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 JUNE 30, 1996
[k] 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 July 31, 1996, Tejas Gas Corporation had 20,485,443 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. These financial statements should 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, 1995 and
Tejas' Form 8-K dated June 18, 1996, as amended by Form 8-K/A dated July 17,
1996, which includes certain historical financial information for the assets and
business acquired and certain pro forma financial information pertaining to the
business combination.
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.
1
TEJAS GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- --------
(IN THOUSANDS)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................................ $ 9,679 $ 4,816
Accounts receivable .................................................................. 239,140 181,704
Exchange gas receivable .............................................................. 15,527 10,004
Storage gas inventory ................................................................ 31,204 38,733
Prepaids and other current assets .................................................... 17,831 9,124
Deferred income tax asset ............................................................ 3,084 2,024
----------- --------
Total current assets ......................................................... 316,465 246,405
----------- --------
PROPERTY, PLANT AND EQUIPMENT - AT COST .................................................. 1,547,738 793,376
Less accumulated depreciation ........................................................ 196,119 178,642
----------- --------
Property, plant and equipment, net ........................................... 1,351,619 614,734
----------- --------
GOODWILL, NET ............................................................................ 10,045 10,278
----------- --------
INVESTMENTS IN UNCONSOLIDATED ENTITIES ................................................... 67,631 31,927
----------- --------
OTHER ASSETS ............................................................................. 22,482 12,107
----------- --------
TOTAL ........................................................................ $ 1,768,242 $915,451
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Gas purchases payable ................................................................ $ 222,225 $153,867
Exchange gas payable ................................................................. 9,240 9,825
Accounts payable ..................................................................... 39,474 9,508
Accrued liabilities .................................................................. 59,124 25,397
Income taxes payable ................................................................. (618) 1,881
Current maturities of long-term obligations .......................................... 6,198 5,317
----------- --------
Total current liabilities .................................................... 335,643 205,795
----------- --------
LONG-TERM DEBT ........................................................................... 1,010,275 306,075
----------- --------
DEFERRED INCOME TAXES .................................................................... 56,923 50,413
----------- --------
PREFERRED MEMBERSHIP UNITS OF A SUBSIDIARY ............................................... 48,048 50,683
----------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1 par value; 6,000,000 shares
authorized; 200,000 shares of 9.96%
Cumulative Preferred Stock issued and
outstanding in 1996 and 1995; $250
liquidation preference per share ........................................ 200 200
260,000 shares of 5 1/4% Convertible
Preferred Stock issued and
outstanding in 1996 and 1995; $250
liquidation preference per share ........................................ 260 260
Common Stock, $.25 par value; 30,000,000 shares
authorized; 17,408,793 and 17,404,895
shares issued and outstanding in 1996 and
1995, respectively ........................................................... 4,351 4,351
Capital surplus ...................................................................... 191,601 191,490
Retained earnings .................................................................... 120,941 106,184
----------- --------
Total stockholders' equity ................................................... 317,353 302,485
----------- --------
TOTAL ........................................................................ $ 1,768,242 $915,451
=========== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES ....................................................... $ 419,284 $ 238,122 $ 851,685 $ 453,755
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales .............................................. 372,793 200,449 761,865 374,219
Operating expenses ......................................... 11,912 9,248 21,428 18,620
Depreciation and amortization .............................. 10,127 8,076 18,206 16,023
General and administrative ................................. 6,211 4,374 12,258 9,668
--------- --------- --------- ---------
Total ................................................... 401,043 222,147 813,757 418,530
--------- --------- --------- ---------
EARNINGS FROM OPERATIONS ....................................... 18,241 15,975 37,928 35,225
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of unconsolidated
entities ................................................ 1,909 (260) 5,575 (334)
Interest income ............................................ 210 98 512 225
(6,586) (12,539) (12,907)
Interest expense ........................................... (7,384)
Distributions on Preferred Membership
Units of a Subsidiary ................................... (925) -- (1,872) --
Other, net ................................................. 580 1,617 672 1,644
--------- --------- --------- ---------
Total ................................................... (5,610) (5,131) (7,652) (11,372)
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES ................................... 12,631 10,844 30,276 23,853
--------- --------- --------- ---------
INCOME TAXES:
Current .................................................... 1,934 1,059 5,873 3,014
Deferred ................................................... 2,682 2,675 5,450 5,550
--------- --------- --------- ---------
Total ................................................... 4,616 3,734 11,323 8,564
--------- --------- --------- ---------
NET EARNINGS ................................................... 8,015 7,110 18,953 15,289
--------- --------- --------- ---------
PREFERRED STOCK DIVIDEND REQUIREMENTS .......................... 2,098 2,098 4,196 4,196
--------- --------- --------- ---------
NET EARNINGS APPLICABLE TO COMMON STOCK ........................ $ 5,917 $ 5,012 $ 14,757 $ 11,093
--------- --------- --------- ---------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ............................................. 17,407 17,346 17,406 17,343
--------- --------- --------- ---------
EARNINGS PER COMMON SHARE ...................................... $ 0.34 $ 0.29 $ 0.85 $ 0.64
========= ========= ========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings ........................................................................ $ 18,953 $ 15,289
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization .................................................... 18,206 16,023
Amortization of deferred loan costs .............................................. 558 464
Deferred income taxes ............................................................ 5,450 5,550
Equity in (earnings) loss of unconsolidated entities ............................. (5,575) 334
Distributions from unconsolidated entities ....................................... 7,391 1,170
Other, net ....................................................................... 1,241 (1,011)
--------- --------
46,224 37,819
Changes in current assets and current liabilities:
(Increase) decrease in -
Accounts and exchange gas receivable ......................................... (12,829) (2,155)
Storage gas inventory ........................................................ 12,011 (12,206)
Prepaids and other current assets ............................................ 9,131 (3,411)
Increase (decrease) in -
Gas purchases, exchange gas and accounts payable ............................. 33,326 36
Accrued liabilities .......................................................... 18,819 (3,413)
Deferred credits ............................................................. (6,971) (761)
Income taxes payable ......................................................... (2,499) (53)
--------- --------
Net cash provided by operating activities ........................................... 97,212 15,856
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and acquisition ................................................ (14,322) (14,374)
Acquisition of Transok .............................................................. (568,500) --
Investments in unconsolidated entities .............................................. (8,082) (184)
Other, net .......................................................................... 194 2,254
--------- --------
Net cash used in investing activities ............................................... (590,710) (12,304)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit agreements ......................... 3,300 (2,800)
Proceeds from issuance of long-term debt ............................................ 605,900 15,000
Retirement of long-term debt ........................................................ (105,000) (10,000)
Preferred stock dividends ........................................................... (4,196) (4,196)
Exercise of stock options ........................................................... 111 35
Retirement of Preferred Membership Units of a Subsidiary ............................ (1,754) --
Other, net .......................................................................... -- --
--------- --------
Net cash provided by (used in) financing activities ................................. 498,361 (1,961)
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............................................... 4,863 1,591
--------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................................ 4,816 7,954
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............................................. $ 9,679 $ 9,545
--------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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. In connection with the preparation of
these financial statements, management was required to make estimates and
assumptions that affect the reported amount of assets, liabilities, revenues,
expenses and disclosure of contingent liabilities. Actual results could differ
from such estimates. 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, 1995 and Tejas' Form 8-K dated June 18, 1996, as
amended by Form 8-K/A dated July 17, 1996, which includes certain historical
financial information for the assets and business acquired and certain pro forma
financial information pertaining to the business combination.
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 subsidiaries as of June 30, 1996
and 1995, the results of their operations for the three month and six month
periods ended June 30, 1996 and 1995 and the cash flows for the six month
periods ended June 30, 1996 and 1995.
2. COMMITMENTS AND CONTINGENCIES
Tejas' West Clear Lake Storage Facility ("WCLSF") requires the
maintenance of cushion gas in order to sustain anticipated operational
requirements. 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 June 30, 1996, Tejas owned approximately 10.4 billion
cubic feet ("BCF") of cushion gas and a third party owned 18.5 BCF of natural
gas, valued at $33.1 million, for which Tejas is obligated to pay a reservation
fee. Based upon volumes and rates in effect at June 30, 1996, Tejas estimates
the net 1996 cost related to the reservation of the 18.5 BCF to be approximately
$1.1 million.
In addition to the obligation to redeliver the 18.5 BCF of natural gas,
Tejas has an obligation to redeliver 0.7 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 38.5 BCF of natural gas in the WCLSF at
June 30, 1996, a total of 19.2 BCF was owned by third parties.
3. STOCKHOLDERS' EQUITY
On April 11, 1996, the Tejas Board of Directors authorized a
three-for-two split of the Common Stock effected in the form of a stock dividend
payable to stockholders of record as of April 26, 1996. All references to shares
issued and outstanding, 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 split. As a result of the stock split,
5,801,769 shares of Common Stock were added to the 11,603,263 common shares
outstanding at December 31, 1995. The par value of the additional shares,
approximately $1.5 million, has been transferred from retained earnings to
Common Stock. As a result of the stock split, the conversion price of Tejas'
5 1/4% Convertible Preferred Stock was adjusted from $63.6364 to $42.4243
5
(equivalent to an adjustment in the conversion rate from .7857 to 1.1786 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 April 27, 1996.
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 split.
4. TRANSOK, INC. ACQUISITION
On June 6, 1996, Tejas acquired Transok, Inc. ("Transok") from Central
and South West Corporation ("CSW") through a merger of a recently formed wholly
owned subsidiary of Tejas into Transok. Immediately prior to the acquisition,
Transok sold seven natural gas processing plants (the "Transok Plants") to a
third party lessor (the "Lessor"), which in turn leased these facilities to a
subsidiary of Tejas (the "Lessee").
Transok operates intrastate natural gas pipeline systems in Oklahoma,
Louisiana and Texas and is one of the largest processors of natural gas in
Oklahoma. Transok's operations include (i) approximately 7,000 miles of
gathering and transmission pipelines in Oklahoma, Louisiana and Texas with 2.3
billion cubic feet of natural gas per day ("BCF/d") of pipeline capacity; (ii)
eight natural gas processing plants, of which seven are leased to a subsidiary
of Tejas, with total processing capacity of 564 million cubic feet per day
("MMCF/d") of natural gas; (iii) a 26 BCF-capacity natural gas reservoir storage
facility with 300 MMCF/d of withdrawal and 200 MMCF/d of injection capacity; and
(iv) 1.4 trillion cubic feet of connected third-party natural gas reserves.
Transok's average system throughput was 1.2 BCF/d during the first quarter of
1996 and 1.3 BCF/d in 1995. Natural gas liquids production averaged 25,100
barrels per day during the first quarter of 1996 and 22,400 barrels per day in
1995.
The acquisition was recorded using the purchase method of accounting and
the allocation of the purchase price based on the fair value of the assets and
liabilities acquired. The Lease is for a five-year term and is accounted for as
an operating lease. The allocation of the purchase price is preliminary, as
valuation and other studies have not been finalized. It is not expected that the
final allocation of the purchase price will produce materially different results
from those presented herein. The results of operations for the assets acquired
or leased as a result of the Transok acquisition are included in the
accompanying financial statements for the period subsequent to June 6, 1996. The
total purchase price received by CSW at closing was $690 million in cash, of
which $565 million was paid by Tejas and $125 million was paid by the Lessor to
acquire the Transok Plants. In addition, as part of the transaction, Transok
retained $200 million of long-term debt. Tejas' financing for its cash
requirements consisted of (i) $178 million borrowed under an existing credit
facility and (ii) $387 million, net of a voluntary prepayment, borrowed under a
new $425 million credit facility (the "Transok Credit Facility"). Tejas intends
to refinance or pay down borrowings under the Transok Credit Facility prior to
the facility's maturity date of December 31, 1997. In July 1996, Tejas completed
the sale of 3,075,000 shares of common stock in a public offering. Net proceeds
of approximately $103 million from the public offering were used to repay
indebtedness under the Transok Credit Facility.
The unaudited pro forma condensed statements of earnings which follow
represent consolidated results of operations as if the Transok acquisition and
the public offering of common stock described in the preceding paragraph had
been consummated at the beginning of each year presented. Pro forma adjustments
have been made to the historical amounts for the entities and operations
acquired for operating expenses, depreciation and amortization, general and
administrative expenses, interest expense and related tax effects. The pro forma
results do not purport to be indicative of the results of operations that would
actually have been obtained if the acquisition had occurred at the beginning of
each year presented.
6
Pro Forma Six Months Ended June 30,
1996 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Revenues ................................... $1,224,160 $779,048
---------- --------
Net earnings ............................... $ 23,922 $ 15,113
---------- --------
Earnings per common share .................. $ .96 $ 0.53
---------- --------
5. LONG-TERM DEBT
To finance the Transok acquisition, on June 6, 1996, a subsidiary of
Tejas entered into a $425 million, nineteen month, revolving credit facility
(the "Transok Credit Facility"). At June 30, 1996, available borrowing capacity
under the Transok Credit Facility was $38 million after giving effect to a
voluntary prepayment. At July 31, 1996, after giving effect to the application
of net proceeds of the public offering of common stock, described in Note 7
below, available borrowing capacity remained at $38 million as the result of a
reduction in the commitment level under the facility to $321.7 million. No
principal payments are required until the facility's final maturity on December
31, 1997. The Transok Credit Facility is 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.
The obligations under the Transok Credit Facility are secured by the
capital stock of all of Transok's subsidiaries and certain partnership interests
held by Transok and are guaranteed by such subsidiaries. The Transok Credit
Facility is also secured by certain intercompany notes. In addition, Tejas
guarantees Transok's obligations under the Transok Credit Facility and under the
lease agreement for the Transok Plants.
The amount of loans, advances and distributions (collectively
"Distributions") that may be made directly or indirectly by Transok to Tejas
under the Transok Credit Facility is subject to certain limitations. At June 30,
1996, Distributions to Tejas of $5.4 million were permitted in the form of
loans. In general, dividend allowances may be adjusted by a percentage of
consolidated quarterly net earnings or losses of Transok, certain investments
and any cumulative aggregate Distributions. Such limitations as herein described
are not expected to have any material effect on the ability of Tejas to meet its
cash obligations.
6. LEASE
The total purchase price received by CSW at closing included $125
million paid by the Lessor to acquire the Transok Plants. The Lessor is leasing
the Transok Plants to the Lessee for a five-year term with annual lease payments
of approximately $9 million. The lease agreement may be extended by the Lessee
with approval by the Lessor, and provides the Lessee the option to purchase the
Transok Plants during the term. The option to purchase all of the Transok Plants
is exercisable for $125 million. If such purchase option is not exercised, the
Lessee will be obligated to pay the Lessor a termination fee of approximately
$106 million at the end of the lease. However, such fee will be reduced by the
amount, if any, by which the proceeds from the Lessor's sale of the assets
exceeds $19 million. The lease also provides the Lessee the option to purchase
at any time during the term one or more of the Transok Plants for an aggregate
amount not exceeding $31 million, with corresponding reductions in the $106
million termination fee and $19 million threshold amount.
7. SUBSEQUENT EVENT
On July 22, 1996, Tejas sold 3,075,000 shares of common stock, par value
$0.25 per share (the "Common Stock") in an underwritten public offering.
Proceeds to Tejas from the sale of the Common Stock was approximately $103
million. The proceeds were used to reduce indebtedness under the Transok Credit
Facility.
7
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:
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------- -------------
1996 1995 1996 1995
----- ----- ----- -----
Average Daily Throughput in MMCF:
System sales ............................... 1,711 1,404 1,785 1,378
Transportation ............................. 1,751 1,514 1,616 1,503
Partnership Volumes (Company's share) ...... 134 106 124 110
----- ----- ----- -----
Total system throughput ............. 3,596 3,024 3,525 2,991
Gas processed, and other ................... 143 89 111 86
----- ----- ----- -----
Total throughput .................... 3,739 3,113 3,636 3,077
----- ----- ----- -----
Processing Data:
Average daily natural gas liquids
production in thousands of gallons ...... 455 182 299 187
----- ----- ----- -----
On June 6, 1996, Tejas acquired pipeline assets and related facilities
and leased processing plants as a result of the Transok acquisition, as more
fully discussed herein under "Capital Resources, Liquidity and Outlook". The
results of operations for the assets acquired or leased ("Transok Operations")
are included herein for the period subsequent to the acquisition on June 6,
1996.
Tejas' net earnings for the first six months of 1996 were $19.0 million
as compared to $15.3 million for the same period in 1995, an increase of $3.7
million. Net earnings for the second quarter of 1996 were $8.0 million as
compared to $7.1 million for the second quarter of 1995. Net earnings applicable
to common stock and earnings per common share for the first half of 1996 were
$14.8 million and $0.85 respectively, versus $11.1 million and $0.64,
respectively, for the first half of 1995. Net earnings applicable to common
stock for the second quarter of 1996 were $5.9 million as compared to $5.0
million for the same period in 1995, an increase of $0.9 million due mainly to
equity earnings from Coral Energy Resources, L.P. ("Coral") and the Transok
acquisition. Earnings per common share increased to $0.34 for the 1996 second
quarter as compared to $0.29 for the 1995 second quarter. Average shares
outstanding used in the computation of per share amounts have been restated to
retroactively reflect a three-for-two split of the common stock implemented in
April 1996 (see Note 3 of "Notes to Consolidated Financial Statements"). 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").
8
NATURAL GAS SYSTEMS
Sales and transportation of natural gas through its owned and/or
operated natural gas pipeline systems is Tejas' core business. For the first
half of 1996, Tejas' system volumes increased 18% from the first half of 1995 to
a total of 3.5 billion cubic feet ("BCF") per day. Improved sales volumes
(primarily attributable to Coral and weather-related demands) accounted for $5.8
million of the $8.7 million increase in gross profit for the first half of 1996.
The addition of the Transok Operations (see Note 4 of "Notes to Consolidated
Financial Statements") accounted for the majority of the remaining $2.9 million
increase in gross profit as well as the increase in gross profit in the second
quarter. In addition, gross profit in 1996 benefited from the availability of
natural gas and enhanced operational flexibility at the West Clear Lake Storage
Facility (the "WCLSF").
