SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 0-17389
TEJAS GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0263364
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1301 MCKINNEY, SUITE 700
HOUSTON, TEXAS 77010
(Address of Principal Executive Offices) (Zip Code)
(713) 658-0509
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
As of October 31, 1995, Tejas Gas Corporation had 11,603,263 shares of
common stock, par value $.25 per share, outstanding.
<PAGE>
TEJAS GAS CORPORATION
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Tejas Gas Corporation
("Tejas") included herein have been prepared, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and notes normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is suggested that these
financial statements be read in conjunction with the audited financial
statements and the notes thereto included in Tejas' Annual Report on Form 10-K
for the year ended December 31, 1994.
Because of the seasonal nature of Tejas' operations, among other
factors, the results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for an entire year.
<PAGE>
TEJAS GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,909 $ 7,954
Accounts receivable 109,799 112,368
Exchange gas receivable 6,481 8,543
Storage gas inventory 50,641 29,635
Prepaids and other current assets 9,957 4,900
Deferred income tax asset 2,185 3,997
------- -------
Total current assets 186,972 167,397
------- -------
PROPERTY, PLANT AND EQUIPMENT - AT COST 785,562 769,642
Less accumulated depreciation 171,285 148,114
------- -------
Property, plant and equipment, net 614,277 621,528
------- -------
GOODWILL, NET 10,395 10,745
------- -------
INVESTMENTS IN UNCONSOLIDATED ENTITIES 28,576 30,515
------- -------
OTHER ASSETS 12,167 12,269
------- -------
TOTAL $ 852,387 $ 842,454
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Gas purchases payable $ 101,535 $ 104,990
Exchange gas payable 6,714 8,776
Accounts payable 6,056 4,543
Accrued liabilities 27,387 25,014
Income taxes payable 673 1,034
------- -------
Total current liabilities 142,365 144,357
------- -------
LONG-TERM DEBT 367,175 378,875
------- -------
DEFERRED INCOME TAXES 48,265 41,748
------- -------
COMMITMENTS AND CONTINGENCIES - -
------- -------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1 par value; 6,000,000 shares authorized;
200,000 shares of 9.96% Cumulative Preferred Stock issued
and outstanding; $250 liquidation preference per share 200 200
260,000 shares of 5 1/4% Convertible Preferred Stock issued
and outstanding; $250 liquidation preference per share 260 260
Common Stock, $.25 par value; 30,000,000 shares authorized;
11,603,263 and 10,508,729 shares issued and outstanding
in 1995 and 1994, respectively 2,901 2,627
Capital surplus 191,490 138,499
Retained earnings 99,731 135,888
------- -------
Total stockholders' equity 294,582 277,474
------- -------
TOTAL $ 852,387 $ 842,454
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------------------------ ------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES $ 246,510 $ 250,953 $ 700,265 $ 812,762
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of sales 204,495 210,985 578,714 696,968
Operating expenses 9,887 9,660 28,507 27,518
Depreciation and amortization 8,222 7,668 24,245 22,615
General and administrative 5,172 5,031 14,840 15,139
------- ------- ------- -------
Total 227,776 233,344 646,306 762,240
------- ------- ------- -------
EARNINGS FROM OPERATIONS 18,734 17,609 53,959 50,522
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of unconsolidated
entities (320) 230 (654) 754
Interest income 111 42 336 160
Interest expense (6,703) (6,313) (19,610) (17,889)
Other, net 113 (42) 1,757 (19)
------- ------- ------- -------
Total (6,799) (6,083) (18,171) (16,994)
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES 11,935 11,526 35,788 33,528
------- ------- ------- -------
INCOME TAXES:
Current 2,951 2,420 5,965 7,041
Deferred 1,338 1,799 6,888 5,184
------- ------- ------- -------
Total 4,289 4,219 12,853 12,225
------- ------- ------- -------
NET EARNINGS 7,646 7,307 22,935 21,303
------- ------- ------- -------
PREFERRED STOCK DIVIDEND REQUIREMENTS 2,098 2,099 6,294 6,295
------- ------- ------- -------
NET EARNINGS APPLICABLE TO COMMON STOCK $ 5,548 $ 5,208 $ 16,641 $ 15,008
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 11,575 11,789 11,566 11,836
======= ======= ======= =======
EARNINGS PER COMMON SHARE $ 0.48 $ 0.44 $ 1.44 $ 1.27
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1995 1994
- - ---------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 22,935 $ 21,303
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 24,245 22,615
Amortization of deferred loan costs 696 1,029
Deferred income taxes 6,888 5,184
Equity in (earnings) loss of unconsolidated entities 654 (754)
Distributions from unconsolidated entity 1,387 2,040
Other, net (805) 879
------- -------
56,000 52,296
Changes in current assets and current liabilities:
(Increase) decrease in -
Accounts and exchange gas receivable 6,694 8,795
Storage gas inventory (21,006) (8,356)
Prepaids and other current assets (5,004) 970
Increase (decrease) in -
Gas purchases, exchange gas and accounts payable (5,824) (14,081)
Accrued liabilities 1,019 (3,691)
Income taxes payable 659 2,968
------- -------
Net cash provided by operating activities 32,538 38,901
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and acquisition (17,003) (53,460)
Investments in unconsolidated entities (102) (77)
Other, net 2,430 (248)
------- -------
Net cash used in investing activities (14,675) (53,785)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit agreements (16,700) 23,700
Proceeds from issuance of long-term debt 15,000 50,900
Retirement of long-term debt (10,000) (60,000)
Preferred stock dividends (6,294) (6,228)
Exercise of stock options 106 317
Other, net (20) (21)
------- -------
Net cash provided by (used in) financing activities (17,908) 8,668
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (45) (6,216)
------- -------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,954 6,690
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,909 $ 474
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements and notes thereto for
Tejas Gas Corporation ("Tejas") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The accompanying consolidated financial
statements and notes thereto should be read in conjunction with the consolidated
financial statements and notes thereto included in Tejas' Annual Report on Form
10-K for the year ended December 31, 1994.
In the opinion of Tejas' management, all adjustments (all of which are
normal and recurring) have been made which are necessary to fairly state the
consolidated financial position of Tejas and its subsidiaries as of September
30, 1995, and the results of their operations and cash flows for the nine month
periods ended September 30, 1995 and 1994.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Certain long-lived assets
and certain identifiable intangibles to be disposed of must be reported at the
lower of carrying amount or fair value less cost to sell. SFAS No. 121 is
effective for the fiscal years beginning after December 15, 1995. Tejas is in
the process of evaluating the implications of SFAS No. 121.
2. COMMITMENTS AND CONTINGENCIES
Tejas currently estimates that approximately 45 billion cubic feet ("BCF")
of cushion gas is required to sustain the anticipated operational requirements
of the West Clear Lake Storage Facility ("WCLSF"). Such cushion gas requirements
may be satisfied by the combination of cushion gas purchased by Tejas and the
volume of gas stored for third parties in the storage cavern. At September 30,
1995, Tejas had purchased approximately 10.4 BCF of cushion gas and a third
party had purchased 34.6 BCF of natural gas from Tejas' existing storage gas
inventory in the WCLSF at a cost of approximately $62.4 million. Based upon
volumes and rates in effect at September 30, 1995, Tejas estimates the net 1995
cost related to the reservation of the 34.6 BCF to be approximately $1.5
million.
In addition to the obligation to redeliver the 34.6 BCF of natural gas,
Tejas has an obligation to redeliver 3.7 BCF of natural gas held in storage for
Exxon Corporation as a result of the acquisition of the WCLSF. Tejas will bear
the cost of physical loss, if any, incurred during storage. Management estimates
that physical losses will not be significant and has insured for physical losses
due to catastrophic events. Of the total 80.0 BCF of natural gas in the WCLSF at
September 30, 1995, a total of 38.3 BCF was owned by third parties.
<PAGE>
3. STOCKHOLDERS' EQUITY
On July 19, 1995, Tejas' Board of Directors authorized a Common Stock
dividend of one-tenth of one share of Common Stock for each share of Common
Stock outstanding payable to stockholders of record on July 27, 1995. All
references to average shares outstanding and earnings per share included in the
financial statements and accompanying notes and schedules have been restated to
give effect to the stock dividend. As a result of the dividend, 1,052,908 shares
of common stock were added to the 10,533,303 common shares outstanding at June
30, 1995. The fair value of the additional shares at the declaration date, $52.8
million, was transferred from retained earnings to Common Stock and capital
surplus in the amount of $0.3 million and $52.5 million, respectively. As a
result of the stock dividend, the conversion price of Tejas' 5 1/4% Convertible
Preferred Stock was adjusted from $70 to $63.6364 (equivalent to an adjustment
in the conversion rate from .7143 to .7857 shares of Common Stock for each
Depositary Share representing a one-fifth interest in a share of the 5 1/4%
Convertible Preferred Stock). The adjustment to the conversion price (and
conversion rate) was effective as of July 28, 1995. Additionally, options to
purchase Common Stock under Tejas' Stock Option Plans as well as option prices
were adjusted as a result of the Common Stock dividend.
4. SUBSEQUENT EVENT
On November 1, 1995, Coral Energy Resources, L.P., a Delaware limited
partnership ("Coral") commenced operations. Coral is a natural gas marketing
venture owned one-third by certain subsidiaries of Tejas and two-thirds by
certain subsidiaries of Shell Oil Company ("Shell"). Tejas has the option to
acquire up to a 50% interest in Coral under certain circumstances at specific
time points in 1998 and 1999.
