor shall deny that the Obligor has any liability or obligation purported to
be credited under any Party Document.

                           b. Rights and Remedies. If any Event of Default shall
occur; then, in each and every such case, Obligee may, without (i) presentment,
demand, or protest, (ii) notice of default, dishonor, demand, nonpayment or
protest, (iii) notice of intent to accelerate all or any part of the
Obligations, (iv) notice of acceleration of all or any part of the Obligations,
or (v) notice of any other kind, all of which Obligor hereby expressly waives
(except for any notice required under this Agreement any other Party Document or
which may not be waived under applicable law), at any time thereafter exercise
and/or enforce any of the following rights and remedies, at Obligee's option,
failure to exercise this option shall not constitute a waiver of the right to
exercise the same with respect to any subsequent Event of Default.

                  A.       Acceleration. If Obligee shall so request, the
Obligation shall become immediately due and payable, and in satisfaction
thereof, the Obligor shall pay to Obligee an amount equal to (i) 100% of the
outstanding principal under the Note, (ii) any and all interest that had accrued
as of the date of such acceleration of the Obligation, (iii) an amount equal to
the product of (x) the average balance which would have been outstanding until
maturity under the terms of this Agreement and (y) the positive difference, if
any, between (1) the interest rate provided in this Agreement and (2) the
average rate for money market funds during such period, and (iv) any other lost
profits or costs and expenses related to such early acceleration or enforcement
costs. If Obligee, however, receives anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to such
excess shall be applied to the reduction of the principal hereof and not to the
payment of interest, or if the amount of such excess exceeds the unpaid balance
of principal hereof, such excess shall be refunded to the Obligor.

                  B.       Liquidation of Collateral. Sell, or instruct any
agent or broker to sell, all or any part of the Collateral (as defined in
Section 2 of the Pledge Agreement) in a public or private sale, direct any agent
or broker to liquidate all or any part of any account and deliver all proceeds
thereof to Obligee, and apply all proceeds to the payment or other satisfaction
of the Obligations in such order and manner as Obligee shall, in its discretion,
choose.

                  C.       Uniform Commercial Code. All of the rights, powers
and remedies of a secured creditor under the Uniform Commercial Code ("UCC") as
adopted in the jurisdiction to which Obligee is subject under this Agreement.

                  Obligor specifically understands and agrees that any sale by
                  Obligee of all or part of the Collateral pursuant to the terms
                  of this Agreement may be effected by Obligee at times and in
                  manners which could result in the proceeds of such sale as
                  being significantly and materially less than might have been
                  received if such sale had occurred at different times or in
                  different manners, and Obligor hereby releases Obligee and its
                  representatives from and against any and all Obligations and
                  liabilities arising out of or related to the timing or manner
                  of any such sale.


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<PAGE>   7

                  If, in the opinion of Obligee, there is any question that a
                  public sale or distribution of any Collateral will violate any
                  state or federal securities law, Obligee may offer and sell
                  such Collateral in a transaction exempt from registration
                  under federal securities law, and any such sale made in good
                  farm by Obligee shall be deemed "commercially reasonable."

                  D.       Other Remedies. Obligee may exercise any other remedy
at law, equity or otherwise.


                  9.       Miscellaneous.

                           a. No Waiver. No failure on the part of Obligee to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other further exercise thereof or the exercise of any other right.

                           b. GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS, WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES WHICH, IF APPLIED,
MIGHT PERMIT OR REQUIRE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.

                           c. Assignment. Obligor may not assign its interest,
duties or obligations under this Agreement without the prior written consent of
Obligee. Obligor acknowledges that Obligee has pledged all of his right, title
and interest in and to this Agreement and the Note to NationsBank, N.A.

                           d. Amendments. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by Obligor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by Obligee and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. The
parties acknowledge that NationsBank, N.A. is a third party beneficiary of
Section 3(d) of this Agreement, and that such section may not be amended without
the consent of NationsBank, N.A.

                           e. Cost and Expenses. The Obligor agrees to pay upon
demand by Obligee all costs and expenses of Obligee incurred in correction with
the preparation, execution, delivery, amendment, administration and enforcement
of this Agreement, including the fees and out-of-pocket expenses of counsel for
Obligee with respect thereto and with respect to advising Obligee as to its
rights and responsibilities under this Agreement and all costs and expenses in
connection with any action or proceeding relating to a court order, injunction,
or other process or decree seeking to restrain Obligee from paying any amount
under the Credit. In addition, the Obligor hereby indemnities and holds Obligee
harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses that Obligee may incur (or that may be claimed against Obligee
by any person or entity whatsoever) by reason of or in connection with the
execution and delivery or transfer of, or payment or failure to make payment
under, the Note;


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<PAGE>   8

provided that the Obligor shall not be required to indemnify Obligee for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by the willful misconduct or gross negligence of Obligee.
Nothing in this Section is intended to limit the repayment obligation contained
in Section 3 hereof.

                           f. Evidence of Debt. Obligee will maintain an account
evidencing the indebtedness of the Obligor to Obligee resulting from the lending
made under the Note and the amounts of principal and interest payable and paid
to Obligee from time to time hereunder. In any legal action or proceeding in
respect of this Agreement, the entries made in such account or accounts shall be
prima facie evidence of the existence and amounts of the obligations of the
Obligor therein recorded; provided, however, that the failure of Obligee to make
such a notation shall not affect the Obligor's obligations hereunder.