ENERGY MARKETING PARTNERSHIP- CORAL ENERGY RESOURCES, L.P.
The Coral energy marketing venture between Tejas and Shell Oil Company
commenced operations in November 1995. Coral's total sales volume for the first
half of 1996 averaged 4.2 BCF per day which contributed equity in earnings of
unconsolidated entities of $5.9 million and $2.0 million, respectively, for the
six months and three months ended June 30, 1996.
NATURAL GAS PROCESSING/OFF-SYSTEM
During the first half of 1996, gross profit for Tejas' natural gas
processing and off-system marketing activities increased by $1.6 million over
the corresponding period in 1995. The $1.6 million increase is due mainly to the
Transok Operations. The increase in gross profit for the second quarter of 1996
as compared to the same quarter in 1995 was $1.8 million, which included an
increase of $2.0 million as a result of the Transok Operations offset by $0.2
million related to a decrease in gross profit associated with Tejas' non-
Transok activities.
REVENUES
Revenues increased by $397.9 million and $181.2 million, respectively,
for the six months and three months ended June 30, 1996, from the same periods
in 1995. This increase in revenues was primarily due to increased natural gas
prices and system sales throughput due to weather-related demands and the
Transok Operations. Revenues attributable to the Transok Operations for the
period June 6, 1996 through the end of the quarter accounted for slightly more
than 20% of the increase in revenues during the quarter.
OPERATING EXPENSES/DEPRECIATION/GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses, depreciation, and general and administrative
expenses increased by $7.6 million and $6.6 million, respectively, for the first
half of 1996 and the second quarter of 1996, from the same periods in 1995. The
increase was primarily due to the acquisition of Transok in June 1996 which
included the leasing of seven natural gas processing plants.
OTHER INCOME (EXPENSE)
Interest expense increased by $0.8 million during the second quarter of
1996 as compared to the same period in 1995 as a result of the acquisition of
Transok on June 6, 1996. Interest expense for the first half of 1996 when
compared to the first half of 1995 reflects a net decrease of $0.4 million
resulting from lower debt balances during the first five months of 1996 offset
by an increased debt balance in June 1996 due to the Transok acquisition. The
second quarter of 1995 includes a pre-tax gain of approximately $1.6 million on
the sale of a non-strategic asset. Also included in other expense for the first
half and second quarter of 1996 are $1.9 million and $0.9 million, respectively,
of Distributions on Preferred Membership Units of a Subsidiary that were issued
to a third party in December, 1995.
9
CAPITAL RESOURCES, LIQUIDITY AND OUTLOOK
TRANSOK ACQUISITION
On June 6, 1996, Tejas acquired Transok, Inc. ("Transok") from Central
and South West Corporation ("CSW") through a merger of a recently formed wholly
owned subsidiary of Tejas into Transok. Immediately prior to the acquisition,
Transok sold seven natural gas processing plants (the "Transok Plants") to a
third party lessor (the "Lessor"), which in turn leased these facilities to a
subsidiary of Tejas (the "Lessee").
Transok operates intrastate natural gas pipeline systems in Oklahoma,
Louisiana and Texas and is one of the largest processors of natural gas in
Oklahoma. Transok's operations include (i) approximately 7,000 miles of
gathering and transmission pipelines in Oklahoma, Louisiana and Texas with 2.3
billion cubic feet of natural gas per day ("BCF/d") of pipeline capacity; (ii)
eight natural gas processing plants, of which seven are leased to a subsidiary
of Tejas with total processing capacity of 564 million cubic feet per day
("MMCF/d") of natural gas; (iii) a 26 BCF-capacity natural gas reservoir storage
facility with 300 MMCF/d of withdrawal and 200 MMCF/d of injection capacity; and
(iv) 1.4 trillion cubic feet of connected third-party natural gas reserves.
Transok's average system throughput was 1.2 BCF/d during the first quarter of
1996 and 1.3 BCF/d in 1995. Natural gas liquids production averaged 25,100
barrels per day during the first quarter of 1996 and 22,400 barrels per day in
1995.
The acquisition was recorded using the purchase method of accounting and
the allocation of the purchase price based on the fair value of the assets and
liabilities acquired. The Lease is for a five-year term and is accounted for as
an operating lease. The allocation of the purchase price is preliminary, as
valuation and other studies have not been finalized. It is not expected that the
final allocation of the purchase price will produce materially different results
from those presented herein. The results of operations for the assets acquired
or leased as a result of the Transok acquisition are included in the
accompanying financial statements for the period subsequent to June 6, 1996. The
total purchase price received by CSW at closing was $690 million in cash, of
which $565 million was paid by Tejas and $125 million was paid by the Lessor to
acquire the Transok Plants. In addition, as part of the transaction, Transok
retained $200 million of long-term debt. Tejas' financing for its cash
requirements consisted of (i) $178 million borrowed under an existing credit
facility and (ii) $387 million, net of a voluntary prepayment, borrowed under a
new $425 million credit facility (the "Transok Credit Facility"). Tejas intends
to refinance or pay down borrowings under the Transok Credit Facility prior to
the facility's maturity date of December 31, 1997. In July 1996, Tejas completed
the sale of 3,075,000 shares of common stock in a public offering. Net proceeds
of approximately $103 million from the public offering were used to repay
indebtedness under the Transok Credit Facility.
CASH FLOWS FROM OPERATING ACTIVITIES
For the six months ended June 30, 1996, net cash provided by operating
activities totaled $97.2 million as compared to $15.9 million for the same
period in 1995. This $81.3 million increase in net cash provided by operations
is primarily due to changes in working capital. Excluding net changes in working
capital components, Tejas' operating activities generated $46.2 million in cash
during the first six months of 1996 as compared to $37.8 million in the first
six months of 1995, an increase of $8.4 million.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities during the second quarter of 1996
totaled $590.7 million. Approximately $568.5 million was used for the
acquisition of Transok, while the remainder was used for capital expenditures
and investments in unconsolidated entities.
CASH FLOWS FROM FINANCING ACTIVITIES
Tejas increased long-term debt by $704.2 million during the first half of 1996.
Tejas borrowed $605.9 million (prior to voluntary prepayment of $38 million and
including acquisition costs) to finance the
10
Transok acquisition. During the same period, $105 million of debt was retired,
$3.3 million of net borrowings were made under Tejas' various money market lines
and $200 million of Transok debt was retained in the acquisition.
LIQUIDITY
Tejas' working capital decreased $59.8 million to $(19.2) million at
June 30, 1996 from $40.6 million at December 31, 1995. This decrease was due
primarily to increased payable balances from the acquisition of Transok and a
decline in Tejas' 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.
To finance the Transok acquisition, on June 6, 1996, a subsidiary of
Tejas entered into the Transok Credit Facility. At June 30, 1996, available
borrowing capacity under the Transok Credit Facility was $38 million after
giving effect to a voluntary prepayment. At July 31, 1996, after giving effect
to the application of net proceeds of the public offering of common stock ( see
Note 7 of "Notes to Consolidated Financial Statements"), available borrowing
capacity remained at $38 million as the result of a reduction in the commitment
level under the facility to $321.7 million. No principal payments are required
until the facility's final maturity on December 31, 1997. The Transok Credit
Facility is 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.
The amount of loans, advances and distributions (collectively
"Distributions") that may be made directly or indirectly by Transok to Tejas
under the Transok Credit Facility is subject to certain limitations. At June 30,
1996, Distributions to Tejas of $5.4 million were permitted in the form of
loans. In general, dividend allowances may be adjusted by a percentage of
consolidated quarterly net earnings or losses of Transok, certain investments
and any cumulative aggregate Distributions. Such limitations as herein described
are not expected to have any material effect on the ability of Tejas to meet its
cash obligations.
In connection with Tejas' acquisition of Transok, Tejas (i) incurred
indebtedness of $387 million, net of a voluntary payment, under the Transok
Credit Facility, which matures on December 31, 1997, (ii) borrowed $180.9
million (including acquisition costs) under the Tejas Acadian Holding Company
credit facility and (iii) retained $200 million of Transok's medium term notes.
At June 30, 1996, Tejas' long-term debt with banks totaled $800.1
million consisting of $398.8 million borrowed under its $480 million revolving
credit facilities established for its subsidiaries, Tejas Acadian Holding
Company ("TAHC") and Tejas Natural Gas Company ("TNGC"), $387 million borrowed
under the Transok Credit Facility and $14.3 million borrowed under various money
market credit lines. In addition, Tejas had $200 million of medium term notes
("MTN's") that were retained by Transok as part of the Transok acquisition, and
$11.2 million in notes payable related to industrial development revenue bonds
issued by Lewis and Pleasants Counties, West Virginia.
The obligations under the TAHC and TNGC revolving credit agreements are
secured by the capital stock, partnership interests and various intercompany
notes of all material subsidiaries and partnerships of TAHC (excluding the
capital stock of Acadian, but including the capital stock and partnership
interests of the material operating subsidiaries and partnerships of Acadian)
and are guaranteed by such subsidiaries and partnerships. In addition, Tejas
guarantees TNGC's obligations under a lease of certain pipeline and related
facilities from a third party. The obligations under the Transok Credit Facility
are secured by the capital stock of all of Transok's subsidiaries and certain
partnership interests held by Transok and are guaranteed by such subsidiaries.
The Transok Credit Facility is also secured by certain intercompany notes. In
addition, Tejas guarantees Transok's obligations under the Transok Credit
Facility and under the lease agreement for the Transok Plants. All of Tejas'
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.
The notes payable related to Lewis & Pleasants counties' bonds are
secured by bank letters of credit
11
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 TAHC and TNGC have additional borrowing capacity available
under their credit facilities, the amount of loans, advances and distributions
that may be made to Tejas from TAHC or TNGC is subject to certain limitations.
At June 30, 1996, the permitted amount of such payments was $123.3 million, of
which $24.8 million could be paid as dividends and $98.5 million could be loaned
to Tejas or used to repay loans from Tejas. Such limitations as herein described
are not expected to have any material effect on the ability of Tejas to meet its
cash obligations. Tejas' liquidity is ultimately dependent on cash generated by
operations, and 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 the TAHC and
TNGC revolving credit facilities and the outstanding principal balance at June
30, 1996, no principal payments are required until early 1999. The Transok
Credit Facility matures on December 31, 1997.
As part of the Transok acquisition, Tejas entered into a five-year
operating lease with a third party (the "Lessor") for seven natural gas
processing plants (the "Transok Plants"). The Lessor is leasing the Transok
Plants to a subsidiary of Tejas (the "Lessee") for a five-year term with annual
lease payments of approximately $9 million. The lease agreement may be extended
by the Lessee with approval by the Lessor, and provides the Lessee the option to
purchase the Transok Plants during the term. The option to purchase all of the
Transok Plants is exercisable for $125 million. If such purchase option is not
exercised, the Lessee will be obligated to pay the Lessor a termination fee of
approximately $106 million at the end of the lease. However, such fee will be
reduced by the amount, if any, by which the proceeds from the Lessor's sale of
the assets exceeds $19 million. The lease also provides the Lessee the option to
purchase at any time during the term one or more of the Transok Plants for an
aggregate amount not exceeding $31 million, with corresponding reductions in the
$106 million termination fee and $19 million threshold amount.
Tejas owns, as a result of the Transok acquisition, a 26 BCF storage
facility in Oklahoma (the "Greasy Creek Storage Facility"). The Greasy Creek
Storage Facility requires the maintenance of cushion gas in order to sustain
operational requirements. Such gas is currently provided by Transok.
In order to hedge the interest rate risks associated with Tejas'
financing activities (including an operating lease obligation), Tejas frequently
enters into interest rate swaps with financial institutions in order to manage
interest rate risk. While the interest rate swaps eliminate the risks associated
with increases in the floating interest rates of Tejas' obligations, the swaps
also eliminate the opportunities associated with reductions in such floating
interest rates. Payments received or made by Tejas under such interest rate
swaps are recorded as reductions to or increases in interest expense over the
life of the interest rate derivative instrument. In connection with the Transok
acquisition, Tejas also entered into certain fixed interest rate swaps and caps
and a notional amount of $200 million of other interest rate option agreements.
As of June 30, 1996, Tejas had entered into a total notional amount of $580.5
million of fixed interest rate swaps and caps for hedging purposes with a
weighted average LIBOR rate of 6.22% (excluding Tejas' average borrowing cost
over LIBOR). The weighted average life of the interest rate swap and cap hedging
transactions is approximately four years.
Tejas uses derivative financial instruments (primarily futures, swaps
and other contracts) as an extension of its commercial natural gas purchases and
sales and to hedge price exposure, including location and pricing basis, of its
storage and exchange gas inventories, commitments, and certain anticipated
transactions. While the derivative financial instruments are intended to reduce
the risks associated with unfavorable changes in such prices, the derivative
financial instruments also reduce the opportunities associated with favorable
changes in market prices. Any increases or decreases in the market value of such
derivative transactions are deferred and accounted for as part of the
transactions or activities being hedged. Tejas' interest rate and other
derivative agreements are with established exchanges, energy companies, and
major financial institutions, and Tejas believes that its counter parties will
be able to satisfy their contractual obligations. Coral engages in similar
derivatives transactions for its own account. Transok has historically entered
into anticipatory hedges for gas storage and gas processing. The methodology
used
12
could result in Transok's having open positions in anticipation of future
requirements.
In the normal course of business, Tejas regularly reviews opportunities
such as Transok 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 1996 to be favorable when compared to the 1995 annual period due to several
factors. Tejas believes there are many opportunities available for future growth
and continued expansion of operations. The Transok acquisition provides Tejas
with the opportunity to increase the sale of natural gas to certain new markets
in Oklahoma and to increase the flow of natural gas, within the state, west to
east. While no prediction can be made as to the impact of Coral on Tejas'
prospects, Tejas 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 Coral. Additionally, substantial
capacity remains to be developed at the WCLSF which has the potential to
continue to enhance profits from services provided to both suppliers and
consumers and from gas held in storage for future delivery. The capital invested
by Tejas at the WCLSF since September 1993 has increased the availability of
natural gas and the operational flexibility of the WCLSF. This permitted Tejas
to sell approximately 11 BCF of additional natural gas volumes out of the
storage facility during the 1995-96 winter season and to provide additional
daily storage injection and withdrawal capabilities to accommodate the seasonal
needs of customers. Further development of the WCLSF is possible and Tejas will
continue to monitor and review the economic benefit of such development. There
can be no assurance that market conditions, including the average cost of
natural gas held in storage, will always be conducive to maintaining the current
level of profitability. 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, revenues or earnings.
In July 1996, Tejas completed the sale of 3,075,000 shares of common
stock in a public offering. Net proceeds of approximately $103 million from the
public offering were used to repay indebtedness under the Transok Credit
Facility. Tejas intends to refinance or make further payments to reduce
borrowings under the Transok Credit Facility (which matures on December 31,
1997) and other indebtedness incurred in connection with the Transok acquisition
through the possible sale of interests in non-strategic assets, formation of
partnerships or joint ventures, placement of long-term debt, renegotiation of
credit facilities, the application of excess cash flow, if any, or otherwise. In
this connection, Tejas is considering the sale of approximately 1,000 miles of
pipeline and a natural gas processing plant in one of Transok's gathering
systems. There can be no assurance that Tejas will be able to pay down such
borrowings or other indebtedness or successfully carry out such refinancing
measures or that such measures, if available, would be on terms favorable to
Tejas. Because of the many opportunities Tejas believes are available for future
growth and continued expansion of operations, Tejas anticipates using
substantially all of its available cash in 1996 and 1997 for capital
expenditures.
The statements included in this Report on Form 10-Q regarding future
financial performance and results and the other statements that are not
historical facts are forward-looking statements. The words "expect," "project,"
"estimate," "predict," "anticipate," "believes" and similar expressions are also
intended to identify forward-looking statements. Such statements and Tejas'
results are subject to numerous risks, uncertainties and assumptions, including
but not limited to, changes in general economic conditions in the United States,
changes in laws and regulations to which Tejas is subject, the cost and effects
of legal and administrative claims and proceedings against Tejas or its
subsidiaries or which may be brought against
13
Tejas or its subsidiaries, conditions in the capital markets utilized by Tejas
to access capital to finance operations, Tejas' ability to develop expanded
markets and product offerings as well as maintain existing markets, energy
prices, competition from other pipelines and alternate fuels, the general level
of natural gas and petroleum product demand and weather conditions, among other
things, and other risks and uncertainties described in this Report on Form 10-Q
and in Tejas' other filings with the Securities and Exchange Commission.
Further, natural gas prices, which directly impact transportation and gathering
and processing throughput and operating profits, may fluctuate in unpredictable
ways. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those indicated.
14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Tejas is a defendant or party in various lawsuits that have risen in the
ordinary course of Tejas' business. In particular, a subsidiary of Tejas is a
defendant in THE LONG TRUSTS V. TEJAS GAS CORP. ET. AL., 123rd judicial District
Court, Panola County, Texas, filed March 1, 1989, in which plaintiffs assert
claims and allege damages for breach of contract and failure to take-or-pay for
natural gas pursuant to three natural gas purchase contracts. Plaintiffs allege
that, in addition to failing to take or pay for gas, Tejas breached (a) one of
the contracts by failing to take a minimum quantity of gas and to install and
maintain pipeline facilities sufficient to permit Tejas to meet its quantity
purchase obligations, and (b) all three contracts by failing to take gas in
quantities sufficient to enable plaintiffs to produce ratably with other
producers in a common reservoir. In plaintiffs' Sixth Amended Original Petition
filed June 6, 1995, the plaintiffs are seeking take-or-pay damages for the ten
year period 1984-1994 in excess of $36 million, plus pre-judgment interest,
post-judgment interest, attorneys' fees and court costs and other unspecified
actual damages. In connection with their depositions in this matter, certain
expert witnesses retained by The Long Trusts have presented damage models
purporting to show approximately $60 million in take-or-pay damages and $70
million in damages for failure to take The Long Trusts' gas ratably. Management
disputes The Long Trusts' claims and believes that The Long Trusts' damage
models are seriously flawed. On January 6, 1993, the court entered an
interlocutory summary judgment order granting in part and denying in part
plaintiffs' motions for summary judgment. The court found, among other things,
as a matter of law that (a) Tejas breached the minimum take obligations under
one of the contracts, (b) Tejas is not entitled to any credits or offsets for
natural gas purchased by third parties, and (c) the "availability" of natural
gas for take-or-pay purposes is established by the delivery capacity testing
procedures in the contracts. Damages, if any, have not been determined. The
effect of this order on Tejas' case is unclear and Tejas has sought
clarification and rehearing, but intends nevertheless to defend its position
aggressively. As of August 12, 1996, no firm trial date has been set.