Pursuant to the Coral limited partnership agreement and related gas sales
contracts, Tejas has committed to Coral substantially all of its natural gas
supply, and Shell has committed to Coral substantially all of its gas production
in the United States (excluding Alaska and Hawaii). Tejas and Shell have each
contributed cash and economic interests in gas sales contracts to Coral for
their respective interests. Each partner has received equity credit for those
gas volumes committed to the partnership that are subject to long-term
contracts, and such volumes are subject to make-up payments by the responsible
partner if actual volumes delivered to Coral fail to meet projections. If Coral
is unable to take all of the gas tendered for delivery by the parties, Coral is
obligated to pay for such gas at the price that would have otherwise been
applicable, mitigated by the amount obtained from any sales of such gas to third
parties.
Coral is managed by a board of directors consisting of four members, two of
whom are appointed by Tejas and two by Shell. Coral has 55 employees, 25 of whom
will be transferred by Tejas or its subsidiaries, effective January 1, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
A summary of natural gas average daily throughput in millions of cubic feet
("MMCF") is set forth below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
----------------- -----------------
<S> <C> <C> <C> <C>
System sales 1,494 1,338 1,417 1,324
Transportation 1,490 1,694 1,499 1,696
Gulf Coast (Tejas' share) 105 112 108 112
----- ----- ----- -----
Total system throughput 3,089 3,144 3,024 3,132
Off-system sales 18 13 10 13
Gas processed 76 87 79 85
----- ----- ----- -----
Total throughput 3,183 3,244 3,113 3,230
===== ===== ===== =====
</TABLE>
Tejas' net earnings for the first nine months of 1995 were $22.9 million as
compared to $21.3 million for the first nine months of 1994, an increase of $1.6
million. Net earnings for the third quarter of 1995 increased to $7.6 million
from $7.3 million of the comparable period in 1994. Net earnings applicable to
common stock and earnings per common share for the first nine months of 1995
were $16.6 million and $1.44 respectively, versus $15.0 million and $1.27,
respectively, for the first nine months of 1994. Net earnings applicable to
common stock and earnings per share for the third quarter of 1995 were $5.5
million and $0.48, respectively, as compared to $5.2 million and $0.44,
respectively, for the third quarter of 1994. Net earnings applicable to common
stock and per share results include a provision for dividends on Tejas' 9.96%
Cumulative Preferred Stock (the "9.96% Preferred Stock") and Tejas' 5 1/4%
Convertible Preferred Stock (the "5 1/4% Preferred Stock"). Average shares
outstanding used in the computation of per share amounts have been restated to
retroactively reflect a stock dividend of one-tenth of one share of Common Stock
for each share of Common Stock outstanding on July 27, 1995.
<PAGE>
NATURAL GAS SYSTEMS
Sales and transportation of natural gas through its owned and/or operated
natural gas pipeline systems is Tejas' core business. Tejas also owns and/or
operates natural gas storage facilities. Total system throughput in the first
nine months and third quarter of 1995 decreased by approximately 3% and 2%,
respectively, as compared to the corresponding 1994 periods. Transportation
volumes were impacted by the expiration of two low margin transportation
contracts and a reduction in volumes nominated under a third low margin
contract. Transportation volumes in the third quarter were also affected by the
second quarter sale of a small gathering system. In addition, volumes were
negatively impacted by warmer than normal weather in Tejas' market area during
the first half of 1995. Improved sales volumes and gas purchase and sales
activity supported by Tejas' WCLSF partially offset by lower transportation
volumes resulted in an increase in gross profit (revenues less cost of sales)
from $109.9 million for the first nine months of 1994 to $115.2 million for the
first nine months of 1995. The WCLSF provides Tejas with operational flexibility
and the ability to store gas for delivery under fully hedged futures contracts
at assured profit margins. Gross profit for the third quarter improved from
$37.7 million in 1994 to $40.0 million in 1995. This is the result of a $4.5
million gain associated with a long-term gas sales contract and higher sales
volumes partially offset by lower sales margins and transportation volumes.
NATURAL GAS PROCESSING/OFF-SYSTEM
During the first nine months and third quarter of 1995, Tejas' natural gas
processing and off-system marketing activities contributed gross profit of $6.3
million and $2.1 million, respectively, as compared to $5.9 million and $2.3
million, respectively, for the corresponding periods in 1994. The increase in
gross profit for the first nine months of 1995 for these activities reflects
improved profitability for natural gas processing primarily as a result of
higher average liquid prices and lower fuel and shrinkage costs. A decline in
volumes of gas processed by Tejas' natural gas processing plants resulted in a
decrease in gross profit in the third quarter of 1995.
REVENUES
Revenues decreased by $112.5 million and $4.4 million, respectively, for
the nine months and three months ended September 30, 1995, from the same periods
in 1994. This decrease in revenues was primarily due to substantially lower
average sales prices of natural gas partially offset by higher system sales
volumes. The remaining decrease in total revenues was attributable to lower
transportation volumes.
<PAGE>
OPERATING EXPENSES/DEPRECIATION/GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses, depreciation, and general and administrative expenses
collectively increased by $2.3 million and $0.9 million, respectively, for the
first nine months and third quarter of 1995 when compared to the corresponding
periods in 1994. The disposition of a small, non-strategic gathering system in
Louisiana as well as lower legal fees in the first half of 1995 partially offset
increased ad valorem taxes and depreciation of capital expenditures, including
depreciation on the fixed assets of a small gathering and marketing company
acquired in February 1995.
OTHER INCOME (EXPENSE)
Interest expense during the first nine months and third quarter of 1995
increased by $1.7 million and $0.4 million, respectively, over the corresponding
1994 periods due to higher interest rates as well as the addition of debt to
finance the purchase of storage gas inventory and for capital expenditures.
Equity in earnings (loss) of unconsolidated entities for the first nine months
and third quarter of 1995 decreased by $1.4 million and $0.6 million,
respectively, from the comparable periods of 1994 due to lower sales margins on
natural gas sold by Gulf Coast Natural Gas Company and Tejas' increased share of
the losses incurred by Evangeline Gas Pipeline Company, L.P. and Evangeline Gas
Corp. ("Evangeline entities"). In 1995, Tejas' interests in the Evangeline
entities bear 100% of all losses as compared to 45% of all losses in 1994. A
gain of approximately $1.6 million, net of certain reserves, reflected in Other,
net, was recognized by Tejas during the second quarter, on the sale of a small,
non-strategic gathering system located in Louisiana.
CAPITAL RESOURCES, LIQUIDITY AND OUTLOOK
- - ----------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
For the nine months ended September 30, 1995, net cash provided by
operating activities declined to $32.5 million from $38.9 million for the
comparable period in 1994. The $6.4 million decrease in net cash provided by
operating activities was primarily attributable to changes in working capital
components including the purchase of $21.0 million of additional storage gas
inventory. Excluding net changes in working capital components, Tejas' operating
activities generated $56.0 million in cash during the first nine months of 1995
as compared to $52.3 million in the first nine months of 1994.
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities totaled $14.7 million. Approximately
$17.0 million was used for capital additions, improvements and major renewals,
and to acquire a small gathering and marketing company in Louisiana. During the
second quarter of 1995, a small, non-strategic gathering system located in
Louisiana was sold to a third party for approximately $3.7 million.
CASH FLOWS FROM FINANCING ACTIVITIES
Tejas made total debt payments of $10.0 million during the first nine
months of 1995 with the necessary funds being provided by cash generated from
its operating activities. During the same period, Tejas also made periodic
borrowings of $15.0 million under its revolving credit facilities. Additionally,
during the first nine months of 1995, Tejas had a net paydown of $16.7 million
under its various money market credit lines.
LIQUIDITY
Tejas' working capital increased $21.1 million to $44.6 million at
September 30, 1995 from $23.5 million at December 31, 1994. This increase was
due primarily to an additional $21.0 million investment in storage gas
inventory. In order to effectively utilize its cash balances, Tejas will
continue to make periodic borrowings under its revolving credit facilities and
money market credit lines to meet immediate cash needs.
At September 30, 1995, Tejas' long-term debt with banks totaled $356.0
million consisting of $342.0 million borrowed under revolving credit facilities
and $14.0 million borrowed under various money market credit lines. In addition,
Tejas had $11.2 million in notes payable related to industrial development
revenue bonds issued by Lewis and Pleasants Counties, West Virginia.
Effective January 12, 1995, Tejas amended its credit facilities to roll-up
a majority of the existing bank debt of its three principal operating
subsidiaries into a single, $455.0 million, eight-year, revolving credit
facility at a newly-formed subsidiary, Tejas-Acadian Holding Company ("TAHC").
One of the subsidiaries, Tejas Natural Gas Company ("TNGC"), retained a $25.0
million working capital facility with terms and conditions substantially similar
to the rolled-up facility. The two facilities combined provide Tejas'
subsidiaries with $480.0 million in borrowing capacity. Borrowings at September
30, 1995 were $342.0 million, and after considering restrictions to provide for
a $10.0 million letter of credit and borrowings under its money market credit
lines (offset by available cash pursuant to the terms of such credit lines),
$121.6 million of additional borrowings were available under these amended
facilities at September 30, 1995. Under the terms of the TAHC credit agreement,
after two years, the revolving credit facility will, unless extended at the
option of the lenders, convert to a six-year reducing revolver. Commitment
reductions of $15.0 million per quarter are scheduled to begin March 31, 1997
with the final remaining commitment reduction to occur on December 31, 2002.
Under the terms of the TNGC credit agreement, the revolving credit facility
will, unless extended at the option of the lenders, expire on December 31, 2002.
<PAGE>
TAHC's credit facility is secured by the capital stock and partnership
interests of all material subsidiaries and partnerships of TAHC (excluding the
capital stock of Acadian Gas Corporation, a subsidiary of TAHC ("Acadian"), but
including the capital stock and partnership interests of the material operating
subsidiaries and partnerships of Acadian) and various intercompany notes. The
TNGC amended credit facility is secured by the capital stock and partnership
interests of TAHC's material subsidiaries and partnerships, as described above,
and is guaranteed by TAHC.