                           g. WAIVER OF JURY TRIAL. THE OBLIGOR AND OBLIGEE
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO
THIS AGREEMENT, THE NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

                           h. Forum-Selection and Comment to Jurisdiction, The
Obligor hereby irrevocably and unconditionally (i) submits for itself and its
property in any legal action or proceeding relating to this Agreement, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of Texas (ii)
consents that any such action or proceeding may be brought in such court and
waive any objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or proceeding was
brought in an inconvenient court and agree not to plead or claim the same; (iii)
agrees that service of process in any such action or proceeding may be effected
by mailing a copy thereof by registered or certified mail return receipt
requested (or any substantially similar form of mail), postage prepaid, to the
Obligor at the address set forth on the signature page hereof or at such other
address of which Obligee shall have been notified in writing pursue it hereto;
and (iv) agrees that nothing herein shall effect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue any
other jurisdiction.

                           i. Notices. Any notice, demand or other communication
to be given under or for the purposes of this Agreement shall be in writing
(including telecopy with prompt written confirmation thereafter, such telecopy
notice to be deemed given upon receipt of such written confirmation) and shall
be treated as properly served or given if hand-delivered or sent by first class
prepaid mail (airmail if appropriate) and all such notices and communications
shall, when mailed or telecopied, be effective upon the earlier of actual
receipt (in case of telecopy, of the written confirmation thereof) or three (3)
business days from the date when deposited in the mails (or in the case of
telecopy, of receipt of the written confirmation thereof);


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<PAGE>   9

         if to the Obligor to:

                  Tatham Brothers, LLC
                  7500 Chase Tower
                  600 Travis Street
                  Houston, Texas  77002
                  Telecopy: (713) 224-7574

         if to Obligee to:

                  Thomas P. Tatham
                  7500 Chase Tower
                  600 Travis Street
                  Houston, Texas  77002
                  Telecopy: (713) 224-7574







                  [Remainder of Page Intentionally Left Blank.]



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<PAGE>   10

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.


                                           TATHAM BROTHERS, LLC


                                           ---------------------------------
                                           Donald V. Weir
                                           Vice President




                                           THOMAS P. TATHAM


                                           ---------------------------------
                                           Thomas P. Tatham



<PAGE>   11

                                    EXHIBIT A


THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, THIS
PROMISSORY NOTE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY
TO THE OBLIGOR OF AN OPINION OF COUNSEL SATISFACTORY TO THE OBLIGOR THAT
REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE OBLIGOR
OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE OBLIGOR TO THE EFFECT THAT
ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER.


                                 PROMISSORY NOTE

                                                                         , 199
                                                              ----------      --
$[            ]                                                   Houston, Texas
  ------------

         For value received, Tatham Brothers, LLC, (the "Obligor") hereby
promises to pay on [____________] to the order of Thomas P. Tatham ("Tatham") or
any subsequent holder (including Tatham, a "Holder") of this Promissory Note
(this "Note") at the offices of Tatham located at 7500 Chase Tower, 600 Travis
Street, Houston, Texas 77002, or at such other place as from time to time may be
designated by the Holder as set forth in the Repayment Agreement (as defined
below), in lawful money of the United States of America, the lesser of (i)
$75,000,000 (the "Maximum Principal Amount") or (ii) the aggregate unpaid
principal amount of the Obligor's obligations under the Repayment Agreement,
dated as of February 27, 1998 between the Obligor and Tatham (the "Repayment
Agreement").

         Obligor further promises to pay (a) interest on the unpaid principal
balance hereof in like money at said office from the date hereof until paid at
the rate per annum contained in Section 3 of the Repayment Agreement, said
interest to be payable at the times provided for in the Repayment Agreement, and
(b) at the times and in the manner stated in the Repayment Agreement, all other
amounts which may become payable under the Repayment Agreement.

         Capitalized terms used herein shall have the meanings given them in the
Repayment Agreement unless otherwise defined herein. The Note is the note
referred to in the Repayment Agreement and is entitled to the benefits thereof
and of the other Transaction Documents. In case of an Event of Default shall
occur and be continuing, the principal of and accrued interest on the Note may
be declared to be due and payable in the manner and with the effect provided in
the Repayment Agreement.

         As to the Note the undersigned and all others who may be or become
liable for all or any part of the obligations evidenced by this Note waive
valuation and appraisal, presentment, protest, demand and notice of dishonor,
and consent to any and all releases or substitutions of security and consent to
any number of renewals or extensions of time for the payment hereof or any other
indulgence or indulgences at any time or from time to time granted to the
undersigned or to any person who at any time may be or become liable for all or
any part of the obligations evidenced by this Note.


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<PAGE>   12


         THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF TEXAS.

         THIS NOTE TOGETHER WITH THE REPAYMENT AGREEMENT REPRESENTS THE FINAL
AGREEMENT OF THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


                                               TATHAM BROTHERS, LLC


                                               By:
                                                  ------------------------
                                                  Donald V. Weir
                                                  Vice President



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