Although Tejas has not obtained a formal opinion, based on discussions
with outside counsel and an internal examination of this lawsuit, management
believes that it has adequate defenses or recourse to third parties relating to
such lawsuit and does not believe this matter will have a material adverse
effect on Tejas' financial condition. Because of the relationship between The
Long Trusts contracts and certain contracts between Tejas and Valero
Transmission Company ("VTC"), and in order to resolve existing and potential
claims and disputes, Tejas, VTC and Valero Transmission, L.P. ("VTLP") entered
into an agreement, pursuant to which, among other things, Tejas, VTC and VTLP
would cooperate in the conduct of The Long Trusts litigation, and VTC and VTLP
would bear a substantial portion of the costs of any appeal and of the amount of
any nonappealable final judgment rendered against Tejas. On April 15, 1994, the
plaintiffs named VTC and VTLP (collectively "Valero") as additional defendants
to the lawsuits, alleging that Valero intentionally and maliciously interfered
with the plaintiffs' contracts with Tejas. In its Sixth Amended Original
Petition, plaintiffs are seeking damages against Valero in an amount in excess
of $36 million, and plaintiffs added a conspiracy claim against Tejas alleging
that Tejas conspired with Valero in interfering with the contracts. Plaintiffs
also have added a claim for exemplary damages treble the amount of the actual
damages, if any, found by the court for the interference and conspiracy claims.
Plaintiffs assert that Tejas should be jointly liable with Valero for the
damages plaintiffs have asserted against Valero.
ITEM 2. CHANGE IN SECURITIES
On April 11, 1996, the Tejas Board of Directors authorized a
three-for-two split of the Common Stock effected in the form of a stock dividend
payable to stockholders of record as of April 26, 1996. As a result of the
split, 5,801,769 shares of Common Stock were added to the 11,603,263 common
shares outstanding at December 31, 1995. Also as a result of the split, the
conversion price of Tejas' 5 1/4% Convertible Preferred Stock was adjusted from
$63.6364 to $42.4243 (equivalent to an adjustment in the conversion rate from
.7857 to 1.1786 shares of Common Stock for each Depositary Share representing a
15
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
April 27, 1996. 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 split.
On July 22, 1996 Tejas sold 3,075,000 shares of common stock, par value
$.25 per share (the "Common Stock") in an underwritten public offering. Proceeds
to Tejas from the sale of the Common Stock was approximately $103 million. The
proceeds were used to reduce indebtedness under the Transok Credit Facility.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.*
Tejas' Annual Meeting of stockholders was held on May 9, 1996. Robert G.
Stone, Jr. and Ronald F. Walker were re-elected to the Board of Directors to
serve until the 1999 annual meeting. The following are the names of directors
whose terms of office as director continued after the meeting (expiration date
in parentheses): Frederic C. Hamilton (1997), Jay A. Precourt (1997), Charles C.
Gates (1997), Charles R. Crisp (1998), A. J. Miller (1998), and Arthur L. Kelly
(1998). In addition, the holders of Common Stock approved the adoption of the
Director Stock Award Plan and ratified the selection of independent auditors for
1996.
The number of shares of Common Stock on the record date of March 12,
1996 was 11,603,263. The number of shares of Common Stock represented at the
meeting in person or by proxy was 8,805,531.
The following were the voting results for each proposal:
<TABLE>
<CAPTION>
Broker
For Against Withheld Abstentions Non-Votes
------------ ---------- --------- ------------ ---------
<S> <C> <C>
a) Election of Directors
Robert G. Stone, Jr. .................. 8,754,743 -- 50,788 -- --
Ronald F. Walker ...................... 8,755,718 -- 49,813 -- --
b) Approval of Director Stock
Award Plan ............................ 8,262,204 237,589 149,223 -- 156,515
c) Ratify selection of independent
auditors for 1996 ..................... 8,798,884 2,095 4,552 -- --
</TABLE>
- -----------
* The number of shares of Common Stock in this item have not been
adjusted to reflect the three-for-two stock split of Common Stock implemented in
April 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
2.1* Agreement of Merger dated as of May 9, 1996 between Central and South
West Corporation and Tejas Gas Corporation relating to Transok, Inc., as
amended by First Amendment to Agreement of Merger dated June 6, 1996
(filed as Exhibit 2(a) to Tejas' Form 8-K dated June 18, 1996, as
amended by Form 8-K/A dated July 17, 1996).
2.2* Lease Agreement dated as of June 6, 1996 between Canadian Imperial Bank
of Commerce Inc. ("CIBC Inc."), as lessor, and Transok Acquisition
Corporation III ("TAC III"), as lessee (filed as Exhibit 2(b) to Tejas'
Form 8-K dated June 18, 1996, as amended by Form 8-K/A dated July 17,
1996).
16
2.3* Participation Agreement dated as of June 6, 1996 between TAC III, as
lessee, CIBC Inc., as lessor, Canadian Imperial Bank of Commerce, New
York agency, as administrative agent, and Bank of Montreal, as
documentation agent (filed as Exhibit 2(c) to Tejas' Form 8-K dated June
18, 1996, as amended by Form 8-K/A dated July 17, 1996).
2.4* Secured Credit Agreement dated as of June 6, 1996 between Transok
Acquisition Company, Bank of Montreal and CIBC Inc. (filed as Exhibit
2(d) to Tejas' Form 8-K dated June 18, 1996, as amended by Form 8-K/A
dated July 17, 1996).
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).
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).
4.10 Issuing and Paying Agency Agreement Medium Term Notes dated as of March
30, 1992 between Transok, Inc. and Central and South West Services,
Inc., including (i) Privately-Placed Medium- Term Notes Administrative
Procedures for Fixed Rate and Floating Rate Notes as Exhibit A, (ii)
Form of Fixed Rate Medium-Term Note as Exhibit B, (iii) Form of Floating
Rate Medium-Term Notes as Exhibit C.
10.1 First Amendment Agreement to the Limited Partnership Agreement of Coral
Energy Resources, L.P.dated April 3, 1996.
10.2 Second Amendment Agreement to the Limited Partnership Agreement of Coral
Energy Resources, L.P. dated April 10, 1996.
10.3 Third Amendment Agreement to the Limited Partnership Agreement of Coral
Energy Resources, L.P. dated June 3, 1996.
10.4 Sixth Amendment to Tejas Gas Corporation Thrift Plan dated June 6, 1996.
17
10.5 Amended and Restated Firm Intrastate Service Agreement dated as of March
12, 1996 between Transok, Inc., as transporter, and Public Service
Company of Oklahoma, as shipper, as amended by Amendment dated as of
June 6, 1996.
10.6 Indemnification Agreement dated as of June 6, 1996 between Public
Service Company of Oklahoma and Transok, Inc.
11.1 Computation of Earnings Per Common Share
27.1 Financial Data Schedule
- -----------------
* Incorporated by reference as indicated.
(b) Reports on Form 8-K
A Current Report on Form 8-K dated June 18, 1996, as amended by a Form
8-K/A dated July 17, 1996, was filed during the second quarter of 1996.
Such form and amendment were filed with respect to Item 2 of Form 8-K
"Acquisition or Disposition of Assets" and Item 7 of Form 8-K "Financial
Statements and Exhibits" to report the acquisition of Transok, Inc. by
Tejas Gas Corporation on June 6, 1996, and to file certain exhibits with
respect thereto. Financial statements included in such Form 8-K filing
included certain historical financial information for the assets and
business acquired and certain pro forma financial information pertaining
to the business combination.
19
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: August 14, 1996
19
EXHIBIT 4.10
ISSUING AND PAYING AGENCY AGREEMENT
MEDIUM-TERM NOTES
THIS ISSUING AND PAYING AGENCY AGREEMENT, dated as of March 30, 1992
(the "Agreement"), between TRANSOK, INC., a corporation organized under the laws
of the State of Oklahoma (the "Company"), and CENTRAL AND SOUTH WEST SERVICES,
INC., a corporation organized and existing under the laws of the State of Texas,
as issuing and paying agent (the "Issuing and Paying Agent", which term shall
also refer to any duly appointed successor thereto);
WITNESSETH:
SECTION 1. APPOINTMENT OF ISSUING AND PAYING AGENT. The Company proposes
to issue and sell its medium-term notes having maturities of 9 months to 30
years from their dates of issue (the "Medium-Term Notes" or the "Notes" or,
where referred to individually, the "Note") and has appointed Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, The First Boston
Corporation and Smith Barney, Harris Upham & Co. Incorporated as the placement
agents and any additional placement agent appointed by the Company in accordance
with the terms and conditions of the Private Placement Agreement, dated March
30, 1992, among the Company and said placement agents (each, a "Placement Agent"
and collectively, the "Placement Agents") for the Notes. The Company hereby
appoints and authorizes the Issuing and Paying Agent to act, on the terms and
conditions specified herein, as issuing and paying agent for the Notes, and the
Issuing and Paying Agent hereby accepts such appointment.
SECTION 2. MEDIUM-TERM NOTE FORMS; SIGNATURE. The Company will from time
to time furnish the Issuing and Paying Agent with an adequate supply of
registered Notes, without coupons, serially numbered, which will have the
following information left blank:
(i) in the case of Notes which will bear fixed rates of interest
(each, a "Fixed Rate Note" and collectively, "Fixed Rate Notes"),
the interest rate;
(ii) in the case of Notes which will bear rates of interest that are
subject to adjustment from time to time (each, a "Floating Rate
Note" and collectively, "Floating Rate Notes"), the interest rate
basis or interest rate bases, initial interest rate, spread, if
any, spread multiplier, if any, initial interest reset date,
interest reset dates, interest reset period, index maturity,
maximum and minimum interest rates, if any, interest payment
period and the calculation agent (if other than the Issuing and
Paying Agent); and
(iii) in each case, the name and address of the Registered Holder (as
hereinafter defined), the principal amount, original issue date,
stated maturity date, interest payment dates, initial redemption
date, if any, initial redemption percentage, if any, annual
redemption percentage reduction, if any, holder's optional
repayment date(s), if any, such other terms as may be set forth
in the applicable Note and such other applicable terms as may be
specified with respect to such Note in accordance with the
Privately-Placed Medium-Term
2
Notes Administrative Procedures for Fixed Rate and Floating Rate
Notes (the "Administrative Procedures") (a copy of which is
attached hereto as Exhibit A).
Each Floating Rate Note will bear interest at a rate determined by
reference to the interest rate basis or interest rate bases, which may be
adjusted by a spread and/or multiplied by a spread multiplier. Each Floating
Rate Note will designate the applicable interest rate basis or interest rate
bases and any related spread and/or spread multiplier, if any. Each such
interest rate basis or interest rate bases shall be calculated by the Issuing
and Paying Agent, as calculation agent (in such capacity, the "Calculation
Agent"). The interest rate borne by any particular Note may vary as against the
interest rate borne by any other Note. Any such variation in the interest rate
with respect to a particular Note shall not affect the interest rate borne by
any other Note issued hereunder. Each Note will be signed manually or by
facsimile by an Authorized Representative (as hereinafter defined).
The Notes (i) will be substantially in the forms of Exhibit B hereto (in
the case of Fixed Rate Notes), Exhibit C hereto (in the case of Floating Rate
Notes) or such additional forms as may hereinafter be designated by the Company,
(ii) will have maturities of 9 months to 30 years from their respective dates of
issue and (iii) will be issued in the respective order of the serial numbers
imprinted thereon in denominations of $150,000 and any larger denominations in
integral multiples of $1,000. The Issuing and Paying Agent will acknowledge
receipt of the Notes delivered to it and hold such blank Notes in safekeeping.
SECTION 3. AUTHORIZED REPRESENTATIVES AND INSTRUCTING REPRESENTATIVES.
From time to time the Company will furnish the Issuing and Paying Agent with a
certificate of the Company, in the form attached hereto as EXHIBIT D, certifying
the authority and specimen signatures of officers or agents authorized to (x)
execute the Notes on behalf of the Company by manual or facsimile signature and
give instructions and notices on behalf of the Company to the Issuing and Paying
Agent (each such officer or agent, an "Authorized Representative") and (y)
designate in writing certain representatives or agents of the Company (each such
representative, an "Instructing Representative") authorized to give instructions
and notices on behalf of the Company to the Issuing and Paying Agent. Until the
Issuing and Paying Agent receives a subsequent incumbency certificate
substantially in the form of Exhibit D, the Issuing and Paying Agent shall be
entitled to rely on the last such certificate delivered to it for purposes of
determining who is an Authorized Representative and an Instructing
Representative.
The Issuing and Paying Agent shall have no responsibility to the Company
to determine (i) by whom or by what means a facsimile signature may have been
affixed on the Notes or (ii) whether any facsimile or manual signature is
genuine, if such facsimile or manual signature resembles the specimen signatures
filed with the Issuing and Paying Agent by duly authorized officers of the
Company.
Any Note bearing the manual or facsimile signature of a person who is an
Authorized Representative on the date such signature is affixed shall bind the
Company after the completion
3
thereof by the Issuing and Paying Agent, notwithstanding that such person shall
have ceased to be an officer or agent of the Company on the date such Note is
countersigned and delivered by the Issuing and Paying Agent.
SECTION 4. ISSUANCE INSTRUCTIONS, COMPLETION, AUTHENTICATION AND
DELIVERY OF NOTES. (a) Not later than 1:00 p.m., New York City time on the
second Business Day (as defined in Section 7 hereof) next preceding the Business
Day on which any Note is to be delivered (the "Settlement Date") written
instructions with respect to the preparation and delivery of such Note shall be
given by the Company, to the Issuing and Paying Agent signed by an Authorized
Representative or Instructing Representative. Such instructions, with respect to
the Notes, shall include:
(i) Exact name of the person in whose name a Note is to be registered
(after such registration such person referred to herein as the
"Registered Holder", such term to include any subsequent
transferee of such Note once such transfer is reflected in the
Note Register (as defined below));
(ii) Exact address of the Registered Holder;
(iii) Exact address of the Registered Holder for interest payments
(including the location and account number of any bank account
designated by the Registered Holder to receive payments) if
different from (ii) above;
(iv) Taxpayer identification number of the Registered Holder, if
applicable;
(v) Principal amount of such Note;
(vi) Trade date;
(vii) Settlement date (original issue date);
(viii) Interest payment dates;
(ix) Stated maturity date;
(x) (a) Fixed Rate Notes: interest rate;
(b) Floating Rate Notes:
(1) interest rate basis or interest rate bases;
(2) initial interest rate;
(3) spread and/or spread multiplier, if any;
4
(4) initial interest reset date;
(5) interest reset dates;
(6) interest reset period;
(7) interest payment period;
(8) index maturity;
(9) maximum and minimum interest rate, if any;
(10) calculation agent (if other than the Issuing and
Paying Agent);
(xi) Initial redemption date, if any;
(xii) Initial redemption percentage, if any;
(xiii) Annual redemption percentage reduction, if any;
(xiv) Holder's optional repayment date(s), if any;
(xv) Other terms, if any;
(xvi) Proceeds, net of commission; and
(xvii) Delivery instructions, if different from Settlement Procedures F
through J as set forth in the Administrative Procedures.
(b) Upon receipt of the information set forth in subsection (a) above,
the Issuing and Paying Agent will confirm to the treasury department of Central
and South West Services, Inc. and the Company (in writing) the aggregate
principal amount of the Notes issued hereunder and outstanding as of such date
after giving effect to such transaction and to all other transactions of which
the Company through an Authorized Representative or Instructing Representative
has given instructions to the Issuing and Paying Agent but which have not yet
been settled.
(c) Upon receipt of such instructions, the Issuing and Paying Agent
shall:
(i) complete each Note with the information specified in Section 4(a)
above, as applicable;
(ii) record each Note in the Note Register (as defined in Section 14
hereof);
5
(iii) cause each Note to be countersigned manually by any one of the
officers or employees of the Issuing and Paying Agent duly
authorized for such purpose;
(iv) send (via telecopy) a copy of the completed Note to the relevant
Placement Agent's clearing operation ("Clearing") and obtain
approval of the Note by Clearing in accordance with Settlement
Procedures C and D set forth in the Administrative Procedures;
(v) deliver the original of each Note to the relevant Placement Agent
by overnight courier to be received by the Placement Agent on the
Business Day prior to the Settlement Date; and
(vi) retain one copy of each Note for its records and send a copy of
each such Note to the Company and the relevant Placement Agent.
(d) In the event any Note delivered to a Placement Agent is determined
by such Placement Agent to be unacceptable for delivery to the customer, the
Issuing and Paying Agent will follow the procedures contained in Settlement
Procedures H and I set forth in the Administrative Procedures.
SECTION 5. RELIANCE ON INSTRUCTIONS. Telephone instructions given by an
Authorized Representative or an Instructing Representative to the Issuing and
Paying Agent may be electronically voice-recorded by the Issuing and Paying
Agent and such recording is hereby consented to. Should any discrepancy develop
between telephonic instructions and the facsimile confirmation thereof, the
Issuing and Paying Agent shall promptly clarify such discrepancy with the
Company. However, if the Issuing and Paying Agent is unable to contact the
Company, the facsimile instructions will be deemed the controlling and proper
instructions. The Issuing and Paying Agent shall incur no liability to the
Company in acting hereunder upon telephonic or other instructions provided for
herein which the Issuing and Paying Agent reasonably believed in good faith to
have been given by an Authorized Representative or Instructing Representative in
writing to the Issuing and Paying Agent as a person authorized to give such
instructions hereunder.