The amount of loans, advances and distributions (collectively
"distributions") that may be made under the TAHC credit facility is subject to
certain limitations. TAHC may make dividend payments to Tejas of up to $30
million initially, adjusted by consolidated future quarterly net earnings or
losses of TAHC. In addition, TAHC may loan Tejas up to $201 million initially
plus the positive amount, if any, of $100 million adjusted by the consolidated
future quarterly net earnings or losses of TAHC. Such loans in excess of the
$201 million allowance are further adjusted by cumulative aggregate
distributions and investments, if any, made by TAHC. Subject to cash on hand and
available borrowing capacity, the maximum amount available for distribution to
Tejas at September 30, 1995 was approximately $236.0 million. Such limitations
as herein described are not expected to have any material effect on the ability
of Tejas to meet its cash obligations.
Tejas has uncommitted money market credit lines which allow Tejas to borrow
up to $50.0 million for periods of up to one month. Any such borrowings are
unsecured and may be extended for additional periods if agreed to by the lender.
At September 30, 1995, Tejas had an outstanding balance of $14.0 million
borrowed under the money market credit lines. Tejas has agreed to maintain
available funds under its revolving credit facilities sufficient to repay
borrowings under the money market credit lines.
The notes payable related to Lewis & Pleasants counties' bonds are secured
by bank letters of credit which in turn are secured by mortgages on two natural
gas processing plants located in West Virginia. The notes are also subject to
certain covenants and require that Tejas' subsidiaries, Gulf Energy Development
Corporation and Gulf Energy Gathering & Processing Corporation, maintain certain
financial standards.
Although Tejas has additional borrowings available under its amended credit
facilities, its liquidity is ultimately dependent on cash generated by
operations. Tejas believes its earnings from operations will generate sufficient
cash to fund expansion projects, make required debt payments and meet
anticipated dividend requirements of the 9.96% Preferred Stock and 5 1/4%
Preferred Stock in the foreseeable future. Based on the terms of Tejas' amended
revolving credit facilities and the outstanding principal balance at September
30, 1995, no principal payments are required until the end of 1998. However,
Tejas' amended credit facilities are subject to certain covenants, including
the maintenance of certain financial ratios, with which Tejas expects to be able
to comply in the ordinary course of business.
<PAGE>
Tejas frequently enters into swaps, futures and other contracts to hedge
the price risks associated with inventories, commitments, and certain
anticipated transactions. The swaps, futures and other contracts are with
established exchanges, energy companies, and major financial institutions and
Tejas believes that its counterparties will be able to satisfy their obligations
under these contracts.
On November 1, 1995, Coral Energy Resources, L.P., a Delaware limited
partnership ("Coral") commenced operations. Coral is a natural gas marketing
venture owned one-third by certain subsidiaries of Tejas and two-thirds by
certain subsidiaries of Shell Oil Company ("Shell"). See Note 4 of "Notes to
Consolidated Financial Statements" for further discussion.
In the normal course of business, Tejas regularly reviews opportunities for
the possible acquisition of additional natural gas pipelines and companies that
own natural gas pipelines. When potential acquisition opportunities are deemed
to be consistent with Tejas' growth strategy, bids or offers in amounts and with
terms acceptable to Tejas may be submitted. It is uncertain whether any such
bids or offers which may be submitted by Tejas would be acceptable to the
sellers of such acquisition targets. In the event of a future significant
acquisition, Tejas may require additional financing in connection therewith.
OUTLOOK
Tejas' management expects its results of operations for the entire year of
1995 to be favorable when compared to the 1994 annual period. Additionally,
Tejas is encouraged by the many opportunities available for future growth and
continued expansion of operations. Tejas is in the process of developing a
portion of the substantial injection and withdrawal capacity remaining at the
WCLSF which has the potential to generate additional profits from services
provided to both suppliers and consumers and from sales of gas held in storage
for future delivery under predetermined contract prices. Tejas has historically
shown the ability to adapt to changing operational requirements and capitalize
on new market opportunities. Although the foregoing factors present Tejas with
opportunities to grow and expand, there can be no assurance that such factors
will result in future growth and expansion of Tejas' operations and revenues and
earnings.
On November 1, 1995, Coral commenced operations as an independently managed
natural gas company. While no prediction can be made as to the impact of the
marketing joint venture on Tejas' prospects, Tejas' management believes that
over the next several years Coral should be in a position to take advantage of
the unutilized capacity in Tejas' major long-distance transmission lines. In
addition, the large number of interconnects between Tejas pipelines and other
intrastate and interstate pipelines have the potential to become important
supply points for the new jointly owned North American natural gas marketing
company.
<PAGE>
Tejas is the transporter of gas for a customer that temporarily curtailed
its volumes in the third quarter of last year due to a take-or-pay dispute with
certain producers, which is currently the subject of litigation. The Texas
Supreme Court recently issued an opinion remanding this litigation back to the
trial court. Pending final determination of the volumes dedicated to the
contract in this litigation, the customer may again suspend or reduce gas
purchases. Any such suspension in the future would affect volumes Tejas
transports for that customer, and would reduce Tejas' revenues and earnings
associated with such transportation.
Tejas' management knows of no trends or uncertainties that will impair
Tejas' ability to comply with its debt covenants or pay the dividends on the
9.96% Preferred Stock and 5 1/4% Preferred Stock.
PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS
Tejas is a member of a joint defense group comprised of twenty-seven
companies that have been threatened with claims by various cities in Texas that
the companies owe franchise type fees for commercial gas operations within their
city limits. Tejas and certain of its subsidiaries are defendants in CITY OF
BAYTOWN V. TEJAS GAS CORPORATION, 11th Judicial District Court, Harris County,
Texas, filed August 31, 1995. Plaintiff alleges that the defendants have carried
on their commercial gas operations within the city limits of Baytown without the
City of Baytown's permission and without payment of fees to the City, and has
asserted a number of causes of action against defendants. Plaintiff seeks
unspecified damages based on various theories of recovery, including a
percentage of gross receipts from gas sales inside the City of Baytown, and
other remedies, including injunctive relief and exemplary damages. On October
13, 1995, in response to defendants' motion for summary judgment, a Harris
County trial judge dismissed a case, substantially identical to CITY OF BAYTOWN
V. TEJAS GAS CORPORATION, filed by the City of Baytown against Houston Pipe Line
Company ("HPL"), a subsidiary of Enron Corp. On October 16, 1995, the City of
Baytown filed a motion to abate the proceedings against Tejas in CITY OF BAYTOWN
V. TEJAS GAS CORPORATION, pending the outcome of CITY OF BAYTOWN V. HOUSTON PIPE
LINE COMPANY. On October 31, 1995, the City Counsel of the City of Baytown
unanimously voted not to appeal the dismissal of CITY OF BAYTOWN V. HOUSTON PIPE
LINE COMPANY. The plaintiff's lawfirm that represented the City of Baytown
announced that it would continue its efforts to bring similar suits by other
cities against pipeline companies.
It is possible that claims by other cities may be filed against Tejas and
other pipeline companies alleging similar causes of action. Management believes
that Tejas has adequate defenses relating to these types of claims, and does not
believe that these matters will have a material adverse effect on Tejas'
financial condition. However, there can be no assurance that additional lawsuits
will not be filed against Tejas or that Tejas will prevail in any that may be
filed against it.
<PAGE>
ITEM 2. CHANGE IN SECURITIES
On July 19, 1995, the Board of Directors of Tejas approved a stock dividend
of one-tenth of one share of Common Stock for each share of Common Stock
outstanding on July 27, 1995. The stock dividend was paid to holders of record
of Common Stock as of July 27, 1995. As a result of the stock dividend, the
conversion price of Tejas' 5 1/4% Convertible Preferred Stock was adjusted from
$70 to $63.6364 (equivalent to an adjustment in the conversion rate from .7143
to .7857 shares of Common Stock for each Depositary Share representing a
one-fifth interest in a share of the 5 1/4% Convertible Preferred Stock). The
adjustment to the conversion price (and conversion rate) was effective as of
July 28, 1995. In addition, pursuant to the terms of Tejas' Rights Agreement
dated November 11, 1994, the number of preferred share purchase rights
associated with each share of Common Stock have been adjusted to reflect the
stock dividend.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1* Certificate of Incorporation of Tejas (filed as Exhibit 3.1 to Tejas'
Registration Statement on Form S-1, No. 33-24697 (the "1988 Registration
Statement")).
4.2* By-Laws of Tejas (filed as Exhibit 3.2 to the 1988 Registration
Statement).
4.3* Certificate of Amendment to Certificate of Incorporation of Tejas dated
May 12, 1993 (filed as Exhibit 4.3 to Tejas' Form 10-Q for the quarter
ended June 30, 1993).
4.4* Certificate of Designation of 5 1/4% Convertible Preferred Stock dated
November 2, 1993 (filed as Exhibit 4.1 to Tejas' Form 10-Q for the
quarter ended September 30, 1993).
4.5* Rights Agreement, dated as of November 11, 1994, between Tejas and
Harris Trust and Savings Bank which includes the Certificate of
Designation for the Series C Junior Participating Preferred Stock as
Exhibit A, the form of Right Certificate as Exhibit B, and the Summary
---------- ---------
of Rights to Purchase Preferred Shares as Exhibit C (filed as Exhibit 1
---------
to Tejas' Current Report on Form 8-K dated November 11, 1994).
4.6* Specimen Stock Certificate for Common Stock (filed as Exhibit 4.4 to
Tejas' Form 10-Q for the quarter ended June 30, 1993).
4.7* Specimen Depositary Receipt Representing 5 1/4% Depositary Shares (filed
as Exhibit 4.8 to Tejas Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
<PAGE>
4.8* Specimen Stock Certificate for 5 1/4% Convertible Preferred Stock
(filed as Exhibit 4.4 to Tejas' Form 10-Q for the quarter ended September
30, 1993).
4.9* Deposit Agreement dated as of November 2, 1993 among Tejas, Harris Trust
and Savings Bank and all holders from time to time of depositary receipts
issued thereunder (filed as Exhibit 4.2 to Tejas' Form 10-Q for the
quarter ended September 30, 1993).
10.1* Gas Sale and Purchase Contract Between Tejas Gas Corporation, as Seller,
and Coral Energy Resources, L.P., as Buyer, dated November 1, 1995 (filed
as Exhibit 10.1 to Tejas' Current Report on Form 8-K dated November 2,
1995) (certain portions of Exhibit 10.1 have been omitted pursuant to a
confidential treatment request filed with the Securities and Exchange
Commission).
10.2* Gas Sale and Purchase Contract between Acadian Gas Corporation, as
Seller, and Coral Energy Resources, L.P., as Buyer, dated November 1,
1995, (filed as Exhibit 10.2 to Tejas' Current Report on Form 8-K dated
November 2, 1995)(certain portions of Exhibit 10.2 have been omitted
pursuant to a confidential treatment request filed with the Securities
and Exchange Commission).
10.3* Limited Partnership Agreement of Coral Energy Resources, L.P., dated
September 1, 1995 (filed as Exhibit 10.3 to Tejas' Current Report on Form
8-K dated November 2, 1995)(certain portions of Exhibit 10.3 have been
omitted pursuant to a confidential treatment request filed with the
Securities and Exchange Commission).
10.4 Exchange Agreement dated July 24, 1995, among Tejas Gas Corporation,
Tejas-Acadian Holding Company, Acadian Gas Corporation and Rene R. Joyce.
10.5 Termination and Grant Agreement dated October 5, 1995, among Tejas Gas
Corporation, Acadian Gas Corporation and Rene R. Joyce.
11.1 Computation of Earnings per Common Share
27 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated August 8, 1995, was filed during the
third quarter of 1995 with respect to Item 5 of Form 8-K "Other Events"
to report an agreement with Shell Oil Company to form a natural gas
marketing joint venture.
- - ---------------
* Incorporated by reference as indicated.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEJAS GAS CORPORATION
(Registrant)
By: /s/ JAMES W. WHALEN
------------------------
James W. Whalen
Executive Vice President - Chief Financial
Officer (principal financial officer and
principal accounting officer)
Date: November 13, 1995
EXHIBIT 11.1
TEJAS GAS CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------------------ -----------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding 11,575 11,534 11,566 11,461
Incremental common shares resulting from
assumed exercise of stock options based
on the stock's daily average market price - 255 - 375
------ ------ ------ ------
Weighted average number of common shares
outstanding and common equivalent shares
for primary calculation 11,575 11,789 11,566 11,836
Incremental common shares resulting from
assumed exercise of stock options based
on the more dilutive of the stock's daily
average market price or ending price - - - -
------ ------ ------ ------
Weighted average number of common shares
outstanding and common equivalent shares
assuming full dilution 11,575 11,789 11,566 11,836
====== ====== ====== ======
Net Earnings Applicable to Common Stock $ 5,548 $ 5,208 $ 16,641 $ 15,008
====== ====== ====== ======
Earnings per common and common equivalent
share:
Primary $ 0.48 $ 0.44 $ 1.44 $ 1.27
====== ====== ====== ======
Fully-diluted $ 0.48 $ 0.44 $ 1.44 $ 1.27
====== ====== ====== ======
<FN>
(1) All shares have been restated to reflect a Common Stock dividend of
one-tenth of one share of Common Stock for each share of Common Stock
outstanding on July 27, 1995.
</FN>
</TABLE>
EXCHANGE AGREEMENT
This Exchange Agreement (this "Agreement") is entered into as of July
24, 1995 among Tejas Gas Corporation, a Delaware corporation ("Tejas"),
Tejas-Acadian Holding Company, a Delaware corporation ("TAHC"), Acadian Gas
Corporation, a Nevada corporation ("Acadian"), and Rene R. Joyce, an individual
and a resident of Texas ("Employee").
W I T N E S S E T H:
WHEREAS, Acadian and Employee entered into that certain Acadian Gas
Corporation Executive Incentive Agreement dated March 13, 1991, as amended by a
letter agreement dated May 13, 1991 and as further amended on May 20, 1992 and
December 4, 1992 (the "Incentive Agreement"), which provides for the right of
Employee to purchase equity rights ("Equity Rights") in Acadian and options for
Employee to purchase additional equity rights ("Equity Rights Options") in
Acadian upon the terms set forth therein; and
WHEREAS, Tejas, TAHC and Acadian desire to acquire the Equity Rights
and Employee has agreed to transfer the Equity Rights to TAHC in exchange for
3,964 shares (the "Tejas Shares") of common stock, par value $.25 per share, of
Tejas ("Tejas Common Stock"), upon the terms and subject to the conditions
hereinafter set forth (the "Exchange").
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto hereby agree as follows:
ARTICLE I.
EXCHANGE
1.1 TRANSFER OF EQUITY RIGHTS AND TRANSFER OF TEJAS SHARES. Upon the
terms and subject to the conditions of this Agreement, Employee shall transfer,
convey and deliver to TAHC all of the Equity Rights and, in exchange therefor,
Tejas shall issue, sell and deliver to Employee the Tejas Shares (being the
3,964 shares of Tejas Common Stock referred to above in the preamble). To
further evidence the transfer of the Equity Rights, Employee and TAHC shall
execute and deliver the Assignment of Equity Rights in the form of EXHIBIT A
hereto. Acadian shall record in the stock record books the transfer to TAHC, and
the ownership by TAHC, of the Equity Rights.
1.2 CLOSING. The closing of the Exchange (the "Closing") will take
place at 11:00 a.m. on a date to be specified by Tejas and Employee, which shall
be no later than the fifth business day after satisfaction of the latest to
occur of the conditions set forth in Sections 4.1(a), 4.2(a) and 4.3 (provided
that the other closing conditions set forth in Article IV have been met or
waived as provided in Article IV at or prior to the Closing) (the "Closing
Date"), at the offices of Tejas, 1301 McKinney, Suite 700, Houston, Texas 77010,
unless another date or place is agreed to in writing by Tejas and Employee.
<PAGE>
1.3 ADJUSTMENT TO TEJAS SHARES. From and after the date of this
Agreement and to and including the Closing Date, in the event that Tejas shall
declare any dividend or other distribution upon its outstanding capital stock
payable in Tejas Common Stock or shall subdivide or reclassify its outstanding
shares of Tejas Common Stock into a greater number of shares, then the number of
Tejas Shares shall be increased in proportion to the increase as a result of
such dividend, distribution, subdivision or reclassification. From and after the
date of this Agreement and to and including the Closing Date, in the event that
Tejas shall combine or reclassify its outstanding shares of Tejas Common Stock
into a smaller number of shares, then the number of Tejas Shares shall be
decreased in proportion to the decrease as a result of such combination or
reclassification. The number of Tejas Shares to be received by Employee in the
Exchange is not subject to adjustment for changes in the price of Tejas Common
Stock or the payment by Tejas of cash dividends in respect of Tejas Common
Stock.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF EMPLOYEE. Employee hereby
represents and warrants to Tejas, TAHC and Acadian that:
(a) AUTHORITY. Employee has all right, power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered and constitutes the valid and
binding obligation of Employee enforceable against him in accordance with its
terms, except as the enforceability hereof may be limited by (i) bankruptcy,
insolvency or other laws relating to or affecting generally creditors' rights
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(b) TITLE TO EQUITY RIGHTS. Employee owns beneficially and of record,
and (subject to Acadian's right to consent to the transfer thereof) has full
legal right and power and all authorization required by law to convey free and
clear of all liens, encumbrances, restrictions and claims of every kind, all of
the Equity Rights and, upon delivery of and payment for the Equity Rights as
herein provided, TAHC will acquire good and valid title to all of the Equity
Rights free and clear of all liens, encumbrances, restrictions, equities and
claims of every kind. For purposes of this Agreement, Equity Rights shall
include all Equity Rights owned or held directly or indirectly by Employee,
including any and all interest or right in or relating to Acadian that Employee
has purchased or otherwise acquired or as to which Employee has any right or
claim pursuant to the Incentive Agreement, other than the Equity Rights Options.
(c) TEJAS DOCUMENTS; QUESTIONS. Employee has received and has had an
opportunity to review and ask questions concerning the Tejas SEC Documents (as
hereinafter defined), this Agreement and the transactions contemplated hereby
and all such questions have been answered to his full satisfaction.
<PAGE>
(d) FULL DISCLOSURE. Employee has disclosed to Tejas, TAHC and Acadian
every fact, the disclosure of which to Tejas, TAHC and Acadian, to Employee's
knowledge and belief upon due inquiry, is necessary in order to prevent any
certificate, representation or warranty of Employee expressed or provided for in
this Agreement from being misleading or in order to prevent Tejas', TAHC's and
Acadian's decisions, determinations or investigations made in connection with
this Agreement from being made on the basis of less than full information.
(e) KNOWLEDGEABLE INVESTOR STATUS. (i) Employee has such knowledge,
skill and experience in business, financial and investment matters so that he is
capable of evaluating the merits and risk of an investment in the Tejas Shares
and is able to bear the economic risk of such investment. To the extent
necessary, Employee has retained, at his own expense, and relied upon,
appropriate professional advice regarding the investment, tax and legal merits
and consequences of this Agreement, the Exchange and owning the Tejas Shares.
(ii) The decision to enter into this Agreement was made by
Employee who has had an opportunity to meet with representatives of Tejas, TAHC
and Acadian and has had access to all information he considers necessary
regarding the Tejas Shares, Tejas, the Equity Rights, TAHC, Acadian and the
Exchange; and that any resale or disposition of Tejas Shares will be made only
in compliance with the procedures set out in Section 3.2 of this Agreement.