SECTION 6. PROCEEDS OF SALE OF NOTES. (a) Proceeds in payment for the
Notes will generally be paid directly to the Company. If, however, any such
proceeds are paid to the Issuing and Paying Agent, the Issuing and Paying Agent
shall wire transfer, or otherwise pay to the Company, immediately available
funds in accordance with the instructions provided in Section 6(b) hereof. From
time to time, upon receipt of instructions given in the manner contemplated by
Section 4 hereof, proceeds from the sale of Notes may be used in payment of
other Notes at maturity or be transferred for credit to the account of the
Company at another bank.
(b) All proceeds received by the Issuing and Paying Agent in payment for
the Notes shall be paid to the Company by wire transfer (or otherwise) in
immediately available funds in accordance
6
with the following instructions, unless the Issuing and Paying Agent shall be
instructed differently in writing by an Authorized Representative or Instructing
Representative:
Bank Name and Address: Mellon Bank, N.A.
One Mellon Bank Plaza
Pittsburgh, PA 15258-0001
Account Name: Central and South West Corporation
Account Number: 138-9943
ABA Routing Number: 043000261
SECTION 7. PAYMENT OF INTEREST. Interest payments will be made, in the
case of a Fixed Rate Note, on each March 1 and September 1 (unless otherwise
specified on the face of such Fixed Rate Note) and, in the case of a Floating
Rate Note, on the dates specified on the face of such Floating Rate Note (in
each case, the "Interest Payment Dates"), and in each case, on the date of
redemption or repayment, if any, and at maturity. If any Interest Payment Date,
maturity date or date of redemption or repayment of a Fixed Rate Note falls on a
day that is not a Business Day, the related payment of principal, premium, if
any, or interest shall be made on the next succeeding Business Day with the same
force and effect as if made on the date such payment was due, and no interest
shall accrue on the amount so payable for the period from and after such
Interest Payment Date, maturity date or date of redemption or repayment, as the
case may be. If any Interest Payment Date (other than a maturity date or date of
redemption or repayment) of any Floating Rate Note is originally scheduled to
occur on a day that is not a Business Day, such Interest Payment Date shall
instead be the next day that is a Business Day except that in the case of a
Floating Rate Note as to which LIBOR is the applicable interest rate basis, if
such Business Day falls in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding Business Day. If any maturity
date or date of redemption or repayment of any Floating Rate Note falls on a day
that is not a Business Day, the related payment of principal, premium, if any,
or interest shall be made on the next succeeding Business Day with the same
force and effect as if it were made on the date such payment was due, and no
interest shall accrue on the amount so payable for the period from and after
such maturity date or date of redemption or repayment, as the case may be.
All such interest payments (other than interest due on the date of
redemption or repayment or at maturity) will be paid to the Registered Holder of
such Note at the close of business on the Regular Record Date. In the case of a
Fixed Rate Note, the "Regular Record Date" with respect to any March 1 or
September 1 Interest Payment Date shall be February 15 or August 15 (whether or
not a Business Day) as the case may be, immediately preceding such Interest
Payment Date; and the "Regular Record Date" with respect to any Interest Payment
Date other than March 1 or September 1 shall be the fifteenth calendar day
(whether or not a Business Day) immediately preceding such Interest Payment
Date. In the case of a Floating Rate Note, the "Regular Record Date" with
respect to any Interest Payment Date shall be the fifteenth calendar day
(whether or not a Business Day) immediately preceding such Interest Payment
Date.
7
For purposes of this Agreement, the term "Business Day" means any day,
other than a Saturday or Sunday or a day on which banks in The City of New York)
(and, with respect to Floating Rate Notes as to which LIBOR is an applicable
interest rate basis, the City of London) are generally authorized or obligated
by law or executive order to close.
Notwithstanding the foregoing, if a Note is issued between the Regular
Record Date next preceding an Interest Payment Date and such Interest Payment
Date, the first payment of interest on such Note will be made on the next
succeeding Interest Payment Date following the next succeeding Regular Record
Date, to the Registered Holder appearing in the Note Register (as hereinafter
defined) on the Regular Record Date immediately succeeding such first Interest
Payment Date.
Unless otherwise provided on the face thereof, each Fixed Rate Note will
accrue interest from the most recent Interest Payment Date to which interest has
been paid or duly provided for or, if no interest has been paid, from the
original issue date until the principal amount thereof has been paid or
otherwise made available for payment. Unless otherwise provided on the face
thereof, each Floating Rate Note will accrue interest from, and including, the
original issue date at the rate of interest borne thereby, determined from time
to time as provided in the applicable Floating Rate Note, until the principal
thereof is paid or otherwise made available for payment.
Interest payments on the Floating Rate Notes shall be the amount of
interest accrued from, and including, the next preceding Interest Payment Date
in respect of which interest has been paid (or from, and including, the original
issue date, if no interest has been paid with respect to such Floating Rate
Note) to, but excluding, the Interest Payment Date; PROVIDED, HOWEVER, that in
the case of Floating Rate Notes on which the interest rate is reset daily or
weekly, each interest payment shall include interest accrued from, and
including, the original issue date (if no interest has been paid) or from, but
excluding, the last Regular Record Date to which interest has been paid, as the
case may be, through, and including, the Regular Record Date next preceding the
applicable Interest Payment Date, except that the interest payments at maturity
or upon earlier redemption or repayment, if applicable, will include interest
accrued to, but excluding, the date of maturity or redemption or repayment, as
the case may be.
Unless otherwise provided on the face thereof, interest on Fixed Rate
Notes (including payments for partial periods) will be calculated and paid on
the basis of a 360-day year of twelve 30- day months. In the case of Floating
Rate Notes, unless otherwise provided on the face thereof, interest will be
calculated and paid on the basis of the actual number of days in the interest
period divided by 360 or, if the interest rate basis designated on the face of
the applicable Floating Rate Note is the "Treasury Rate", by the actual number
of days in the year.
All interest payments on any Note (other than interest due on the date
of redemption or repayment, if applicable, or at maturity) will be paid by check
and mailed by the Issuing and Paying Agent to the Registered Holder of such Note
at its address set forth in the Note Register on the immediately preceding
Regular Record Date, or at such other place as such Registered Holder shall
designate to the Issuing and Paying Agent in writing PROVIDED, HOWEVER, that at
the option of the
8
Issuing and Paying Agent, payments of interest on a Note may be made by
Automated Clearinghouse ("ACH") transfer to a bank account designated by the
Registered Holder. Notwithstanding the foregoing, upon receipt of written
instructions from the Registered Holder of an aggregate principal amount of
Notes in excess of $10,000,000 having the same Interest Payment Date not less
than fifteen (15) calendar days prior to such Interest Payment Date, the Issuing
and Paying Agent will make such interest payment by the transfer of immediately
available funds to such account at a bank the Registered Holder of such Notes
shall have designated; PROVIDED, that such bank has appropriate facilities
therefor. If required by applicable law or requested by the Company, the Issuing
and Paying Agent shall withhold any taxes or other governmental charges on any
payments made in connection with the Notes.
SECTION 8. PAYMENTS AT MATURITY. Upon the earlier of the date of
redemption or repayment, if applicable, or maturity of any Note, the Issuing and
Paying Agent will pay, subject to the receipt of funds as provided in Section 11
hereof, and against presentation and surrender of such Note by the Registered
Holder thereof at the office of the Issuing and Paying Agent located at 1616
Woodall Rodgers Freeway, Dallas, TX 75202 Attention: Investor Relations, or at
such other office or agency of the Company as the Company shall designate in
writing to such Registered Holder, the principal amount of such Note, together
with accrued interest, if any, on the date of redemption or repayment or at
maturity, and any redemption premium specified in any Note. Such payment will be
made in immediately available funds; PROVIDED, that the Note is presented to the
Issuing and Paying Agent in accordance with the procedures set forth in EXHIBIT
E. The Issuing and Paying Agent will forthwith (i) cancel each such Note, (ii)
mark it "PAID", (iii) make appropriate entries in its records, (iv) send the
Company an appropriate debit advice concerning the payment made to the
Registered Holder, (v) hold each such Note for one year after the date of
cancellation, and (vi) after such one-year period destroy each such Note and
send the Company an affidavit of destruction on the date each such Note is
destroyed.
SECTION 9. DESIGNATION OF ACCOUNTS TO RECEIVE PAYMENT. A bank account
may be designated to the Issuing and Paying Agent to receive payments of
interest, premium, if any, and principal under Sections 7 and 8 hereof either
(i) by an Authorized Representative or Instructing Representative in the
authentication instructions given by it to the Issuing and Paying Agent under
Section 4(a) hereof in respect of a particular purchase of Notes, or (ii) in the
event that the authentication instructions make no designation, or that the
Registered Holder wishes to change a designation previously made, by written
notice from the Registered Holder to the Issuing and Paying Agent. Such written
notice must be provided to the Issuing and Paying Agent not later than two (2)
days prior to any payment.
SECTION 10. INFORMATION REGARDING AMOUNTS DUE. The Issuing and Paying
Agent shall, within five Business Days after the applicable Regular Record Date,
furnish Treasury and the Company with a list of interest payments to be made on
the next Interest Payment Date for each Note and in total on all of the Notes
(the "Record Date Statement") and the Issuing and Paying Agent will provide to
the Company and Treasury by the fifteenth day of any month preceding a month in
which any Note will mature a list of the principal, premium, if any, and accrued
interest to be paid
9
on the Notes maturing in the next succeeding month indicating, for each such
Note the principal amount thereof, and, premium, if any, and accrued interest
thereon to be paid at maturity and a list of the principal amount of each Note
outstanding as of the date of such list (the "Maturity Schedule"). In the case
of Floating Rate Notes which reset daily or weekly, however, the Issuing and
Paying Agent will provide to the Company and Treasury a Maturity Schedule on the
tenth day prior to the maturity date or date of redemption or repayment, as the
case may be. Unless otherwise specified in a Floating Rate Note, the interest
rate in effect for the ten calendar days immediately prior to the maturity date
or date of redemption or repayment of such Floating Rate Note shall be the rate
in effect on the tenth calendar day preceding such maturity date or date of
redemption or repayment, as the case may be.
SECTION 11. DEPOSIT OF FUNDS. The Company shall, at least one Business
Day prior to each Interest Payment Date, pay to the Issuing and Paying Agent an
amount in New York Clearing House or similar next-day funds sufficient to pay
all interest due on Notes on such Interest Payment Date and shall, at least one
Business Day prior to the date of redemption or repayment, if applicable, or the
maturity date of any Note, pay to the Issuing and Paying Agent an amount in New
York Clearing House or similar next-day funds sufficient to pay the principal of
any such Note, and accrued and unpaid interest and premium, if any, to the date
of redemption or repayment or the maturity date, as the case may be; PROVIDED,
HOWEVER, that the Company may make such payments to the Issuing and Paying Agent
on an Interest Payment Date or date of redemption or repayment or maturity date,
as the case may be, if made in immediately available funds.
The Issuing and Paying Agent shall be liable to the Company for any
additional interest costs incurred by reason of the gross negligence or willful
misconduct of the Issuing and Paying Agent or any of its officers, directors or
employees in failing to issue Notes as instructed hereunder and for funds paid
by the Issuing and Paying Agent to any Registered Holder in excess of the amount
agreed upon by the Issuing and Paying Agent and the Company pursuant to the
Record Date Statement or Maturity Schedule. Notwithstanding anything herein to
the contrary, the Issuing and Paying Agent is not under any obligation to pay
principal, interest or premium, if any (whether at maturity or upon earlier
redemption or repayment or otherwise) to any Registered Holder unless and until
it has immediately available funds on deposit to make such payments.
SECTION 12. OPTIONAL REDEMPTION. In the event that any Note or Notes
permit the Company to redeem the Note or Notes at its option and the Company
elects to redeem such Note or Notes in whole or in part, the Company shall give
written notice to the Issuing and Paying Agent of the principal amount of such
Note or Notes to be so redeemed not less than 45 calendar days prior to the date
of redemption or such other date that the Company and the Issuing and Paying
Agent mutually agreed upon in writing. The Issuing and Paying Agent shall cause
notice of redemption to be given not less than 30 nor more than 60 calendar days
prior to the date of redemption in the name of and at the expense of the Company
in the manner provided in the Note or Notes. Whenever less than all the Notes at
any time outstanding are to be redeemed, the Notes to be so redeemed shall be
selected by the Company, and the Company shall notify the Issuing and Paying
Agent in writing of the terms of the Notes to be redeemed. If less than all the
Notes of identical terms at any time
10
outstanding are to be redeemed, the Notes to be so redeemed shall be selected by
the Issuing and Paying Agent by lot or in any usual manner approved by it.
SECTION 13. OPTIONAL REPAYMENT. In the event that any Note or Notes
permit the Registered Holder thereof to have such Note or Notes repaid by the
Company at such Registered Holder's option and the Registered Holder elects to
have such Note or Notes repaid in whole or in part, such Note or Notes must be
received, with the form entitled "Option to Elect Repayment" contained thereon
duly completed, by the Issuing and Paying Agent at its offices located at 1616
Woodall Rodgers Freeway, Dallas, TX 75202 Attention: Investor Relations, or such
other address which the Company shall from time to time notify the Registered
Holders of the Notes, not more than 60 nor less than 30 calendar days prior to a
Holder's Optional Repayment Date (as defined in the Notes). A Registered Holder
may receive payment for such Notes in immediately available funds provided the
procedures set forth in Exhibit E are satisfied. Exercise of such repayment
option by the Registered Holder of a Note or Notes shall be irrevocable with
respect to such Note or Notes for which such repayment election is made.
SECTION 14. NOTE REGISTER; REGISTRATION; TRANSFER; EXCHANGE; PERSONS
DEEMED OWNERS. (a) The Issuing and Paying Agent shall maintain the Note Register
on its own internal registration record keeping system. The term "Note Register"
shall mean the definitive record in which shall be recorded the names,
addresses, addresses for payment and taxpayer identification numbers of
Registered Holders of the Notes and details with respect to the issuance,
transfer and exchange of Notes as appropriate.
(b) If any resale or transfer of a Note is proposed to be made (i)
directly to an institutional investor that is an "Accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended
(the "1933 Act") approved by a Placement Agent or the Company or to an
institutional investor approved by any applicable Placement Agent and the
Company (each such institutional investor, an "Institutional Accredited
Investor"), in a transaction approved by the Company, (ii) through a dealer
other than a Placement Agent to an Institutional Accredited Investor in a
transaction approved by the Company, (iii) to a "qualified institutional buyer"
as defined in Rule 144A ("Rule 144A") promulgated under the 1933 Act in a
transaction (other than a transaction involving the resale or transfer to, by,
through, or in a transaction approved by, a Placement Agent) which meets the
requirements of Rule 144A or (iv) to an Institutional Accredited Investor in a
transaction (other than a transaction involving the resale or transfer to, by,
through, or in a transaction approved by, a Placement Agent) which meets the
requirements of Regulation S Promulgated under the 1933 Act, the Issuing and
Paying Agent shall not register the transfer of such Note unless the Registered
Holder thereof and the prospective purchaser have completed the Certificate of
Transfer set forth on the reverse of such Note or a Bond Power in substantially
the form attached as Exhibit A to the Private Placement Memorandum relating to
the offer and sale of the Notes most recently delivered by the Company to the
Issuing and Paying Agent (the "Bond Power"), and the Issuing and Paying Agent
has received such Note (and any Bond Power) at its offices located at 1616
Woodall Rodgers Freeway, Dallas, TX 75202 Attention: Investor Relations, or such
address which the Company shall from time to time notify the Registered Holders
of the
11
Notes. If any resale or transfer of a Note is proposed to be made through a
Placement Agent or in a transaction approved by a Placement Agent (other than a
resale or transfer to, or by, a Placement Agent) and a duly completed Note or
Bond Power has not been submitted to the Issuing and Paying Agent, the Issuing
and Paying Agent shall register the transfer of such Note upon receipt of
written instructions from the Company or a Placement Agent to effect such resale
or transfer.
(c) All Notes presented for registration of transfer shall be duly
endorsed or shall be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Issuing and Paying Agent, duly executed by
the Registered Holder thereof or his attorney duty authorized in writing.
Subject to the conditions stated in this Section 14, the Issuing and Paying
Agent shall register the transfer of any Note and complete, countersign and
deliver, in the name of the designated transferee or transferees, one or more
new Notes of any authorized denominations having the same aggregate principal
amount and the same terms and provisions as the Note or Notes surrendered for
transfer; PROVIDED, HOWEVER, that the Issuing and Paying Agent will not be
required to register the transfer of any Note or any portion thereof that has
been called for redemption or repayment during a period beginning at the opening
of business fifteen calendar days before the day of mailing of a notice of such
redemption or repayment and ending at the close of business on the day of such
mailing.
(d) (i) If any Note is presented for transfer other than between a
Regular Record Date and a corresponding Interest Payment
Date, the new Note shall be dated as of the last Interest
Payment Date;
(ii) if any Note is presented for transfer between a Regular
Record Date and a corresponding Interest Payment Date, the
new Note shall be dated as of such Interest Payment Date;
(iii) if any Note is presented for transfer on an Interest
Payment Date, the new Note shall be dated as of such
Interest Payment Date;
(iv) if no interest has been paid on any Note to be
transferred, the Note to be issued upon transfer shall be
dated as of the date of the Note presented for transfer;
and
(v) if interest is overdue on any Note to be transferred, the
Note to be issued upon transfer shall be dated as of the
last Interest Payment Date to which interest has been paid
or duly provided for.
(e) In the event of redemption under Section 12 hereof or repayment
under Section 13 hereof of a Note in part only, a new Note for the unredeemed or
unrepaid portion thereof shall be issued by the Issuing and Paying Agent in the
name of the Registered Holder thereof upon the surrender of the Note being
redeemed or repaid in part.
12
(f) In connection with any registration of transfer of Notes, the
Company and the Issuing and Paying Agent may require payment by the transferor
of a sum sufficient to cover any applicable tax or other governmental charge.
(g) The Company and the Issuing and Paying Agent may deem and treat the
Registered Holder of any Note as the absolute owner of such Note for the purpose
of receiving payment of the principal of, and premium, if any, and interest on,
such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Company nor the Issuing and Paying Agent, except as
provided in this Section 14, shall be affected by notice to the contrary.