(iii) Employee agrees to furnish any additional information
requested to assure compliance with the applicable United States federal and
state securities laws in connection with the purchase and sale of Tejas Shares.
(f) INVESTMENT INTENT. Employee is acquiring the Tejas Shares for
investment, solely for his own account and not with a view to, or for sale in
connection with, the distribution thereof. Neither Employee nor any agent acting
for Employee has taken any action which would subject the issuance and sale of
the Tejas Shares to the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act"). Employee is not a party to any contract,
undertaking, agreement or arrangement to sell, transfer or grant a participation
in the Tejas Shares to any third person.
(g) SHARES UNREGISTERED. Employee understands, acknowledges and agrees
that (i) the offer and sale of the Tejas Shares have not been registered under
the Securities Act, (ii) the Tejas Shares are "restricted securities" pursuant
to Rule 144 promulgated under the Securities Act (which rule imposes, among
other things, a two-year holding period on restricted securities before they may
be sold pursuant to such rule), (iii) the Tejas Shares must be held indefinitely
and Employee must continue to bear the economic risk of the investment in the
Tejas Shares unless the offer and sale of such Tejas Shares is subsequently
registered under the Securities Act and all applicable state securities laws, or
an exemption from such registration is available as further described under
Section 3.2(a) hereof, (iv) Tejas has made no covenant (and has no obligation to
Employee) to register the Tejas Shares under the Securities Act, and (v) a
restrictive legend in the form set forth in Section 3.2(d) hereof shall be
placed on the certificates evidencing the Tejas Shares.
2.2 REPRESENTATIONS AND WARRANTIES OF TEJAS, TAHC AND ACADIAN.
Tejas, TAHC and Acadian hereby represent and warrant to Employee:
<PAGE>
(a) ORGANIZATION, STANDING AND POWER. Each of Tejas, TAHC and Acadian
is a corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business now being conducted.
(b) AUTHORITY. Each of Tejas, TAHC and Acadian has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized and approved by all necessary corporate action on the part
of each of Tejas, TAHC and Acadian. This Agreement has been duly executed and
delivered and constitutes the valid and binding obligation of each of Tejas,
TAHC and Acadian enforceable against each of them in accordance with its terms,
except as the enforceability hereof may be limited by (i) bankruptcy, insolvency
or other laws relating to or affecting generally creditors' rights and (ii)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) SEC DOCUMENTS. Tejas has made available to Employee copies of the
following documents filed by Tejas with the Securities and Exchange Commission
(the "Tejas SEC Documents"): Annual Report on Form 10-K for the year ended
December 31, 1994; Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1995; Current Report on Form 8-K dated January 20, 1995; and
Registration Statement on Form 8-A dated December 2, 1992 and the amendments
thereto on Forms 8-A/A dated September 16, 1993 and March 17, 1994.
(d) ISSUANCE. The issuance, sale and delivery of the Tejas Shares has
been duly authorized by all requisite corporate action on the part of Tejas, and
when issued, sold and delivered in accordance with the terms and conditions set
forth in this Agreement, the Tejas Shares will be validly issued and
outstanding, fully paid and nonassessable.
ARTICLE III.
ADDITIONAL AGREEMENTS
3.1 INCENTIVE AGREEMENT
(a) ACADIAN CONSENT TO ASSIGNMENT; WAIVER OF PURCHASE RIGHT.
In accordance with Section 9 of the Incentive Agreement, Acadian hereby (i)
consents to the transfer to TAHC of the Equity Rights (and any further transfer
of the Equity Rights that TAHC or any of its affiliates may thereafter make),
and (ii) waives all rights to purchase the Equity Rights from Employee (and from
TAHC or any of its affiliates that may subsequently transfer the Equity Rights).
3.2 RESTRICTIONS CONCERNING RESALE OF TEJAS SHARES ISSUED IN
EXCHANGE.
(a) SALES BY EMPLOYEE. Employee shall not sell, assign or
transfer any of the shares of Tejas Common Stock received by it in the Exchange
except (i) pursuant to an effective registration statement under the Securities
<PAGE>
Act, (ii) in conformity with the volume, holding period and otherlimitations of
Rule 144 promulgated under the Securities Act, or (iii) in a transaction which,
in the opinion of independent counsel satisfactory to Tejas or as described in a
"no-action" or interpretive letter from the staff of the Securities and Exchange
Commission, is not required to be registered under the Securities Act. In the
event of a sale or other disposition pursuant to Rule 144, Employee shall supply
Tejas with evidence of compliance with such Rule in the form of a letter
satisfactory to Tejas.
(b) RULE 144. It has been the past practice of Tejas to timely
file reports required by the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), but Tejas shall have no obligation to Employee to continue such
practice or to maintain its status as a public company or any registration of
the Tejas Common Stock.
(c) RESALE THROUGH LICENSED BROKER-DEALERS. All sales of the
Tejas Shares made by Employee shall be made only throughlicensed broker-dealers,
unless Tejas shall consent in writing to sales by other means.
(d) RESTRICTIVE LEGEND. Certificates evidencing the shares of
Tejas Common Stock issued to Employee in the Exchange shall bear a restrictive
legend as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES STATUTE. THESE SHARES MAY NOT
BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO TEJAS GAS CORPORATION TO THE EFFECT THAT SUCH
REGISTRATION AND COMPLIANCE ARE NOT REQUIRED BECAUSE SUCH
TRANSACTION IS EXEMPT.
3.3 ADDITIONAL AGREEMENTS. Each of Tejas, TAHC, Acadian and Employee
covenants and agrees that it will use its best efforts to obtain the
satisfaction of the conditions to Closing applicable to it as set forth in
Article IV. Subject to the terms and conditions of this Agreement, each of
Tejas, TAHC, Acadian and Employee further agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including cooperating fully with the other parties, including by provision of
information and making of all necessary filings in connection with the Exchange.
In case at any time after the Closing Date any further action is necessary or
desirable to carry out the purposes of this Agreement or to vest TAHC with full
title to the Equity Rights, Employee and the proper officers and directors of
each of Tejas, TAHC and Acadian shall take all such action which may be
necessary, appropriate or desirable to carry out such purposes or to vest TAHC
<PAGE>
with full title to the Equity Rights. Employee agrees to take any further
actions, and to execute and deliver any further documents, reasonably requested
by Tejas, TAHC or Acadian to (i) assure Tejas, TAHC and Acadian of the
enforceability of the rights of Tejas, TAHC and Acadian and the obligations of
Employee under this Agreement, including without limitation assurances of the
truth of any representation or warranty of Employee contained in this Agreement
and (ii) enable Tejas, TAHC and Acadian to enforce such rights and obligations.
ARTICLE IV.
CONDITIONS
4.1 CONDITIONS TO THE OBLIGATIONS OF TEJAS, TAHC AND ACADIAN. The
obligations of Tejas, TAHC and Acadian to proceed with the Closing contemplated
hereby are subject to the satisfaction on or before the Closing Date of all of
the following conditions, any one or more of which may be waived, in whole or in
part, by Tejas, TAHC and Acadian:
(a) COMPLIANCE. Employee shall have complied on or before the Closing
Date in all material respects with each of his covenants and agreements
contained in this Agreement to be performed on or before the Closing Date. The
representations and warranties made by Employee in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date with the same effect as though made on the Closing Date, except
as otherwise contemplated by this Agreement.
4.2 CONDITIONS TO THE OBLIGATIONS OF EMPLOYEE. The obligations of
Employee to proceed with the Closing contemplated hereby are subject to the
satisfaction on or before the Closing Date of all of the following conditions,
any one or more of which may be waived, in whole or in part, by Employee:
(a) COMPLIANCE. Each of Tejas, TAHC and Acadian shall have complied on
or before the Closing Date in all material respects with each of its covenants
and agreements contained in this Agreement to be performed by it on or before
the Closing Date. The representations and warranties made by Tejas, TAHC and
Acadian in this Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date with the same effect as
though made on the Closing Date, except as otherwise contemplated by this
Agreement.
4.3 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE EXCHANGE. The
respective obligation of each party to effect the Exchange shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) NYSE LISTING. The shares of Tejas Common Stock issuable to Employee
pursuant to this Agreement shall have been authorized for listing on the New
York Stock Exchange upon official notice of issuance.
<PAGE>
(b) OTHER APPROVALS. All authorizations, consents, orders or approvals
of, or declarations or filings with, or expirations of waiting periods imposed
by, any governmental entity in connection with the Exchange, the failure to
obtain which would have a material adverse effect on Tejas, TAHC, Acadian or
Employee shall have been filed, occurred or been obtained. Tejas shall have
received all state securities or "Blue Sky" permits and other authorizations
necessary to issue the Tejas Shares in exchange for the Equity Rights.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Exchange shall be in effect.
4.4 WAIVER ON CLOSING. Upon the completion of the Closing, each party
hereto shall be deemed to have conclusively waived any condition to its
obligations under this Agreement.
ARTICLE V.
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
5.1 EFFECT OF BREACH OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS BY EMPLOYEE. Employee hereby agrees to reimburse Tejas, TAHC and
Acadian for, and hold Tejas, TAHC and Acadian harmless from, any loss, damage
(excluding consequential damages), expense (including reasonable attorneys'
fees) or liability sustained by Tejas, TAHC or Acadian arising out of or
resulting from any breach of any of the representations, warranties, covenants
or agreements made by Employee herein.
5.2 EFFECT OF BREACH OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS BY TEJAS, TAHC OR ACADIAN. Tejas, TAHC and Acadian hereby agree to
reimburse Employee for, and hold Employee harmless from, any loss, damage
(excluding consequential damages), expense (including reasonable attorneys'
fees) or liability sustained by Employee arising out of or resulting from any
breach of any of the representations, warranties, covenants or agreements made
by Tejas, TAHC and Acadian herein.
5.3 SURVIVAL. The representations, warranties, covenants and agreements
set forth in this Agreement and in any certificate or instrument delivered in
connection herewith shall survive the Closing Date and shall terminate upon
expiration of the applicable statute of limitations (or any extension or waiver
thereof).
5.4 TAX BENEFITS; INSURANCE PROCEEDS. In determining the amount of any
loss, liability or expense for which any party is entitled to reimbursement
under this Article V, the gross amount thereof will be reduced by any
correlative tax benefit or insurance proceeds realized or to be realized by such
party, and such correlative insurance benefit shall be net of any insurance
premium which becomes due as a result of such claim.
<PAGE>
ARTICLE VI.
MISCELLANEOUS
6.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if mailed by registered or certified mail,
return receipt requested, to the parties at the following addresses:
(a) If to Tejas, TAHC or Acadian, to:
Tejas Gas Corporation
1301 McKinney, Suite 700
Houston, Texas 77010
Telecopy: (713) 650-6231
Attention: James W. Whalen
Executive Vice President
(b) If to Employee, to:
c/o Acadian Gas Corporation
1301 McKinney, Suite 700
Houston, Texas 77010
6.2 CERTAIN EXPENSES AND COSTS. Except as otherwise expressly provided
in this Agreement, each of the parties hereto shall assume and bear all
expenses, costs and fees incurred or assumed by such party in the preparation
and execution of this Agreement and in compliance with and performance of the
agreements and covenants contained in this Agreement, regardless whether the
transactions contemplated hereby shall be consummated. Notwithstanding the
foregoing and in addition to any rights that may otherwise accrue to a party if
the transactions contemplated by this Agreement are not consummated as a result
of the breach by a party of the representations, warranties, covenants or
agreements contained herein, the breaching party shall assume and bear all
expenses, costs and fees incurred or assumed by the nonbreaching party.
6.3 CHOICE OF LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of Texas without regard to
the choice of law principles thereof.
6.4 AMENDMENT. This Agreement may be amended by the parties hereto.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
6.5 CAPTIONS. The captions used in this Agreement are for convenience
of reference only and will not be construed to define any portion of this
Agreement.
<PAGE>
6.6 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
6.7 COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by the parties and delivered to
each other, it being understood that the parties need not sign the same
counterpart.
6.8 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
6.9 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. Any provision of this Agreement that is invalid or unenforceable
in any jurisdiction shall be ineffective only to the extent of such invalidity
or unenforceability without invalidating or rendering unenforceable the
remaining provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6.10 ASSIGNMENTS. No party hereto shall assign this Agreement or any
part hereof without the prior written consent of the other parties. Any
attempted assignment without such consent shall be null and void. Except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement shall entitle any person other than Employee,
Tejas, TAHC or Acadian, or their respective successors and assigns permitted
hereby, to any claim, cause of action, remedy or right of any kind.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
TEJAS GAS CORPORATION
By: /s/ JAMES W. WHALEN
-------------------------
Name: James W. Whalen
Title: Executive Vice President
<PAGE>
TEJAS-ACADIAN HOLDING COMPANY
By: /s/ JAMES W. WHALEN
-------------------------
Name: James W. Whalen
Title: Executive Vice President
ACADIAN GAS CORPORATION
By: /s/ JAMES W. WHALEN
------------------------
Name: James W. Whalen
Title: Executive Vice President
EMPLOYEE
Rene R. Joyce
/s/ RENE R. JOYCE
-------------------------------
<PAGE>
EXHIBIT A
ASSIGNMENT OF EQUITY RIGHTS
---------------
ACADIAN GAS CORPORATION
---------------
WHEREAS, Acadian Gas Corporation, a Nevada corporation ("Acadian"), and
Rene R. Joyce, an individual and a resident of Texas ("Assignor"), entered into
that certain Acadian Gas Corporation Executive Incentive Agreement dated March
13, 1991, as amended by a letter agreement dated May 13, 1991 and as further
amended on May 20, 1992 and December 4, 1992, which provides for the right of
Assignor to purchase equity rights ("Equity Rights") in Acadian upon the terms
set forth therein; and
WHEREAS, Tejas Gas Corporation, a Delaware corporation ("Tejas"),
Tejas-Acadian Holding Company, a Delaware corporation ("Assignee"), Acadian and
Assignor entered into that certain Exchange Agreement dated July 24, 1995 (the
"Exchange Agreement") pursuant to which Assignor agreed to transfer, sell and
deliver all of the Equity Rights (as more fully described in Section 2.1(b) of
the Exchange Agreement), to Assignee, who desires to acquire and receive all of
the Equity Rights; and
WHEREAS, pursuant to the Exchange Agreement, Acadian has consented to
such assignment;
NOW, THEREFORE, Assignor, for and in consideration of the premises, the
receipt of the Shares (as defined in the Exchange Agreement) from Tejas, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby transfers, sells, delivers and assigns unto
Assignee, its successors and assigns, all of the Equity Rights.
This Assignment of Equity Rights is made by Assignor and accepted by
Assignee pursuant to the terms and provisions of the Exchange Agreement.
Assignor and Assignee agree to promptly execute and deliver, one to the other,
any corrective assignments, certificates and other legal documents or
notifications reasonably requested by the other party to give effect to the
intent hereof.
This Assignment of Equity Rights shall be binding upon and inure to the
benefit of Assignor and Assignee, their successors and assigns and shall be
subject to and interpreted under the laws of the State of Texas.
IN WITNESS WHEREOF, this instrument is executed this ___ day of
____________, 1995.
ASSIGNOR: ASSIGNEE:
RENE R. JOYCE TEJAS-ACADIAN HOLDING COMPANY
____________________________ By: _______________________________
Name:_______________________________
Title:_______________________________
TERMINATION AND GRANT AGREEMENT
This Termination and Grant Agreement (this "Agreement") is entered into
as of October 5, 1995 among Tejas Gas Corporation, a Delaware corporation
("Tejas"), Acadian Gas Corporation, a Nevada corporation ("Acadian"), and Rene
R. Joyce, an individual and a resident of Texas ("Employee").
W I T N E S S E T H:
WHEREAS, Acadian and Employee entered into that certain Acadian Gas
Corporation Executive Incentive Agreement dated March 13, 1991, as amended by a
letter agreement dated May 13, 1991 and as further amended on May 20, 1992 and
December 4, 1992 (the "Incentive Agreement"), which provides for the right of
Employee to purchase equity rights ("Equity Rights") in Acadian and options for
Employee to purchase additional equity rights ("Equity Rights Options") in
Acadian upon the terms set forth therein;
WHEREAS, Tejas, Tejas-Acadian Holding Company, a Delaware corporation
("TAHC"), Acadian and Employee entered into that certain Exchange Agreement
dated July 24, 1995 ("Exchange Agreement") pursuant to which Employee
transferred the Equity Rights to TAHC in exchange for 4,360 shares of common
stock, par value $0.25 per share, of Tejas ("Tejas Common Stock"); and
WHEREAS, Tejas, Acadian and Employee desire to terminate and cancel the
Equity Rights Options and Tejas desires to grant a stock option giving Employee
the right to purchase 29,602 shares of Tejas Common Stock (the "Tejas Stock
Option") pursuant to the Tejas Gas Corporation Employee Stock Option Plan (as
amended and restated effective July 21, 1992), as it may be amended from time to
time (the "Option Plan"), at a purchase price per share equal to the Fair Market
Value (as defined in the Option Plan) of a share of Tejas Common Stock on the
day preceding the Closing Date (as defined below), upon the terms and subject to
the conditions hereinafter set forth (the "Transaction").
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto hereby agree as follows:
ARTICLE I.
TRANSACTION
1.1 TERMINATION AND CANCELLATION OF EQUITY RIGHTS OPTIONS AND GRANT OF
TEJAS OPTION. Upon the terms and subject to the conditions of this Agreement,
the Equity Rights Options are hereby terminated and cancelled and shall be of no
further force and effect and, in consideration of the termination and
cancellation of the Equity Rights Options and the Incentive Agreement as
provided herein, Tejas will grant and deliver to Employee the Tejas Stock Option
which shall be evidenced by the Tejas Gas Corporation Stock Option Agreement
("Tejas Stock Option Agreement")
<PAGE>
in the form of EXHIBIT A hereto (being the stock option for 29,602 shares of
Tejas Common Stock referred to above in the preamble).
1.2 CLOSING. The closing of the Transaction (the "Closing") will take
place at 4:00 p.m. on a date to be specified by Tejas and Employee, which shall
be no later than the fifth business day after satisfaction of the latest to
occur of the conditions set forth in Sections 4.1(a), 4.2(a) and 4.3 (provided
that the other closing conditions set forth in Article IV have been met or
waived as provided in Article IV at or prior to the Closing) (the "Closing
Date"), at the offices of Tejas, 1301 McKinney, Suite 700, Houston, Texas 77010,
unless another date or place is agreed to in writing by Tejas and Employee.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF EMPLOYEE. Employee hereby
represents and warrants to Tejas and Acadian that:
(a) AUTHORITY. Employee has all right, power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered and constitutes the valid and
binding obligation of Employee enforceable against him in accordance with its
terms, except as the enforceability hereof may be limited by (i) bankruptcy,
insolvency or other laws relating to or affecting generally creditors' rights
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(b) TITLE TO EQUITY RIGHTS OPTIONS. Employee owns beneficially and of
record, and has full legal right and power and all authorization required by law
to terminate and cancel the Equity Rights Options and such options are held by
Employee free and clear of all liens, encumbrances, restrictions, equities and
claims of every kind. For purposes of this Agreement, Equity Rights Options
shall include all Equity Rights Options granted to or held directly or
indirectly by Employee, including any and all interest or right in or relating
to Acadian that Employee has purchased or otherwise acquired or as to which
Employee has any right or claim pursuant to the Incentive Agreement, other than
the Equity Rights that were previously conveyed by Employee to TAHC pursuant to
the Exchange Agreement.