SECTION 15. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. In case any Note
shall become mutilated, destroyed, lost or stolen, the Company in its discretion
may, upon the written request of the Registered Holder of such Note, execute and
upon its request the Issuing and Paying Agent shall complete, countersign and
deliver a new Note, having the same terms and provisions and a number not then
outstanding, payable in the same principal amount, of like tenor, dated the same
date, in exchange and in substitution for the mutilated Note or in lieu of and
in substitution for the Note destroyed, lost or stolen. In each such case, the
applicant for a substituted Note shall furnish to the Company and the Issuing
and Paying Agent such security or indemnity as may be required by them to save
each of them harmless, and, in every case of destruction, loss or theft, the
applicant shall also furnish to the Company and the Issuing and Paying Agent
evidence to their satisfaction of the destruction, loss or theft of such Note
and of the ownership thereof. The Issuing and Paying Agent is authorized to
complete and countersign any such substituted Note and deliver the same upon
written request or authorization of an Authorized Representative or Instructing
Representative. Upon the issuance of any substituted Note, the Company and the
Issuing and Paying Agent may require the payment by the Registered Holder
thereof of a sum sufficient to cover any fees and expenses connected therewith.
In case any Note shall become mutilated or be destroyed, lost or stolen, after
such Note has matured or within 30 calendar days of the redemption or maturity
thereof, the Company may, instead of issuing a substitute Note, pay or authorize
the payment of the same (without surrender thereof except in the case of a
mutilated Note) upon compliance by the Registered Holder thereof with the
provisions of this Section 15. The Issuing and Paying Agent shall record on the
Note Register the cancellation of any original Notes (whether or not physically
surrendered to the Issuing and Paying Agent) and the reissuance of Notes in
substitution therefor due to mutilation, destruction, loss or theft.
SECTION 16. RETURN OF UNCLAIMED FUNDS. Any moneys deposited by the
Company with the Issuing and Paying Agent for the payment of the principal of,
or interest or premium, if any, on any Notes and remaining unclaimed at the end
of 90 calendar days after such principal, interest or premium shall have become
due and payable (whether at maturity or upon earlier redemption or repayment or
otherwise), shall then be repaid to the Company by the Issuing and Paying Agent,
and upon such repayment all liability of the Issuing and Paying Agent with
respect to such moneys shall thereupon cease, without, however, limiting in any
way any obligation which the Company may have to pay the principal of, or
interest or premium, if any, on, any Notes as the same shall become due. The
Registered Holder of any Notes to which such deposit related shall, after
repayment to the
13
Company of such deposit pursuant to this Section 16, look only to the Company
for the payment of principal, interest or premium, if any, to which such deposit
shall have related.
SECTION 17. LIABILITY. Neither the Issuing and Paying Agent nor its
officers, directors or employees shall be liable to the Company for any act or
omission hereunder except in the case of gross negligence or willful misconduct.
The duties and obligations of the Issuing and Paying Agent, its officers,
directors and employees shall be determined by the express provisions of this
Agreement, and none of them shall be liable, except for the negligent
performance of such duties and obligations as are specifically set forth herein
or their willful misconduct in connection therewith and no implied covenants
shall be read into this Agreement against any of them. Neither the Issuing and
Paying Agent nor any of its officers, directors or employees shall be required
to ascertain whether any issuance or sale of Notes (or any amendment or
termination of this Agreement) has been duly authorized (provided that the
Issuing and Paying Agent in good faith has determined that the facsimile or
manual signature of an Authorized Representative or Instructing Representative
in writing to the Issuing and Paying Agent resembles the specimen signatures
filed with the Issuing and Paying Agent) or is in compliance with any other
agreement to which the Company is a party (whether or not the Issuing and Paying
Agent is also a party to such other agreement), and the Issuing and Paying Agent
and each of its officers, directors and employees shall be entitled to rely upon
any instructions reasonably believed in good faith (in accordance with Section 5
hereof) by the Issuing and Paying Agent and its officers, directors and
employees to be given on behalf of the Company by an Authorized Representative
or Instructing Representative in writing to the Issuing and Paying Agent as a
person authorized to give such instructions hereunder, whether or not in fact
given by an Authorized Representative or Instructing Representative. In acting
under this Agreement, the Issuing and Paying Agent is acting solely as Issuing
and Paying Agent of the Company and does not assume any obligation or
relationship of agency or trust, for any of the Registered Holders of the Notes.
SECTION 18. INDEMNIFICATION. Subject to Section 11 hereof, the Company
agrees to indemnify and hold harmless the Issuing and Paying Agent, its
officers, directors and employees from and against all liabilities, claims,
damages, costs and expenses (including reasonable legal fees and expenses of
counsel to the Issuing and Paying Agent) relating to or arising out of their
actions or inactions taken or omitted to be taken by the Issuing and Paying
Agent in good faith in connection with this Agreement or the issuance, delivery,
payment or non-payment of any Note or interest or premium thereon, or other
receipt or other funds for the payment of the Notes or interest or premium
thereon; PROVIDED, HOWEVER, that the Issuing and Paying Agent shall be liable
for any liabilities, claims, damages, costs and expenses (including reasonable
legal fees and expenses of counsel to the Company) caused by the gross
negligence or willful misconduct of the Issuing and Paying Agent or any of its
officers, directors or employees. This indemnity shall survive the termination
of this Agreement and the payment in full of any Notes issued hereunder.
SECTION 19. COMPANY'S REPRESENTATIONS AND WARRANTIES. Each instruction
given to the Issuing and Paying Agent in accordance with Section 4 hereof shall
constitute a representation and warranty to the Issuing and Paying Agent by the
Company that the issuance and delivery of the
14
Notes have been duly and validly authorized by the Company and that the Notes
when completed, countersigned and delivered pursuant hereto, will constitute the
legal, valid and binding obligations of the Company.
SECTION 20. COMPENSATION OF THE ISSUING AND PAYING AGENT. The Company
agrees to pay the compensation of the Issuing and Paying Agent at such rates as
shall be agreed upon from time to time.
SECTION 21. NOTICES. (a) All communications by or on behalf of the
Company relating to the completion, delivery or payment of the Notes shall be
directed to the Issuing and Paying Agent at its address set forth in Section
21(b) hereof (or such other address as the Issuing and Paying Agent shall
specify to the Company as herein provided). The Company will send all Notes to
be completed and delivered by the Issuing and Paying Agent to the aforementioned
address (or such other address as the Issuing and Paying Agent shall specify to
the Company as herein provided). The Issuing and Paying Agent will advise the
Company from time to time of the individuals generally responsible for the
administration of this Agreement.
(b) All notices and communications hereunder shall (except to the extent
otherwise expressly provided) be in writing and shall be addressed as follows,
or to such other addresses as the parties hereto shall specify from time to time
as herein provided:
(i) if to the Company: Transok, Inc.
2 West Sixth Street
P.O. Box 3008
Tulsa, OK 74101
Attention: Treasurer
Telephone No.: (918) 583-1121
Telecopier No.: (918) 561-9403
(ii) if to the Issuing
and Paying Agent: Central and South West
Services, Inc.
1616 Woodall Rodgers Freeway
Dallas, TX 75202
Attention: Investor Relations
Telephone No.: (214) 754-1000
Telecopier No.: (214) 754-1223
SECTION 22. RESIGNATION OR REMOVAL OF ISSUING AND PAYING AGENT. The
Issuing and Paying Agent may at any time resign as such Issuing and Paying Agent
by giving written notice to the Company of such intention on its part,
specifying the date on which its resignation shall become
15
effective; PROVIDED, HOWEVER, that such date shall not be less than 90 days
after the giving of such notice by the Issuing and Paying Agent to the Company.
The Issuing and Paying Agent may be removed without cause at any time by written
notice signed by an Authorized Representative of the Company and specifying such
removal and the date upon which it is intended to become effective. Such
resignation or removal shall take effect on the date of the appointment by the
Company of a successor Issuing and Paying Agent and the acceptance of such
appointment by such successor Issuing and Paying Agent. In the event of
resignation by the Issuing and Paying Agent, if a successor Issuing and Paying
Agent has not been appointed by the Company by the date as of which the
resignation of the Issuing and Paying Agent is to be effective, as set forth in
the resignation notice of the Issuing and Paying Agent referred to above, the
Issuing and Paying Agent may, at the expense of the Company, petition any court
of competent jurisdiction for appointment of a successor Issuing and Paying
Agent. Any successor Issuing and Paying Agent so appointed by such court shall
immediately and without further act be superseded by any successor Issuing and
Paying Agent appointed as above provided within one year from the date of the
appointment by such court.
SECTION 23. INFORMATION FURNISHED BY THE ISSUING AND PAYING AGENT. The
Issuing and Paying Agent shall provide to the Company, on any day on which a
Note is issued, notification of all issuances of Notes on such day. The Issuing
and Paying Agent will send by first class mail (or in any other manner
acceptable to the Company) to the Company at its address set forth in Section 21
hereof, a copy of each Note issued on such day. In addition to any report
required to be provided by the Issuing and Paying Agent to the Company under the
terms of this Agreement, the Issuing and Paying Agent shall promptly at its own
expense provide one additional report (containing information with respect to
Notes issued hereunder to the extent such information is reasonably available)
upon the reasonable request of the Company within any 30 calendar day period.
SECTION 24. FEDERAL INCOME TAXES. The Issuing and Paying Agent shall
comply with all Federal income tax information reporting and withholding
requirements (including, without limitation, obtaining appropriate certification
and remitting the same to the Company) with respect to payments of interest
(including original issue discount) on the Notes.
SECTION 25. EVENTS OF DEFAULT. Upon the occurrence of any event of
default described in the Notes, the Company shall promptly provide the Issuing
and Paying Agent written notice as to, and instruct the Issuing and Paying Agent
in writing to promptly provide all of the Registered Holders of Notes such
written notice as to, such occurrence of any event of default. Upon receipt of
any such written instruction in respect of the occurrence of any such event of
default or default, the Issuing and Paying Agent shall promptly mail to all
Registered Holders of Notes, at the addresses of such Registered Holders as they
appear in the Note Register, any such written notice of such event of default or
default, unless in the case of any such default the Company shall have notified
the Issuing and Paying Agent in writing that such default shall have been cured
before the mailing of such written notice by the Issuing and Paying Agent.
SECTION 26. BENEFIT OF THIS AGREEMENT. This Agreement is solely for the
benefit of the parties hereto, their successors and assigns and the Registered
Holders of Notes and, as provided in
16
Section 29, the Placement Agents and no other person shall acquire or have any
right hereunder or by virtue hereof
SECTION 27. NOTES HELD BY THE ISSUING AND PAYING AGENT. The Issuing and
Paying Agent, in its individual or other capacity, may become the owner or
pledgee of the Notes with the same rights it would have if it were not acting as
the Issuing and Paying Agent.
SECTION 28. CANCELLATION OF UNISSUED NOTES. Promptly upon the written
request of the Company, the Issuing and Paying Agent shall cancel and return to
the Company, or destroy, in accordance with the instructions of the Company, all
unissued Notes in its possession at the time of such request.
SECTION 29. AMENDMENTS. This Agreement may be amended from time to time
by any instrument in writing executed and delivered by each of the parties
hereto, but any such amendment will not affect the rights of a Registered Holder
of Notes issued prior to the date of any such amendment.
In addition, the Issuing and Paying Agent hereby agrees, for the benefit
of the Company and the Placement Agents, that it will enter into such amendments
or supplements to this Agreement, and will consent to such amendments or
supplements to the Administrative Procedures and the Notes, as the Company may
reasonably request in order to effect the changes contemplated in Section
3(a)(xi) of the Private Placement Agreement; PROVIDED, that all such amendments
or supplements shall be reasonably satisfactory to the Issuing and Paying Agent.
SECTION 30. GOVERNING LAW. This Agreement is to be delivered and
performed in, and shall be governed by, and construed in accordance with, the
laws of the State of Texas applicable to agreements to be entered into and to be
performed in such State.
SECTION 31. COUNTERPARTS. This Agreement may be executed by the parties
hereto in any number of counterparts, and by each of the parties hereto in
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.
SECTION 32. MERGER, CONSOLIDATION OR SALE OF BUSINESS BY THE ISSUING AND
PAYING AGENT. Any corporation into which the Issuing and Paying Agent may be
merged or consolidated, or any corporation resulting from any merger or
consolidation to which the Issuing and Paying Agent may be a party, or any
corporation to which the Issuing and Paying Agent may sell or otherwise transfer
all or substantially all of its assets and business, shall, to the extent
permitted by applicable law, become the Issuing and Paying Agent under this
Agreement without the execution or filing of any paper or any further act by the
parties hereto. Notice in writing of any such merger, consolidation or sale
shall be given to the Company.
17
SECTION 33. COMPLETE AGREEMENT. This Agreement embodies the entire
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
SECTION 34. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind the respective successors and assigns of the parties hereto, whether so
expressed or not; PROVIDED, HOWEVER, this Section 34 shall not by itself
authorize any delegation of duties by the Issuing and Paying Agent or any
assignment other than any assignment expressly permitted by the terms of this
Agreement.
IN WITNESS WHEREOF, the Company and the Issuing and Paying Agent have
caused this Agreement to be duly executed by their respective officers as of the
date first above written.
TRANSOK, INC.
By: /s/ F. J. BECRAFT
Name: F. J. Becraft
Title: President
CENTRAL AND SOUTH WEST SERVICES, INC.,
as Issuing and Paying Agent
By: /s/ STEPHEN J. MCDONNELL
Name: Stephen J. McDonnell
Title: Treasurer
<PAGE>
Exhibit A
TRANSOK, INC.
Privately-Placed Medium-Term Notes
Administrative Procedures for
Fixed Rate and Floating Rate Notes
The administrative procedures and the specific terms of the
offering of privately-placed Medium-Term Notes (the "Notes") on a continuing
basis by Transok, Inc., an Oklahoma corporation (the "Company"), pursuant to the
Private Placement Agreement, dated March 30, 1992 (the "Agreement"), among the
Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, The First Boston Corporation and Smith Barney, Harris Upham & Co.
Incorporated (each, an "Agent" and collectively, the "Agents") are explained
below.
The Notes will be issued pursuant to an issuing and paying agency
agreement (the "Issuing and Paying Agency Agreement") dated as of March 30,
1992, between Central and South West Services, Inc., as issuing and paying agent
(the "Issuing and Paying Agent"), and the Company. The Notes will be
countersigned by the Issuing and Paying Agent. The Issuing and Paying Agent will
also make payments of interest on the Notes on each Interest Payment Date (as
set forth on the Notes), payment of principal, premium, if any, and interest due
at maturity on the Notes, and will act as transfer agent and registrar of the
Notes. As used herein, the term "Private Placement Memorandum" refers to the
most recent private placement memorandum or similar document and any amendment
or supplement thereto, that has been prepared by the Company for use by the
Agents in connection with the offering of the Notes.
Other variable terms of the Notes are subject to change by the
Company from time to time, but no such change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Administrative procedures and specific terms of the offering are
explained below.
Date of Issuance/
Authentication: Each Note will bear an original issue date (the
"Original Issue Date"). The Original Issue Date
will remain the same for all Notes subsequently
issued upon transfer, exchange, or substitution of
a Note regardless of their dates of authentication.
Maturities: Each Note will mature on a date selected by the
purchaser and agreed to by the treasury department
of Central and South West Services, Inc.
("Treasury") , on behalf of the Company, which is
not less than 9 months nor more than 30 years from
its Original Issue Date; PROVIDED, HOWEVER, that
A-1
Notes bearing interest at rates determined by
reference to selected interest rate bases
("Floating Rate Notes") will mature on an Interest
Payment Date.
Denominations: The Notes will be issued in minimum denominations
of $150,000 and in integral multiples of $1,000 in
excess thereof.
Registration: Notes will be issued only in fully registered form.
Interest: Each Note will bear interest in accordance with its
terms. Interest will begin to accrue on the
Original Issue Date of the Note for the first
interest period and on the most recent Interest
Payment Date to which interest has been paid for
all subsequent periods. Each payment of interest
will include interest accrued to, but excluding,
the date of such payment. Notwithstanding the
foregoing, in the case of Floating Rate Notes which
reset daily or weekly, interest payments will
include accrued interest from, and including, the
date of issue or from, but excluding, the last date
in respect of which interest has been paid, as the
case may be, through and including the Regular
Record Date which immediately precedes such
Interest Payment Date, except that at maturity the
interest payable will include interest accrued to,
but excluding, the maturity date (which date, for
purposes hereof, shall also include the date of
redemption or repayment, with respect to such
Notes). Interest with respect to a Fixed Rate Note
will be payable semiannually on March 1 and
September 1 of each year and at maturity or upon
earlier redemption or repayment (unless otherwise
specified in such Fixed Rate Note). The "Regular
Record Date" for a Fixed Rate Note with respect to
any March 1 or September 1 Interest Payment Date
will be February 15 or August 15 (whether or not a
Business Day) immediately preceding such Interest
Payment Date. The "Regular Record Date" for a Fixed
Rate Note with respect to any Interest Payment Date
other than March 1 and September 1 will be the
fifteenth calendar day (whether or not a Business
Day) immediately preceding such Interest Payment
Date. Interest payments with respect to a Floating
Rate Note will be made on the Interest Payment Date
specified in such Floating Rate Note. The "Regular
Record Date" for a Floating Rate Note with respect
to any Interest Payment Date will be the fifteenth
calendar day (whether or not a Business Day)
immediately preceding such Interest Payment Date.
However, the first payment of interest on any Note
originally issued between a Regular Record Date and
the next succeeding Interest Payment Date will be
made on the Interest Payment Date following the
next Regular Record Date to the Registered Holder
(as defined below) on such next Regular Record
Date. Interest due at maturity or upon earlier
redemption or repayment will be payable to the
person to whom principal shall be payable. For
other special provisions relating to Floating Rate
Notes, see the Private Placement Memorandum.
A-2
Calculation of
Interest: In the case of Fixed Rate Notes, interest
(including payments for partial periods) will be
computed on the basis of a 360-day year of twelve
30-day months. Interest does not accrue on the 31st
day of any month. In the case of Floating Rate
Notes, interest will be calculated and paid on the
basis of the actual number of days in the interest
period divided by 360, except for Floating Rate
Notes for which the "Treasury Rate" is designated
on the applicable Floating Rate Note as an interest
rate basis, in which case interest will be
calculated and paid on the basis of the actual
number of days in the interest period divided by
the actual number of days in the year.