(c) TEJAS DOCUMENTS; QUESTIONS. Employee has received and has had an
opportunity to review and ask questions concerning the Tejas SEC Documents (as
hereinafter defined), the Tejas Stock Option Documents (as hereinafter defined),
this Agreement and the transactions contemplated hereby and all such questions
have been answered to his full satisfaction.
(d) FULL DISCLOSURE. Employee has disclosed to Tejas and Acadian
every fact, the disclosure of which to Tejas and Acadian, to Employee's
knowledge and belief upon due inquiry, is necessary in order to prevent any
certificate, representation or warranty of Employee expressed or provided for in
<PAGE>
this Agreement from being misleading or in order to prevent Tejas' and Acadian's
decisions, determinations or investigations made in connection with this
Agreement from being made on the basis of less than full information.
(e) OPTION TERMS. Employee understands, acknowledges and agrees that
(i) the Tejas Stock Option is exercisable only in accordance with the procedures
and terms set forth in the Tejas Stock Option Agreement, (ii) the Tejas Stock
Option is subject to the terms and conditions of the Option Plan, and (iii) the
Tejas Stock Option is nontransferable by Employee, other than as provided in the
Option Plan.
2.2 REPRESENTATIONS AND WARRANTIES OF TEJAS AND ACADIAN. Tejas
and Acadian hereby represent and warrant to Employee:
(a) ORGANIZATION, STANDING AND POWER. Each of Tejas and Acadian is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of organization and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business now being conducted.
(b) AUTHORITY. Each of Tejas and Acadian has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized and approved by all necessary corporate action on the part of each of
Tejas and Acadian. This Agreement has been duly executed and delivered and
constitutes the valid and binding obligation of each of Tejas and Acadian
enforceable against each of them in accordance with its terms, except as the
enforceability hereof may be limited by (i) bankruptcy, insolvency or other laws
relating to or affecting generally creditors' rights and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(c) SEC DOCUMENTS. Tejas has made available to Employee copies of the
following documents filed by Tejas with the Securities and Exchange Commission
(the "Tejas SEC Documents"): Annual Report on Form 10-K for the year ended
December 31, 1994; Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1995 and June 30, 1995; Current Reports on Form 8-K dated
January 20, 1995 and August 9, 1995; and Registration Statement on Form 8-A
dated December 2, 1992 and the amendments thereto on Forms 8-A/A dated September
16, 1993 and March 17, 1994.
(d) TEJAS STOCK OPTION DOCUMENTS. Tejas has made available to Employee
copies of the following documents relating to the Tejas Stock Option: the Option
Plan (as in existence on the date of this Agreement); Prospectus dated July 30,
1993 relating to the Option Plan; and the form of Tejas Stock Option Agreement
(EXHIBIT A hereto).
(e) GRANT. The grant and delivery of the Tejas Stock Option has been
duly authorized by the Stock Option Committee of the Board of Directors of
Tejas, and when the shares of Tejas Common Stock subject to the Tejas Stock
Option are issued upon the exercise thereof and in accordance with the terms and
<PAGE>
conditions of the Option Plan and the Tejas Stock Option Agreement, such shares
will be validly issued and outstanding, fully paid and nonassessable.
ARTICLE III.
ADDITIONAL AGREEMENTS
3.1 TERMINATION OF INCENTIVE AGREEMENT
(a) TERMINATION OF INCENTIVE AGREEMENT; MUTUAL RELEASE. In
consideration of the mutual promises and covenants contained herein, including
the grant of the Tejas Option to Employee, which shall constitute full
satisfaction and discharge of all of Acadian's obligations under the Incentive
Agreement, the Incentive Agreement and the Equity Rights Options are each hereby
terminated and canceled and shall be of no further force and effect. Each of
Acadian and Employee hereby releases, acquits and forever discharges the other
(and their respective affiliates) from any and all claims, actions, causes of
action, suits, obligations, debts, sums of money, accounts, covenants, rights,
damages, demands, agreements, promises, liabilities, controversies, costs, and
expenses based on any federal or state law or right of action (contractual or
otherwise), at law or in equity or otherwise, foreseen or unforseen, matured or
unmatured, known or unknown, accrued or not accrued, which Acadian or Employee
had, now has or can have, or shall or may hereafter have in connection with,
arising out of, or which in any way relate to their rights, obligations, or
duties under the Incentive Agreement or any acts, failures to act, omissions or
misrepresentations by either Acadian or Employee with respect to the Incentive
Agreement.
3.2 ADDITIONAL AGREEMENTS. Each of Tejas, Acadian and Employee
covenants and agrees that it will use its best efforts to obtain the
satisfaction of the conditions to Closing applicable to it as set forth in
Article IV. Subject to the terms and conditions of this Agreement, each of
Tejas, Acadian and Employee further agrees to use its best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including cooperating fully with the other parties, including by provision of
information and making of all necessary filings in connection with the
Transaction. In case at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, Employee and
the proper officers and directors of each of Tejas and Acadian shall take all
such action which may be necessary, appropriate or desirable to carry out such
purposes. Employee agrees to take any further actions, and to execute and
deliver any further documents, reasonably requested by Tejas or Acadian to (i)
assure Tejas and Acadian of the enforceability of the rights of Tejas and
Acadian and the obligations of Employee under this Agreement, including without
limitation assurances of the truth of any representation or warranty of Employee
contained in this Agreement and (ii) enable Tejas and Acadian to enforce such
rights and obligations.
<PAGE>
ARTICLE IV.
CONDITIONS
4.1 CONDITIONS TO THE OBLIGATIONS OF TEJAS AND ACADIAN. The obligations
of Tejas and Acadian to proceed with the Closing contemplated hereby are subject
to the satisfaction on or before the Closing Date of all of the following
conditions, any one or more of which may be waived, in whole or in part, by
Tejas and Acadian:
(a) COMPLIANCE. Employee shall have complied on or before the Closing
Date in all material respects with each of his covenants and agreements
contained in this Agreement to be performed on or before the Closing Date. The
representations and warranties made by Employee in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date with the same effect as though made on the Closing Date, except
as otherwise contemplated by this Agreement.
4.2 CONDITIONS TO THE OBLIGATIONS OF EMPLOYEE. The obligations of
Employee to proceed with the Closing contemplated hereby are subject to the
satisfaction on or before the Closing Date of all of the following conditions,
any one or more of which may be waived, in whole or in part, by Employee:
(a) COMPLIANCE. Each of Tejas and Acadian shall have complied on or
before the Closing Date in all material respects with each of its covenants and
agreements contained in this Agreement to be performed by it on or before the
Closing Date. The representations and warranties made by Tejas and Acadian in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date with the same effect as though made
on the Closing Date, except as otherwise contemplated by this Agreement.
4.3 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE EXCHANGE.
The respective obligation of each party to effect the Transaction shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) APPROVALS. All authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
governmental entity in connection with the Transaction, the failure to obtain
which would have a material adverse effect on Tejas, Acadian or Employee shall
have been filed, occurred or been obtained.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Transaction shall be in effect.
4.4 WAIVER ON CLOSING. Upon the completion of the Closing, each party
hereto shall be deemed to have conclusively waived any condition to its
obligations under this Agreement.
<PAGE>
ARTICLE V.
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
5.1 EFFECT OF BREACH OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS BY EMPLOYEE. Employee hereby agrees to reimburse Tejas and Acadian
for, and hold Tejas and Acadian harmless from, any loss, damage (excluding
consequential damages), expense (including reasonable attorneys' fees) or
liability sustained by Tejas or Acadian arising out of or resulting from any
breach of any of the representations, warranties, covenants or agreements made
by Employee herein.
5.2 EFFECT OF BREACH OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS BY TEJAS OR ACADIAN. Tejas and Acadian hereby agree to reimburse
Employee for, and hold Employee harmless from, any loss, damage (excluding
consequential damages), expense (including reasonable attorneys' fees) or
liability sustained by Employee arising out of or resulting from any breach of
any of the representations, warranties, covenants or agreements made by Tejas
and Acadian herein.
5.3 SURVIVAL. The representations, warranties, covenants and agreements
set forth in this Agreement and in any certificate or instrument delivered in
connection herewith shall survive the Closing Date and shall terminate upon
expiration of the applicable statute of limitations (or any extension or waiver
thereof).
5.4 TAX BENEFITS; INSURANCE PROCEEDS. In determining the amount of any
loss, liability or expense for which any party is entitled to reimbursement
under this Article V, the gross amount thereof will be reduced by any
correlative tax benefit or insurance proceeds realized or to be realized by such
party, and such correlative insurance benefit shall be net of any insurance
premium which becomes due as a result of such claim.
ARTICLE VI.
MISCELLANEOUS
6.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if mailed by registered or certified mail,
return receipt requested, to the parties at the following addresses:
i. If to Tejas or Acadian, to:
Tejas Gas Corporation
1301 McKinney, Suite 700
Houston, Texas 77010
Telecopy: (713) 650-6231
Attention: James W. Whalen
Executive Vice President
<PAGE>
ii. If to Employee, to:
Rene R. Joyce
c/o Acadian Gas Corporation
1301 McKinney, Suite 700
Houston, Texas 77010
6.2 CERTAIN EXPENSES AND COSTS. Except as otherwise expressly provided
in this Agreement, each of the parties hereto shall assume and bear all
expenses, costs and fees incurred or assumed by such party in the preparation
and execution of this Agreement and in compliance with and performance of the
agreements and covenants contained in this Agreement, regardless whether the
transactions contemplated hereby shall be consummated. Notwithstanding the
foregoing and in addition to any rights that may otherwise accrue to a party if
the transactions contemplated by this Agreement are not consummated as a result
of the breach by a party of the representations, warranties, covenants or
agreements contained herein, the breaching party shall assume and bear all
expenses, costs and fees incurred or assumed by the nonbreaching party.