Payments of
Principal and
Interest: The Company will pay the principal amount of each
Note at maturity or upon earlier redemption or
repayment against presentment of such Note to the
Issuing and Paying Agent by the Registered Holder
in accordance with the procedures set forth in
Annex I hereto. Interest payments other than at
maturity will be made by check mailed to the
Registered Holder entitled thereto as provided in
the Note; PROVIDED, HOWEVER, that at the option of
the Issuing and Paying Agent, payments of interest
may be made by Automated Clearinghouse ("ACH")
transfer to a bank account designated by the
Registered Holder. Notwithstanding the foregoing,
upon receipt of written instructions from the
Registered Holder of an aggregate principal amount
in excess of $10,000,000 of Notes having the same
Interest Payment Date not less than fifteen
calendar days prior to such Interest Payment Date,
the Issuing and Paying Agent will make such payment
of interest by the transfer of immediately
available funds to such account at a bank as the
Registered Holder of such Note shall have
designated; PROVIDED, FURTHER, that such bank has
appropriate facilities therefor. If required by
applicable law or if requested by the Company, the
Issuing and Paying Agent shall withhold any taxes
or any governmental charges on any payments made in
connection with the Notes.
Acceptance and
Rejection of
Offers: Unless otherwise agreed by the Company, Treasury
and the Agents, Treasury, on behalf of the Company,
will have the sole right to accept offers to
purchase Notes and may, in its sole discretion,
accept or reject any proposed purchase of the
Notes, in whole or in part. Each Agent will
communicate to Treasury, orally or in writing, each
offer to purchase Notes it does not reject. Each
Agent shall have the right, in its discretion
reasonably exercised, to reject any proposed
purchase of Notes, in whole or in part.
A-3
Settlement: The receipt of immediately available funds by the
Company in payment for a Note and the issuance and
delivery of such Note shall, with respect to such
Note, constitute "Settlement." Any orders accepted
by the Company will be settled on the fifth
business day thereafter pursuant to the timetable
for settlement set forth below unless the Company
and the purchaser agree to Settlement on another
day and other than purchases and sales of Notes
pursuant to a Delayed Delivery Contract (a form of
which is attached hereto as Annex II) in accordance
with the terms of the Agreement. In no case shall
Settlement occur later than five business days
thereafter, unless the Company and the purchaser so
agree or except with respect to Notes sold pursuant
to a Delayed Delivery Contract under the Agreement,
in which case, Settlement shall occur on the date
specified therein.
Settlement
Procedures: Settlement procedures with regard to each Note sold
by an Agent shall be as follows:
A. Such Agent will advise Treasury by telephone or by
facsimile transmission of the following settlement
information:
1. Exact name in which the Note is to be
registered ("Registered Holder").
2. Exact address of the Registered Holder and
address for payment of interest prior to
maturity (including the location and account
number of any bank account designated by the
Registered Holder to receive payments).
3. Taxpayer identification number of the
Registered Holder.
4. Principal amount of the Note.
5. Trade date.
6. Settlement date.
7. Stated Maturity date.
8. (a) Fixed Rate Notes:
(i) interest rate;
(ii) interest payment dates.
(b) Floating Rate Notes:
(i) interest rate basis or
interest rate bases;
(ii) initial interest rate;
A-4
(iii) spread and/or spread
multiplier, if any;
(iv) initial interest reset date;
(v) interest reset dates;
(vi) interest reset period;
(vii) interest payment dates;
(viii) interest payment period;
(ix) index maturity;
(x) maximum and minimum interest
rates, if any;
(xi) calculation agent.
9. Initial Redemption Date, if any.
10. Initial Redemption Percentage, if any.
11. Annual Redemption Percentage Reduction, if
any.
12. Holder's Optional Repayment Date(s), if any.
13. Proceeds net of commission.
14. Delivery instructions, if other than to such
Agent.
15. Other terms, if applicable.
The Original Issue Date of, and the settlement date
for, the Notes will be the same.
B. After receiving the details described in "A" above
by telephone or by facsimile transmission from such
Agent, Treasury, on behalf of the Company, will
advise the Issuing and Paying Agent of the above
settlement information and cause the Issuing and
Paying Agent to deliver the Notes. The Company will
prepare, when applicable, an appropriate Pricing
Supplement to the Private Placement Memorandum and
deliver copies to such Agent via next day mail or
telecopy to arrive by 11:00 A.M. on the Business
Day immediately following the trade date at the
following applicable addresses:
Merrill Lynch & Co. - Tritech Services
4 Corporate Place
Corporate Park 287
Piscataway, New Jersey 08854
Attn: Final Prospectus Unit/Nachman Kimerling
Telephone Nos.: (908) 878-6525/6526/6527
Telecopier No.: (908) 878-6530
with a copy to:
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
World Financial Center, North Tower
10th Floor
New York, New York 10281-1310
Attn: MTN Product Management
Telephone No.: (212) 449-7582
Telecopier No.: (212) 449-2234
The First Boston Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Attn: Neal Kean
Telephone No.: (212) 909-2225
Telecopier No.: (212) 644-6947
Smith Barney, Harris Upham & Co.
Incorporated
Prospectus Department
140 58th Street, 8th Floor
Brooklyn Army Terminal
Brooklyn, New York 11220
Attention: Manager - Prospectus Department
Telephone No.: (212) 921-8036
Telecopier No.: (212) 921-8052
Such Agent will cause the Private Placement
Memorandum and any Pricing Supplement received from
the Company to accompany or precede written
confirmation of the sale and delivery of the Notes
to the customer.
C. The Issuing and Paying Agent will send (via
telecopy) a copy of the completed Note by 3:00 P.M.
(New York time) on the second Business Day prior to
the settlement date to such Agent's clearing
operation ("Clearing") as follows:
A-5
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
75 Barclay Street
Ground Level, Window C
New York, New York 10080
Attn: Mr. Kevin Brennan,
Medium-Term Note Clearance
Telephone No.: (212) 602-6333
Telecopier No.: (212) 602-6332
The First Boston Corporation
5 World Trade Center
7th Floor
New York, New York 10048
Attn: MTN Settlements / Paul Riley
Telephone No.: (212) 322-1603
Telecopier No.: (212) 938-0960
Smith Barney, Harris Upham & Co.
Incorporated
110 Wall Street
16th Floor
New York, New York 10005
Attn: John Hacker, Cashiers Clearance
Telephone No.: (212) 809-3707
Telecopier No.: (212) 742-0357
D. Clearing will promptly review such Note to
determine whether the terms of such Note are
correct and, as instructed on the cover page of the
transmittal of such Note from the Issuing and
Paying Agent, by no later than 4:00 P.M. on such
date (New York time) contact the Issuing and Paying
Agent (at the telephone or telecopy number
specified by the Issuing and Paying Agent) to
either confirm that the terms of such Note are
correct or provide any corrections to be made to
such Note.
E. The Issuing and Paying Agent will complete the Note
and make three appropriately designated photocopies
thereof as follows:
Copy 1 - for the Issuing and Paying Agent.
Copy 2 - for the Agent.
Copy 3 - for the Company.
A-6
F. The Issuing and Paying Agent will cause the Note
and Copy 2 to be delivered by overnight courier no
later than 2:15 P.M. (New York time) on the
Business Day prior to the settlement date, with
appropriate instructions for payment to an account
of the Company of an amount equal to the principal
amount of the Note less the applicable commission
as provided in the Agreement, to Clearing at the
following applicable address:
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
75 Barclay Street
Ground Level, Window C
New York, New York 10080
Attn: Mr. Kevin Brennan,
Medium-Term Note Clearance
Telephone No.: (212) 602-6333
Telecopier No.: (212) 602-6332
The First Boston Corporation
5 World Trade Center
7th Floor
New York, New York 10048
Attn: MTN Settlements / Paul Riley
Telephone No.: (212) 322-1603
Telecopier No.: (212) 938-0960
Smith, Barney, Harris Upham & Co.
Incorporated
110 Wall Street
16th Floor
New York, New York 10005
Attn: John Hacker, Cashiers Clearance
Telephone No.: (212) 809-3707
Telecopier No.: (212) 742-0357
G. Upon receipt of the Note, Clearing will confirm (at
the telecopy or telephone number specified by the
Issuing and Paying Agent) to the Issuing and Paying
Agent that the Note is in a form acceptable for
delivery to the customer. Clearing will hold the
Note overnight in safekeeping.
H. If the Note is determined by Clearing to be
unacceptable for delivery to the customer, Clearing
shall immediately notify the Issuing and
A-7
Paying Agent (at the telephone or telecopy number
specified by the Issuing and Paying Agent).
I. The Issuing and Paying Agent will cause a corrected
Note and Copy 2 to be delivered by overnight
courier to arrive at Clearing no later than 2:15
P.M. (New York time) on the settlement date.
J. Clearing will deliver the Note (with confirmation)
received from the Company to the customer against
payment in immediately available funds. In
accordance with "B" hereof, each Agent will cause
the Private Placement Memorandum and any Pricing
Supplement received from the Company to accompany
or precede written confirmation of the sale and
delivery of the Notes to the customer.
K. The Issuing and Paying Agent will send Copy 3 of
the Note to the Company by first class mail or any
other means acceptable to the Company.
In the event of a purchase of Notes by the Agent as
principal, appropriate settlement details will be
set forth in the applicable Terms Agreement to be
entered into between the Agent and the Company
pursuant to the Private Placement Agreement.
Settlement
Procedures
Timetable: For offers accepted by the Company (or as provided
above, by an Agent on behalf of the Company),
Settlement Procedures "A" through "K" set forth
above shall be completed on or before the
respective times (New York City time) set forth
below.
Settlement
PROCEDURE TIME
A-B 1:00 P.M. on the second Business Day
prior to settlement date
C 3:00 P.M. on second Business Day prior
to settlement
D 4:00 P.M. on second Business Day prior
to settlement
E-F 8:00 P.M. on the second Business Day
prior to settlement
G-H 3:00 P.M. on the Business Day prior to
settlement
I 8:00 P.M. on the Business Day prior to
settlement
A-8
J 3:00 P.M. on day of settlement
K 5:00 P.M. on day of settlement
Date of
Issuance: Each Note shall bear an original Issue Date which,
with respect to any Note (or any portion thereof),
shall remain the same for all Notes subsequently
issued upon transfer, exchange or substitution of
such original Note regardless of the date of
issuance of any such subsequently issued Note.
Failure to
Settle: In the event that a Purchaser shall either fail to
accept delivery of or make payment for any Note on
the applicable settlement date, such Agent will
forthwith notify the Issuing and Paying Agent and
Treasury by telephone or by telecopy and return the
Note to the Issuing and Paying Agent. The Company
will immediately credit the account of such Agent
in an amount equal to the amount previously
credited to the Company by such Agent. Such debits
and credits will be made on the settlement date if
possible, and in any event not later than the day
following the settlement date. If such failure
shall have occurred for any reason other than
default by such Agent in the performance of its
obligations hereunder and under the Agreement, the
Company will reimburse such Agent on an equitable
basis as agreed upon by the Company and such Agent
for its loss of the use of the funds for each day
when they were credited to the account of the
Company. Immediately upon receipt of the Note in
respect of which the failure occurred, the Issuing
and Paying Agent will cancel and destroy the Note,
make appropriate entries in its records to reflect
the fact that the Note was never issued, and
accordingly notify in writing the Company.
Procedure for
Rate Changes: When a decision has been reached to change the
interest rate on Notes being offered for sale,
Treasury, on behalf of the Company, will promptly
advise the Agents and the Agents will forthwith
suspend solicitation of offers to purchase such
Notes. The Agents will telephone Treasury with
recommendations as to the changed interest rates.
At such time as Treasury advises the Agents of the
new interest rates, the Agents may resume
solicitation of offers to purchase such Notes.
Until such time only "indications of interest" may
be recorded.
Suspension of
Solicitation: Subject to its representations, warranties and
covenants contained in the Agreement, the Company
or Treasury, on behalf of the Company, may instruct
the Agents to suspend solicitation of purchases at
any time. Upon receipt of such instructions, the
Agents will forthwith suspend solicitation until
such time as Treasury has advised the Agents that
solicitation of purchases may be resumed. If the
Company decides to amend or supplement
A-9
the Private Placement Memorandum (other than to
change interest rates), it will promptly advise the
Agents and the Issuing and Payment Agent and will
furnish the Agents and its counsel with copies of
the proposed amendment or supplement.
In the event that at the time the solicitation of
offers to purchase from the Company is suspended
(other than an amendment or supplement providing
solely for a change in the interest rates offered
on the Notes or a change in the principal amount of
the Notes remaining to be sold or similar changes)
there shall be any orders outstanding which have
not been settled, the Company will promptly advise
the Agents and the Issuing and Paying Agent whether
such orders may be settled and whether copies of
the Private Placement Memorandum as theretofore
amended and/or supplemented as in effect at the
time of the suspension may be delivered in
connection with the settlement of such orders. The
Company will have the sole responsibility for such
decision and for any arrangements which may be made
in the event that the Company determines that such
orders may not be settled or that copies of such
Private Placement Memorandum may not be so
delivered.
Disclosure
Documents: The Agents will provide purchasers with a copy of
the Private Placement Memorandum including
documents that are to be delivered therewith
pursuant to the terms of the Agreement (the
"Disclosure Documents") at the time of their
initial purchase and at the time of any later
purchase if the Disclosure Documents have been
amended or supplemented since the prior delivery of
the Disclosure Documents. Such Disclosure Documents
must accompany or precede the earlier of (a) the
written confirmation of a sale sent to a customer
or his agent and (b) the delivery of Notes to a
customer or his agent.
Authenticity of
Signatures: The Company will cause the Issuing and Paying Agent
to furnish the Agents from time to time with the
specimen signatures of the Issuing and Paying
Agent's officers, employees and agents who have
been authorized by the Issuing and Paying Agent to
authenticate Notes. However, the Agents will have
no obligation or liability to the Company or the
Issuing and Paying Agent in respect of the
authenticity of the signature of any officer,
employee or agent of the Company or the Issuing and
Paying Agent on any Note.
Business Day: As used herein, "Business Day" means any day, other
than a Saturday or Sunday or a day on which banks
in The City of New York (and with respect to Notes
as to which LIBOR is designated on the applicable
Floating Rate Note as an applicable interest rate
basis or one of the applicable interest rate bases,
the City of London) are generally authorized or
obligated by law or executive order to close.
A-10
Exhibit B
TRANSOK, INC.
[FORM OF FIXED RATE MEDIUM-TERM NOTE]
THIS MEDIUM-TERM NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), AND SALES OR OTHER TRANSFERS HEREOF MAY BE MADE
ONLY TO INSTITUTIONAL INVESTORS THAT ARE "ACCREDITED INVESTORS" AS DEFINED IN
RULE 501(a) PROMULGATED UNDER THE 1933 ACT APPROVED BY MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE FIRST BOSTON CORPORATION
OR SMITH BARNEY, HARRIS UPHAM & CO. INCORPORATED (EACH A "PLACEMENT AGENT";
COLLECTIVELY, THE "PLACEMENT AGENTS") OR BY TRANSOK, INC. ("TRANSOK" OR THE
"COMPANY") OR INSTITUTIONAL INVESTORS APPROVED BY ANY APPLICABLE PLACEMENT AGENT
AND THE COMPANY (INDIVIDUALLY, AN "INSTITUTIONAL ACCREDITED INVESTOR" AND
COLLECTIVELY, "INSTITUTIONAL ACCREDITED INVESTORS") IN TRANSACTIONS EXEMPT FROM
REGISTRATION UNDER THE 1933 ACT (INCLUDING, WITHOUT LIMITATION, COMPLIANCE WITH
REGULATION S PROMULGATED UNDER THE 1933 ACT ("REGULATION S")) . THIS NOTE WILL
INITIALLY BEAR LEGENDS ("RESTRICTIVE LEGENDS") SETTING FORTH THE FOLLOWING
REPRESENTATIONS AND RESTRICTIONS ON RESALES AND OTHER TRANSFERS. BY ITS
ACCEPTANCE OF THIS NOTE BEARING A RESTRICTIVE LEGEND, THE PURCHASER WILL BE
DEEMED (A) TO HAVE REPRESENTED TO THE COMPANY AND THE PLACEMENT AGENTS (i) THAT
IT IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IS ACQUIRING THIS NOTE FOR ITS
OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO MUST BE INSTITUTIONAL ACCREDITED INVESTORS UNLESS THE
PURCHASER IS A BANK ACTING IN ITS FIDUCIARY CAPACITY) FOR INVESTMENT AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, THE DISTRIBUTION
HEREOF, OR (ii) THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A ("RULE 144A") PROMULGATED UNDER THE 1933 ACT AND IS ACQUIRING THIS NOTE FOR
ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT
FOR OTHERS (WHICH OTHERS ALSO MUST BE QUALIFIED INSTITUTIONAL BUYERS), OR (iii)
THAT IT IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IS ACQUIRING THIS NOTE
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY
REGULATION S, AND (B) TO HAVE AGREED THAT, SO LONG AS THIS NOTE BEARS A
RESTRICTIVE LEGEND, ANY RESALE OR OTHER TRANSFER OF THIS NOTE OR ANY INTEREST
THEREIN WILL BE MADE ONLY (i) TO THE COMPANY OR ANY OF ITS AFFILIATES, (ii) TO,
BY, THROUGH, OR IN A TRANSACTION APPROVED BY, A PLACEMENT AGENT, (iii) DIRECTLY
TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION APPROVED BY THE
COMPANY, (iv) THROUGH A DEALER OTHER THAN A PLACEMENT AGENT TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION APPROVED BY THE COMPANY, (v) TO A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION (OTHER THAN A TRANSACTION
B-1
DESCRIBED IN CLAUSE (ii) ABOVE) THAT MEETS THE REQUIREMENTS OF RULE 144A UNDER
THE 1933 ACT, OR (vi) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION
(OTHER THAN A TRANSACTION DESCRIBED IN CLAUSE (ii) ABOVE) THAT MEETS THE
REQUIREMENTS OF REGULATION S; PROVIDED THAT THE FOREGOING AGREEMENT OF THE
PURCHASER SHALL BE SUBJECT TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF
SUCH PURCHASER'S PROPERTY SHALL AT ALL TIMES BE AND REMAIN WITHIN ITS CONTROL.
ANY RESALE OR OTHER TRANSFER DESCRIBED IN CLAUSE (iii), (iv), (v) OR (vi)
REQUIRES THE SUBMISSION TO THE ISSUING AND PAYING AGENT REFERRED TO HEREIN OF A
DULY COMPLETED NOTE OR A BOND POWER IN THE FORM ATTACHED HERETO AS EXHIBIT A TO
THE PRIVATE PLACEMENT MEMORANDUM RELATING TO THE OFFER OR SALE OF THE NOTES MOST
RECENTLY DELIVERED BY THE COMPANY TO THE ISSUING AND PAYING AGENT. ANY RESALE OR
OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER TRANSFER, OF ANY NOTE BEARING A
RESTRICTIVE LEGEND WHICH IS NOT MADE IN COMPLIANCE WITH THE RESTRICTIONS SET
FORTH THEREIN WILL NOT BE RECOGNIZED BY THE COMPANY. SUBJECT TO THE RIGHT OF THE
COMPANY TO REQUIRE AN OPINION OF THE HOLDER'S COUNSEL, SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT SUCH RESTRICTIONS ARE NO LONGER REQUIRED UNDER THE
1933 ACT, NOTES NO LONGER SUBJECT TO THE RESTRICTIONS ON RESALES OR OTHER
TRANSFERS ARISING UNDER THE 1933 ACT WITH RESPECT TO PRIVATELY PLACED SECURITIES
(WHETHER BY VIRTUE OF RULE 144 OR OTHERWISE) MAY BE SURRENDERED TO THE ISSUING
AND PAYING AGENT FOR NEW NOTES NOT BEARING A RESTRICTIVE LEGEND.
THIS NOTE AND RELATED DOCUMENTATION (INCLUDING, WITHOUT LIMITATION, THE ISSUING
AND PAYING AGENCY AGREEMENT REFERRED TO HEREIN) MAY BE AMENDED OR SUPPLEMENTED
FROM TIME TO TIME, WITHOUT THE CONSENT OF BUT UPON NOTICE TO THE REGISTERED
HOLDER OF THIS NOTE SENT TO ITS REGISTERED ADDRESS, (i) TO MODIFY THE
RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS NOTE TO
REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION
THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR OTHER TRANSFER OF RESTRICTED
SECURITIES GENERALLY AND (ii) TO ACCOMMODATE THE ISSUANCE, IF ANY, OF THIS NOTE
IN BOOK-ENTRY FORM, AS DESCRIBED HEREIN, THROUGH THE FACILITIES OF THE
DEPOSITORY TRUST COMPANY OR OTHERWISE. EACH HOLDER OF THIS NOTE SHALL BE DEEMED,
BY ITS ACCEPTANCE OF THIS NOTE, TO HAVE AGREED TO ANY SUCH AMENDMENT OR
SUPPLEMENT (EACH OF WHICH SHALL BE CONCLUSIVE AND BINDING ON SUCH HOLDER AND ALL
FUTURE HOLDERS OF THIS NOTE AND ANY NOTES ISSUED IN EXCHANGE OR SUBSTITUTION FOR
THIS NOTE WHETHER OR NOT ANY NOTATION THEREOF IS MADE THEREON).
B-2
REGISTERED PRINCIPAL AMOUNT
NO. FX-_______ $_______________
TRANSOK, INC.
MEDIUM-TERM NOTE
(Fixed Rate)
ORIGINAL ISSUE DATE: INTEREST RATE: STATED MATURITY DATE:
INTEREST PAYMENT DATES:[ ] Semiannually on March 1
and September 1
[ ] Other
INITIAL REDEMPTION INITIAL REDEMPTION ANNUAL REDEMPTION
DATE: PERCENTAGE: PERCENTAGE
REDUCTION:
HOLDER'S OPTIONAL
REPAYMENT DATE(S):
OTHER TERMS:
TRANSOK, INC., an Oklahoma corporation (the "Company", which term
includes any successor corporation permitted by the terms hereof), for value
received, hereby promises to pay to
, or registered assigns, the principal sum of
DOLLARS on the Stated Maturity Date specified above (except to the extent
redeemed or repaid prior to the Stated Maturity Date) and to pay interest
thereon at the Interest Rate per annum specified above, until the principal
hereof is paid or duly made available for payment.
Unless otherwise specified on the face hereof, the Company shall
pay interest on each Interest Payment Date specified above commencing on the
first Interest Payment Date next succeeding the Original Issue Date specified
above, unless the Original Issue Date occurs between a Regular Record Date (as
defined below) and the next succeeding Interest Payment Date, in which case
commencing on the Interest Payment Date following the next Regular Record Date
to the Registered Holder (as defined below) of this Note on such next Regular
Record Date, and on the Stated Maturity Date, or any Redemption Date or Holder's
Optional Repayment Date (in each case as defined on the reverse hereof) (each
such Stated Maturity Date, Redemption Date and Holder's Optional Repayment Date
being referred to hereinafter as a "Maturity Date" with respect to principal
repayable on such date). Interest on this Note shall accrue from and including
the most recent Interest Payment Date to which interest has been paid or duly
provided for or, if no interest has been paid, from the Original Issue Date
specified above, to, but excluding, such Interest Payment Date or the Maturity
Date, as the case may be. If a Maturity Date or an Interest Payment Date falls
on a day that is not a Business Day (as defined below), principal, premium, if
any, or interest payable with respect to such Maturity Date or Interest Payment
Date shall be paid on the next succeeding Business Day with the same force and
effect as if made on the date on which such payment was due, and no interest
shall accrue with respect to the amount so payable for the period from and after
such
B-3
Maturity Date or Interest Payment Date, as the case may be. The interest so
payable or duly provided for on any Interest Payment Date shall be paid to the
person in whose name this Note (or one or more predecessor Notes) is registered
(the "Registered Holder") at the close of business on the Regular Record Date
for such Interest Payment Date. The "Regular Record Date" with respect to any
March 1 or September 1 Interest Payment Date shall be the February 15 or August
15 (whether or not a Business Day) immediately preceding such Interest Payment
Date. The "Regular Record Date" with respect to any Interest Payment Date other
than March 1 or September 1 shall be the fifteenth calendar day (whether or not
a Business Day), as the case may be, immediately preceding such Interest Payment
Date; PROVIDED, HOWEVER, that interest payable on any Maturity Date shall be
payable to the person to whom the principal hereof shall be payable. As used
herein, "Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in The City of New York, New York are generally
authorized or obligated by law or executive order to close.
Payment of the principal of, interest on and premium, if any,
with respect to this Note shall be made in such coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts.
The principal of, and premium, if any, and interest on this Note
which is due on any Maturity Date, will be paid against presentation of this
Note by the Registered Holder hereof at the office of the Issuing and Paying
Agent, 1616 Woodall Rodgers Freeway, Dallas, TX 75202, Attention: Investor
Relations, or at such other office or agency of the Company as the Company shall
designate in writing to the Registered Holder hereof. The Registered Holder will
be entitled to payment in immediately available funds PROVIDED this Note is
presented to the Issuing and Paying Agent in accordance with the procedures set
forth on the reverse hereof under the caption "Presentation of Notes for
Payment".
Payment of interest on any Interest Payment Date other than the
Maturity Date will be made by check mailed to the address of the Registered
Holder hereof as of the immediately preceding Regular Record Date at such
address as shall appear in the Note Register (as defined on the reverse hereof)
PROVIDED, HOWEVER, that at the option of the Issuing and Paying Agent, payments
of interest on this Note may be made by Automated Clearinghouse ("ACH") transfer
to a bank account designated by the Registered Holder hereof. Notwithstanding
the foregoing, upon receipt by the Issuing and Paying Agent of written
instructions from the Registered Holder hereof of an aggregate principal amount
of Notes, including this Note, in excess of $10,000,000 having the same Interest
Payment Date, not less than fifteen (15) calendar days prior to such Interest
Payment Date, the Issuing and Paying Agent will make such payment of interest by
the transfer of immediately available funds to such account at a bank as the
Registered Holder hereof shall have PROVIDED, such bank has appropriate
facilities therefor. The Issuing and Paying Agent has agreed to comply with all
Federal income tax information reporting and withholding requirements
(including, without limitation, obtaining appropriate certifications and
remitting the same to the Company) with respect to payments of interest
(including original issue discount) on this Note.
B-4
Neither the Company nor the Issuing and Paying Agent shall be
obligated to register any transfer of this Note not made in compliance with the
restrictions set forth above, on the reverse hereof and in the Issuing and
Paying Agency Agreement referred to the reverse hereof.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Issuing and Paying Agent under the Issuing and Payment Agency Agreement
referred to on the reverse hereof by the manual signature of one of its
authorized officers, this Note shall not be entitled to any benefit under the
Issuing and Paying Agency Agreement or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed, manually or by facsimile.
TRANSOK, INC.
By:__________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION:
This is one of the Notes issued under
the Issuing and Paying Agency Agreement
referred to on the reverse hereof.
Dated:
CENTRAL AND SOUTH WEST SERVICES, INC.,
as Issuing and Paying Agent
By: _____________________________
Authorized Officer
B-5
[FORM OF REVERSE]
TRANSOK, INC.
MEDIUM-TERM NOTE
(Fixed Rate)
This Note is one of a duly authorized issue of the Company's
Medium-Term Notes With Maturities of 9 Months to 30 Years from Date of Issue
(the "Notes"). The Notes are to be issued under the Issuing and Paying Agency
Agreement, dated as of March 30, 1992 (the "Issuing and Paying Agency
Agreement"), between the Company and Central and South West Services, Inc., as
Issuing and Paying Agent (the "Issuing and Paying Agent," which term includes
any successor Issuing and Paying Agent under the Issuing and Paying Agency
Agreement). Reference is hereby made to such Issuing and Paying Agency Agreement
and all supplements thereto for a statement of the respective rights thereunder
of the Company, the Issuing and Paying Agent and the Registered Holders of the
Notes and the terms upon which the Notes are, and are to be, authenticated and
delivered. The Issuing and Paying Agency Agreement may be amended or replaced
from time to time in accordance with the terms thereof, but any such amendment
or replacement shall not affect the rights of the Registered Holder hereof. In
acting under the Issuing and Paying Agency Agreement, the Issuing and Paying
Agent is acting solely as agent of the Company and does not assume any
obligation or relationship of agency or trust for any of the beneficial owners
or Registered Holders of Notes, except that any funds held by the Issuing and
Paying Agent for payment on this Note shall be held in trust as provided in the
Issuing and Paying Agency Agreement. The terms of individual Notes may vary with
respect to interest rates or interest rate formulas, issue dates, maturity
dates, redemption, repayment and otherwise.
This Note has been issued by the Issuing and Paying Agent on
behalf of the Company pursuant to the Issuing and Paying Agency Agreement.
Copies of the Issuing and Paying Agency Agreement and related documents are on
file at the office of the Issuing and Paying Agent specified on the face hereof
and are available for inspection during normal business hours at such office.
This Note shall not be subject to any sinking fund and, unless
otherwise provided on the face hereof in accordance with the following
provisions, shall not be redeemable or repayable prior to its Stated Maturity
Date.
If so provided on the face of this Note, this Note may be
redeemed by the Company on any date on and after the Initial Redemption Date, if
any, specified on the face hereof. If no Initial Redemption Date is set forth on
the face hereof, this Note may not be redeemed at the option of the Company
prior to the Stated Maturity Date. On and after the Initial Redemption Date, if
any, this Note may be redeemed at any time in whole or from time to time in part
in increments of $1,000 principal amount hereof (PROVIDED, that any remaining
principal hereof shall be at least $150,000) at the option of the Company at the
applicable Redemption Price (as defined below) together with accrued and unpaid
interest hereon at the applicable rate payable to the date of redemption (each
B-6
such date, a "Redemption Date"), on written notice given by the Company to the
Registered Holder not less than 30 nor more than 60 calendar days prior to the
Redemption Date. Whenever less than all the Notes at any time outstanding are to
be redeemed, the Notes to be so redeemed shall be selected by the Company. If
less than all the Notes of identical terms at any time outstanding are to be
redeemed, the Notes to be so redeemed shall be selected by the Issuing and
Paying Agent by lot or in any usual manner approved by it. In the event of
redemption of this Note in part only, a new Note for the unredeemed portion
hereof shall be issued in the name of the Registered Holder hereof upon the
surrender hereof.
The "Redemption Price" shall initially be the Initial Redemption
Percentage, if any, specified on the face hereof, of the principal amount of
this Note to be redeemed and shall decline at each anniversary of the Initial
Redemption Date, shown on the face hereof, by the Annual Redemption Percentage
Reduction, if any, specified on the face hereof, of the principal amount to be
redeemed until the Redemption Price is 100% of such principal amount.
This Note may be subject to repayment at the option of the
Registered Holder hereof on any Holder's Optional Repayment Date(s), if any,
specified on the face hereof. If no Holder's Optional Repayment Dates are set
forth on the face hereof, this Note may not be so repaid at the option of the
Registered Holder hereof prior to the Stated Maturity Date. On any Holder's
Optional Repayment Date this Note shall be repayable in whole or in part in
increments of $1,000 (provided that any remaining principal hereof shall be at
least $150,000) at the option of the Registered Holder hereof at a repayment
price equal to 100% of the principal amount to be repaid, together with accrued
and unpaid interest thereon payable to the date of repayment. For this Note to
be repaid in whole or in part at the option of the Registered Holder hereof,
this Note must be received, with the form entitled "Option to Elect Repayment"
below duly completed, by the Issuing and Paying Agent at 1616 Woodall Rodgers
Freeway, Dallas, TX 75202, Attention: Investor Relations, or such other address
as the Company shall from time to time notify the Registered Holders of the
Notes, not less than 30 nor more than 60 calendar days prior to a Holder's
Optional Repayment Date. Exercise of such repayment option by the Registered
Holder hereof shall be irrevocable.
Interest on this Note shall be computed and paid on the basis of
a 360-day year consisting of twelve 30-day months.
This Note, and any Note or Notes issued upon transfer or exchange
hereof, may be issued only in fully registered form, without coupons, in minimum
denominations of $150,000 and in integral multiples of $1,000 in excess thereof.
The Issuing and Paying Agent shall maintain the Note Register on
its own internal registration record-keeping system. The term "Note Register"
shall mean the definitive record in which shall be recorded the names,
addresses, addresses for payment and taxpayer identification numbers of
Registered Holders of the Notes and details with respect to the issuance,
transfer and exchange of Notes as appropriate. If any resale or transfer of this
Note is proposed to be made (i) directly to an institutional investor that is an
"Accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act of 1933, as amended (the "1933 Act") approved by a Placement Agent (as
defined hereinafter) or the Company or to an institutional investor approved
B-7
by any applicable Placement Agent and the Company (each such institutional
investor, an "Institutional Accredited Investor"), in a transaction approved by
the Company, (ii) through a dealer other than Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, The First Boston Corporation and
Smith Barney, Harris Upham & Co. Incorporated (each, a "Placement Agent" and
collectively, the "Placement Agents") to an Institutional Accredited Investor in
a transaction approved by the Company, (iii) to a "qualified institutional
buyer" as defined in Rule 144A ("Rule 144A") promulgated under the 1933 Act in a
transaction (other than a transaction involving the resale or transfer to, by,
through, or in a transaction approved by, a Placement Agent) which meets the
requirements of Rule 144A or (iv) to an Institutional Accredited Investor in a
transaction (other than a transaction involving the resale or transfer to, by,
through, or in a transaction approved by, a Placement Agent) which meets the
requirements of Regulation S promulgated under the 1933 Act, the Issuing and
Paying Agent shall not register the transfer of this Note unless the Registered
Holder hereof and the prospective purchaser have completed the Certificate of
Transfer below or a Bond Power substantially in the form of EXHIBIT A to the
Company's Private Placement Memorandum relating to the offer and sale of the
Notes most recently delivered by the Company to the Issuing and Paying Agent
(the "Bond Power") and the Issuing and Paying Agent has received this Note (and
any Bond Power) at its offices at 1616 Woodall Rodgers Freeway, Dallas, TX
75202, Attention: Investor Relations, or such other address as the Company shall
from time to time notify the Registered Holders of the Notes. If any resale or
transfer of this Note is proposed to be made through a Placement Agent or in a
transaction approved by a Placement Agent (other than a resale or transfer to,
or by, a Placement Agent) and a duly completed Note or Bond Power has not been
submitted to the Issuing and Paying Agent, the Issuing and Paying Agent shall
register the transfer of this Note upon receipt of written instructions from the
Company or the Placement Agent to effect such resale or transfer.
The Company agrees (i) to make available upon request of the
Registered Holder hereof or any prospective transferee, such information
required by Rule 144A under the 1933 Act to enable resales of this Note to be
made pursuant to Rule 144A and (ii) it shall otherwise use all reasonable
efforts to ensure that such exemption remains available with respect to this
Note. Further, the restrictions upon resales and other transfers of this Note,
as set forth on this Note, may be modified from time to time, without the
consent of but upon notice to the Registered Holder hereof, (A) to reflect any
amendment to Rule 144A or change in the interpretation thereof or practices
thereunder and (B) to accommodate the issuance, if any, of this Note in
book-entry form and related matters.
This Note, if presented for registration of transfer, shall be
duly endorsed or shall be accompanied by a written instrument of transfer, in
form satisfactory to the Company and the Issuing and Paying Agent, duly executed
by the Registered Holder hereof or its attorney duly authorized in writing.