6.3 CHOICE OF LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of Texas without regard to
the choice of law principles thereof.
6.4 AMENDMENT. This Agreement may be amended by the parties
hereto. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
6.5 CAPTIONS. The captions used in this Agreement are for
convenience of reference only and will not be construed to define any portion of
this Agreement.
6.6 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
6.7 COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by the parties and delivered to
each other, it being understood that the parties need not sign the same
counterpart.
6.8 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
<PAGE>
6.9 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. Any provision of this Agreement that is invalid or unenforceable
in any jurisdiction shall be ineffective only to the extent of such invalidity
or unenforceability without invalidating or rendering unenforceable the
remaining provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6.10 ASSIGNMENTS. No party hereto shall assign this Agreement or any
part hereof without the prior written consent of the other parties. Any
attempted assignment without such consent shall be null and void. Except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement shall entitle any person other than Employee,
Tejas or Acadian, or their respective successors and assigns permitted hereby,
to any claim, cause of action, remedy or right of any kind.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
TEJAS GAS CORPORATION
By: /s/ JAMES W. WHALEN
---------------------------
Name: James W. Whalen
Title: Executive Vice President
ACADIAN GAS CORPORATION
By: /s/ JAMES W. WHALEN
---------------------------
Name: James W. Whalen
Title: Executive Vice President
EMPLOYEE
Rene R. Joyce
/s/ RENE R. JOYCE
-----------------------------------
<PAGE>
EXHIBIT A
TEJAS GAS CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated this 5th day of
October, 1995 between Tejas Gas Corporation, a Delaware corporation ("Tejas"),
and _______________________ ("Optionee").
WHEREAS, Tejas desires, by affording the Optionee an opportunity to
purchase shares of its common stock ("Common Stock"), as hereinafter provided,
to carry out the purpose of the Tejas Employee Stock Option Plan, as it may be
amended from time to time and hereinafter referred to as the "Plan"; and
WHEREAS, the Stock Option Committee of Tejas has granted this stock
option;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. GRANT OF OPTION. Tejas hereby grants to Optionee the option
(the "Option") to purchase on terms and conditions hereinafter set forth
___________ shares of its Common Stock.
2. OPTION PRICE. The purchase price of the Common Stock covered
by this Option shall be $______ per share.
3. TYPE OF OPTION. This option is granted as a Non-Qualified
Stock Option in accordance with the terms and conditions of the Plan.
4. TIME TO EXERCISE. Except as provided elsewhere herein, this
Option shall be exercisable in installments as follows:
Beginning Number of Shares
October 5, 1995 _____
October 5, 1996 _____
October 5, 1997 _____
October 5, 1998 _____
October 5, 1999 _____
To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, in any subsequent period. No part of the
Option may be exercised after the date set forth in paragraph 6.
5. SUBJECT TO PLAN. This Option and the exercise hereof is
subject to the terms and conditions of the Plan which is incorporated herein by
reference and is made part hereof. If there is any inconsistency between this
Agreement and the Plan, the Plan will govern.
<PAGE>
6. TERM. This Option shall terminate at 5:00 p.m., Houston time,
on October 5, 2002.
7. MANNER OF EXERCISE. To exercise this Option, Optionee shall
give written notice to Tejas of the number of shares being purchased and the
purchase price to be paid therefor accompanied by the following:
(a) full payment in cash or its equivalent (including the
assignment of the Common Stock of Tejas valued at its then fair market value) of
the purchase price for the shares of Common Stock being purchased;
(b) an amount required by the appropriate taxing authorities
to be collected for withholding taxes on the difference between the fair market
value of the shares on the date of exercise and the purchase price; provided if
Tejas shall be required to withhold any amounts by reason of any federal, state
or local tax rules or regulations in respect of the payment of cash or the
issuance of Common Stock pursuant to the exercise of an Option, then Tejas shall
be entitled to deduct and withhold such amounts from any cash payments to be
made, or Common Stock to be issued, to Optionee. In any event, Optionee shall
make available to Tejas, promptly when requested by Tejas, sufficient funds to
meet the requirements of such withholding, and Tejas shall be entitled to take
and authorize such steps as it may deem advisable in order to have such funds
made available to Tejas out of any funds or property (including, without
limitation, Common Stock) due or to become due to Optionee; and
(c) an undertaking to furnish or execute such documents as
Tejas in its reasonable discretion shall deem necessary, (1) to evidence the
exercise, in whole or in part, of the Option evidenced by this Agreement, (2) to
determine whether registration is then required under the Securities Act of
1933, as then in effect, and (3) to comply with or satisfy the requirements of
the Securities Act of 1933, or any other law, as then in effect.
8. REGISTRATION. Tejas shall endeavor, but shall not be obligated, to
register the Common Stock to be issued upon exercise of the Option under the
Securities Act of 1933, as amended, as well as any applicable state statutes. In
the event that the Common Stock to be issued upon exercise of the Option is not
so registered, Tejas may, as a condition precedent to the exercise of the
Option, require from Optionee (or, in the event of his death, his legal heirs,
legatees or distributees) such written representations as, in the opinion of
counsel for Tejas, may be necessary to ensure that such exercise and subsequent
disposition will not involve a violation of the Securities Act of 1933, as
amended, or any other applicable federal or state statute as then in effect.
9. LAW GOVERNING. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the state of Delaware.
<PAGE>
10. DEATH, DISABILITY, RETIREMENT, OF OR OTHER TERMINATION OF OPTIONEE.
In the event of the death, disability, resignation, termination for any reason
(with or without cause) or retirement of Optionee, Optionee or his heirs or
administrators shall be entitled to exercise any remaining vested options, as
follows:
(a) DEATH. If Optionee's employment by Tejas and its
Subsidiaries (as defined in Section 425 of the Internal Revenue Code of 1986, as
amended) terminates by reason of death, the Option shall be exercisable only to
the extent exercisable as of the date of death at any time prior to the
expiration date of the Option or within twelve (12) months after the date of
death, whichever period is shorter. Tejas may extend the exercise period beyond
twelve (12) months as it deems appropriate, but in no event shall the exercise
period exceed the expiration date of the Option. Options which were not
exercisable as of the date of death shall be forfeited and no longer subject to
any right to exercise.
(b) DISABILITY. If Optionee's service to Tejas and its
Subsidiaries terminates by reason of disability (as defined under the Federal
Social Security Act of 1935, as amended), the Option shall be exercisable only
to the extent exercisable as of the date of such disability prior to the
expiration date of the Option or within three (3) months after the date of such
disability, whichever period is shorter. Options which were not exercisable as
of the date of disability shall be forfeited and no longer subject to any right
to exercise.
(c) RETIREMENT. In the event the service of Optionee is
terminated by reason of normal or early retirement (as defined under the Tejas
Pension Plan), the Option shall be exercisable only to the extent exercisable as
of the date of such retirement prior to the expiration date of the Option or
within thirty (30) calendar days after the date of such retirement, whichever is
shorter. Options which were not exercisable as of the date of such retirement
shall be forfeited and no longer subject to any right to exercise.
(d) OTHER TERMINATION. If Optionee's employment shall
terminate for any reason (with or without cause) other than death, disability,
or retirement (as defined in Subsection 10 (a), (b) and (c) above), any Options
which are unexercised as of the date of such termination shall be forfeited and
no longer subject to any right to exercise.
11. PRIVILEGES. Optionee or any person entitled to exercise an
Option hereunder shall have no rights as a stockholder with respect to any
shares covered by this Option until the date of issuance of a certificate for
such shares.
12. NON-TRANSFERABILITY. The Option granted hereunder shall not
be transferable other than by laws of descent and distribution or by will.
13. EMPLOYMENT. Nothing in the Plan shall interfere with or limit
in any way the right of Tejas to terminate any Optionee's service at any time,
nor confer upon Optionee any right to continue in the employ of Tejas.
<PAGE>
14. REQUIREMENTS OF LAW. The granting of the Option herein and the
issuance of shares of Common Stock upon the exercise of such Option shall be
subject to all applicable rules, laws, regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required. Tejas
shall make a good faith effort to take such reasonable actions as may be
necessary to comply with such rules, laws or regulations and to receive such
approvals as may be required.
IN WITNESS WHEREOF, Tejas has caused this Agreement to be signed by its
duly authorized officer and Optionee has duly signed this Agreement on the day
and year first above written.
-----------------------------------
, Optionee
---------------------
TEJAS GAS CORPORATION
By:
----------------------------
Jay A. Precourt
Chief Executive Officer
ATTEST:
- - ----------------------------
P. Anthony Lannie, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Earnings and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,909
<SECURITIES> 0
<RECEIVABLES> 109,799
<ALLOWANCES> 0
<INVENTORY> 50,641
<CURRENT-ASSETS> 186,972
<PP&E> 785,562
<DEPRECIATION> 171,285
<TOTAL-ASSETS> 852,387
<CURRENT-LIABILITIES> 142,365
<BONDS> 0
<COMMON> 2,901
0
460
<OTHER-SE> 291,221
<TOTAL-LIABILITY-AND-EQUITY> 852,387
<SALES> 700,265
<TOTAL-REVENUES> 700,265
<CGS> 578,714
<TOTAL-COSTS> 631,466
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,610
<INCOME-PRETAX> 35,788
<INCOME-TAX> 12,853
<INCOME-CONTINUING> 22,935
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,935
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.44
</TABLE>