Subject to the conditions stated herein, the Issuing and Paying Agent shall
register the transfer of this Note and complete, countersign and deliver, in the
name of the designated transferee or transferees, one or more new Notes of any
authorized denominations having the same aggregate principal amount and the same
terms and provisions as set forth herein; PROVIDED, HOWEVER, that the Issuing
and Paying Agent shall not be required to register the transfer of this Note or
any portion hereof that has been called for redemption or repayment during a
period beginning at the opening of business fifteen (15) calendar days before
the day of mailing of a notice of such redemption or
B-8
repayment and ending at the close of business on the day of such mailing. If
this Note is presented for transfer other than between a Regular Record Date and
a corresponding Interest Payment Date, the new Note shall be dated as of the
last Interest Payment Date. If this Note is presented for transfer between a
Regular Record Date and a corresponding Interest Payment Date, the new Note
shall be dated as of such Interest Payment Date. If this Note is presented for
transfer on an Interest Payment Date, the new Note shall be dated as of the
Interest Payment Date. If no interest has been paid on this Note, the Note to be
issued upon transfer shall be dated as of the date of this Note. If interest is
overdue on this Note, the Note to be issued upon transfer shall be dated as of
the last Interest Payment Date to which interest has been paid or duly provided
for.
In connection with any registration of transfer of this Note, the
Company and the Issuing and Paying Agent may require payment by the Registered
Holder hereof of a sum sufficient to cover any applicable tax or other
governmental charge.
The Company and the Issuing and Paying Agent may deem and treat
the Registered Holder hereof as the absolute owner of this Note for the purpose
of receiving payments of the principal of and premium, if any, and interest on
this Note and for all other purposes whatsoever, whether or not this Note shall
be overdue, and neither the Company nor the Issuing and Paying Agent, except as
provided herein, shall be affected by notice to the contrary.
In case this Note shall become mutilated, destroyed, lost or
stolen, the Company in its discretion may, upon the written request of the
Registered Holder hereof, execute and, upon the Company's request, the Issuing
and Paying Agent shall complete, countersign and deliver, a new Note having
identical terms and provisions and a serial number not then outstanding, payable
in the same principal amount, of like tenor, dated the same date in exchange and
in substitution for the mutilated Note or in lieu of and in substitution for the
Note destroyed, lost or stolen. In each such case, the applicant for a
substituted Note shall furnish to the Company and the Issuing and Paying Agent
such security or indemnity as may be required by them to save each of them
harmless, and, in every case of destruction, loss or theft, the applicant shall
also furnish to the Company and the Issuing and Paying Agent evidence to their
satisfaction of the destruction, loss or theft of this Note and of the ownership
hereof. The Issuing and Paying Agent is authorized to complete and countersign
any such substituted Note and deliver the same upon written request or
authorization of any authorized representative of the Company or person
designated in writing to issue instructions by such authorized representative of
the Company. Upon the issuance of any substituted Note, the Company and the
Issuing and Paying Agent may require the payment by the Registered Holder hereof
of a sum sufficient to cover any fees and expenses connected therewith. In case
this Note shall become mutilated or be destroyed, lost or stolen, after the
Stated Maturity Date hereof or within 30 calendar days of redemption or any
Maturity Date hereof, the Company may, instead of issuing a substitute Note, pay
or authorize the payment of the same (without surrender hereof except in the
case of a mutilated Note) upon compliance by the Registered Holder hereof with
the provisions herein. The Issuing and Paying Agent shall record on the Note
Register the cancellation of any original Notes (whether or not physically
surrendered to the Issuing and Paying Agent) and the reissue of Notes in
substitution therefor due to mutilation, destruction, loss or theft.
So long as this Note is outstanding, the Company will not create
or assume, or permit to exist, any mortgage, lien or encumbrance on, pledge of,
or other security interest (collectively, a
B-9
"Mortgage"), in any property or assets of any kind (real or personal, tangible
or intangible) of the Company to secure any notes, bonds, debentures or other
similar evidences of indebtedness for money borrowed by the Company ("Debt"),
without at the same time securing this Note equally and ratably with such Debt;
PROVIDED, HOWEVER, that this covenant shall not apply to:
(a) Mortgages created to secure all or part of the purchase price
of any property (or to secure a loan made to enable the Company or any
subsidiary to acquire the property described in such Mortgage), PROVIDED
that such Mortgage shall extend only to the property so acquired, fixed
improvements thereon, replacements thereof and the income and profits
therefrom;
(b) Mortgages on property to secure (in the case of property
which is, in the opinion of the Board of Directors, substantially
unimproved for the use intended by the company) all or part of the cost
of improvement thereof, or to secure Debt incurred to provide funds for
any such purpose;
(c) Mortgages which secure only indebtedness owing by the Company
to one or more subsidiaries of the Company;
(d) Mortgages on the property of any corporation or other entity
existing at the time such corporation or other entity becomes a
subsidiary of the Company;
(e) Mortgages on any property to secure Debt or other
indebtedness incurred in connection with the construction, installation
or financing of pollution control or abatement facilities or other forms
of industrial revenue bond financing or Debt issued or guaranteed by the
United States of America, any State, municipality, political subdivision
or any department, agency or instrumentality of any of them; or
(f) Any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any
Mortgage referred to in the foregoing clauses (a) through (e) or of any
Debt secured thereby, provided that the principal amount of Debt so
secured thereby shall not exceed the principal amount of Debt so secured
at the time of such extension, renewal or replacement, and that such
extension, renewal or replacement Mortgage shall be limited to all or
part of substantially the same property which secured the Mortgage
extended, renewed or replaced (plus improvements on such property).
Notwithstanding the foregoing provisions, the Company may issue
Debt secured by Mortgages which would otherwise be subject to the foregoing
restrictions in an aggregate principal amount which, together with the aggregate
outstanding principal amount of all other Debt of the Company which would
otherwise be subject to the foregoing restrictions (not including Debt permitted
to be secured under clauses (a) through (f)), does not at the time of issuance
exceed 20% of the stockholders' equity in the Company and its consolidated
subsidiary companies as shown in the latest audited consolidated balance sheet
of the Company.
B-10
The following types of transactions, among others, shall not be
deemed to create Debt secured by Mortgages:
(1) The sale or other transfer of natural gas or other
petroleum hydrocarbons in place for a period of time until, or in
an amount such that, the transferee will realize therefrom a
specified amount (however determined) of money or such natural
gas or other petroleum hydrocarbons, or the sale or other
transfer of any other interest in property of the character
commonly referred to as a production payment or as an overriding
royalty, and
(2) Mortgages required by any contract or statute in order
to permit the Company or a subsidiary of the Company to perform
any contract or subcontract made by it with or at the request of
the United States of America, any State, municipality, political
subdivision or any department, agency or instrumentality of any
of them, or to secure partial, progress, advance or any other
payments to the Company or any subsidiary by the United States of
America, any State, municipality, political subdivision or any
department, agency or instrumentality of any of them pursuant to
the provisions of any contract or statute.
So long as this Note remains outstanding, the Company shall not
consolidate with or merge with or into, or transfer all or substantially all of
its assets to, any person unless (A) either the Company shall be the resulting
or surviving entity or the resulting or surviving entity is a corporation
organized and existing under the laws of the United States of America, a state
thereof or the District of Columbia that expressly assumes all the obligations
of the Company under the Notes (in which case all such obligations of the
Company under the Notes shall terminate upon the assumption of such obligations
by such successor), and (B) immediately before and immediately after giving
effect to such transaction (and treating any indebtedness which becomes an
obligation of the resulting or surviving entity as a result of such transaction
as having been incurred by the resulting or surviving entity at the time of such
transaction) no event shall have occurred and be continuing which with the
passing of time or the giving of notice or both would allow the Registered
Holder of any Note to accelerate the maturity of such Note.
The Registered Holder of this Note may, by notice in writing to
the Company, accelerate the maturity of this Note upon the occurrence of one or
more of the following events:
(i) default in the payment of any interest upon any of the
Notes as and when the same shall become due and payable and
continuance of such default for a period of 30 calendar days; or
(ii) default in the payment of the principal of or
premium, if any, on any of the Notes as and when the same becomes
due and payable either at maturity or otherwise; or
(iii) a decree or order by a court having jurisdiction
shall have been entered adjudging the Company a bankrupt or
insolvent, or approving as properly
B-11
filed a petition seeking reorganization of the Company under the
Bankruptcy Code (Title 11, U.S. Code) or any other similar
applicable Federal or state law, and such decree or order shall
have continued undischarged and unstayed for a period of 60
calendar days; or a decree or order of a court having
jurisdiction for the appointment of a receiver or liquidator or
trustee or assignee in bankruptcy or insolvency of the Company or
its property, or for the winding up or liquidation of its
affairs, shall have been entered, and such decree or order shall
have continued undischarged and unstayed for a period of 60
calendar days; or
(iv) the Company shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing
of a bankruptcy proceeding against the Company, or shall file a
petition or answer or consent seeking reorganization under the
Bankruptcy Code (Title 11, U.S. Code) or any other similar
applicable Federal or state law, or shall consent to the filing
of any such petition, or shall consent to the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of its property, or shall make an
assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become
due; or
(v) the Company shall fail to perform or observe any other
term, covenant or agreement contained in this Note to be
performed or observed by it and any such failure shall continue
and remain unremedied for at least 30 calendar days after written
notice, specifying such failure and requesting the Company to
remedy such failure, shall have been received by the Company from
the Registered Holders of at least 25% in aggregate principal
amount of the Notes outstanding affected thereby; or
(vi) the Company shall default in the payment when due
(subject to any applicable grace period), whether at stated
maturity or otherwise, of any principal of or interest on
(howsoever designated) any indebtedness for borrowed money of, or
guaranteed by, the Company in the aggregate principal amount of
$10 million or more, whether such indebtedness now exists or
shall hereafter be created which default shall result in such
indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable;
PROVIDED, HOWEVER, that if any such acceleration shall
subsequently be rescinded or annulled (including through the
discharge of the accelerated indebtedness) prior to the obtaining
of any judgment or decree for the payment of any money due on
this Note or the actual payment of money due on this Note, any
acceleration of this Note consequent solely on such other
acceleration shall likewise be deemed rescinded or annulled
without further action on the part of the Registered Holder.
Upon the occurrence of any event described above, the Company shall promptly
instruct the Issuing and Paying Agent in writing to notify the Registered Holder
of this Note as to such occurrence. In addition, the Company will, within five
calendar days after the occurrence thereof, instruct the Issuing and Paying
Agent in writing to promptly notify the Registered Holders of Notes in writing
B-12
as to any event which after notice or lapse of time or both would become an
event of default pursuant to paragraph (E) above ("default"). Upon receipt of
any such written instruction in respect of the occurrence of any such event of
default or default, the Issuing and Paying Agent will promptly mail to all
Registered Holders of Notes such written notice of such event of default, unless
in the case of any such default the Company shall have notified the Issuing and
Paying Agent in writing that such default shall have been cured before the
mailing of such written notice by the Issuing and Paying Agent.
All notices to the Company under this Note shall be in writing
and addressed to the Company at 2 West Sixth Street, Tulsa, Oklahoma 74119,
Attention: Treasurer or to such other address as the Company may notify the
Registered Holder of this Note.
Any action by the Registered Holder of this Note shall bind all
future Registered Holders of this Note, and of any Note issued in exchange or
substitution herefor or in place hereof, in respect of anything done or
permitted by the Company or the Issuing and Paying Agent in pursuance of such
action.
Any moneys paid by the Company to the Issuing and Paying Agent
for the payment of the principal of, or interest or premium, if any, on any
Notes, and remaining unclaimed at the end of 90 calendar days after such
principal, interest or premium shall have become due and payable (whether at
maturity or upon call for redemption or upon repayment or otherwise) shall then
be repaid to the Company by the Issuing and Paying Agent and upon such repayment
all liability of the Issuing and Paying Agent with respect to such moneys shall
thereupon cease, without, however, limiting in any way any obligation which the
Company may have to pay the principal of or interest or premium, if any, on this
Note as the same shall become due.
No provision of this Note or of the Issuing and Paying Agency
Agreement shall alter or impair the obligation of the Company which is absolute
and unconditional, to pay the principal of, premium, if any, and interest on
this Note at the time, place, and rate, and in the manner and the coin or
currency, herein prescribed.
The Issuing and Paying Agency Agreement shall be governed by and
construed in accordance with the laws of the State of Texas applicable to
agreements made and performed in Texas and this Note shall be governed by and
construed in accordance with the laws of the State of New York applicable to
instruments entered into and performed in New York.
All terms not otherwise defined herein which are defined in the
Issuing and Paying Agency Agreement shall have the meanings assigned to them in
the Issuing and Paying Agency Agreement.
B-13
PRESENTATION OF NOTES FOR PAYMENT
PRESENTATION OF NOTES AT MATURITY OR UPON REDEMPTION
The principal amount of, and premium, if any, and interest on
this Note due at maturity, or upon earlier redemption hereof, will be paid
against presentation of this Note by the Registered Holder hereof at the offices
of the Issuing and Paying Agent at:
Central and South West Services, Inc.
1616 Woodall Rodgers Freeway
Dallas, TX 75202
Attention: Investor Relations
The Registered Holder shall not be entitled to receive such
payment in immediately available funds unless the following conditions are met:
(1) the Registered Holder has provided in writing wire or
Automated Clearinghouse ("ACH") transfer instructions to
the Issuing and Paying Agent at the address specified
above or by telecopy at (214) 754-1223;
(2) the wire or ACH instructions are received by the Issuing
and Paying Agent no later than the second Business Day
prior to the date any such payment is due; and
(3) the bank specified to receive such transfer has
appropriate facilities therefor.
PRESENTATION OF NOTES FOR HOLDER'S OPTIONAL REPAYMENT
This Note must be presented to the Issuing and Paying Agent at
its address set forth above not less than 30 nor more than 60 calendar days
prior to the Holder's Optional Repayment Date, if any, specified on the face
hereof with the "Option to Elect Repayment" form below duly completed. The
Registered Holder may receive payment for this Note in immediately available
funds PROVIDED that the conditions set forth above have been satisfied.
ALTERNATE MANNER FOR DELIVERING NOTES
The Registered Holder hereof may deliver this Note to IBJ
Schroder Bank & Trust Company (the "Drop Agent") (or at such other office or
agency of the Company as the Company shall designate in writing to the
Registered Holder of this Note) for forwarding to the Issuing and Paying Agent
at the address of the Drop Agent set forth below:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Transfer Department
B-14
To provide for timely presentation of this Note to the Issuing
and Paying Agent, a Registered Holder must deliver this Note to the Drop Agent
no later than 12:00 noon (New York City time), two Business Days prior to the
date it must be received by the Issuing and Paying Agent. Payment on this Note,
if subsequently presented to the Drop Agent, will be made on the second Business
Day following the Drop Agent's receipt of this Note. For purposes of the
preceding sentence, receipt of this Note by the Drop Agent later than 12:00 noon
(New York City time) on any Business Day will be treated as receipt on the
following Business Day.
THE DROP AGENT IS NOT A PAYING AGENT FOR THIS NOTE AND ITS SOLE RESPONSIBILITY
SHALL BE TO FORWARD THIS NOTE TO THE ISSUING AND PAYING AGENT. THIS NOTE MUST BE
RECEIVED BY THE ISSUING AND PAYING AGENT BEFORE ANY PAYMENT HEREON WILL BE MADE.
WHETHER OR NOT THIS NOTE IS DELIVERED TO THE DROP AGENT AT THE TIMES SPECIFIED
ABOVE, NEITHER THE ISSUING AND PAYING AGENT NOR THE DROP AGENT SHALL BE LIABLE
UNDER ANY CIRCUMSTANCES FOR ANY UNTIMELY PRESENTATION OF THIS NOTE TO THE
ISSUING AND PAYING AGENT.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations.
TEN COM--as tenants in common
UNIF GIFT MIN ACT--..........Custodian..........
Under Uniform Gifts to Minors Act
.................................
TEN ENT--as tenants by the entireties
JT TEN--as joint tenants with right of survivorship
and not as tenants in common
Additional abbreviations may also be used though not in the above
list.
B-15
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably request(s) and instruct(s) the
Company to repay this Note (or portion hereof specified below) pursuant to its
terms at a price equal to 100% of the principal amount hereof to be repaid,
together with accrued and unpaid interest hereon payable to the repayment date,
to the undersigned, at
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of the undersigned)
If less than the entire principal amount of this Note is to be
repaid, specify the portion hereof (which shall be increments of $1,000) which
the undersigned elects to have repaid and specify the denomination or
denominations (which shall be $150,000 or an integral multiple of $1,000 in
excess of $150,000) of the Notes to be issued to the undersigned for the portion
of this Note not being repaid (in the absence of any such specification, one
such Note will be issued for the portion not being repaid).
Principal amount to be repaid: $
(if less than the entire
principal amount hereof)
NO. OF NOTES DENOMINATION(S)
Reissuance Instructions: $
(if needed)
Date
NOTICE: The signature on this
Option to Elect Repayment
must correspond with the name
as written upon the face of
this Note in every
particular, without
alteration or enlargement or
any change whatsoever.
B-16
CERTIFICATE OF TRANSFER
(Not required for resales or other transfers to the Company or any of its
affiliates or a Placement Agent or resales or other transfers by, through, or in
a transaction approved by, a Placement Agent)
FOR VALUE RECEIVED, the undersigned Registered Holder hereby
sell(s), assign(s) and transfer(s) unto
PLEASE INSERT TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE
___________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of Assignee)
the accompanying Note and all rights thereunder, hereby irrevocably constituting
and appointing ___________________________ attorney to transfer said Note on the
books of the Company, with full power of substitution in the premises.
In connection with any resale or other transfer of this Note
occurring prior to the time the legend originally set forth on the face of this
Note (or one or more predecessor Notes) restricting resales and other transfers
thereof has been removed in accordance with the procedures set forth in the
Issuing and Paying Agency Agreement referred to therein (other than a resale or
other transfer made (i) to the Company or any of its affiliates or (ii) to, by,
through, or in a transaction approved by, one of the Placement Agents referred
to in such legend), the undersigned confirms that without utilizing any general
solicitation or general advertising:
[Check one]
[ ] (a) This Note is being transferred by the undersigned to a
"qualified institutional buyer" as defined in Rule 144A
promulgated under the Securities Act of 1933, as amended,
pursuant to the exemption from registration under the Securities
Act of 1933, as amended, provided by Rule 144A promulgated
thereunder.
OR
[ ] (b) This Note is being transferred by the undersigned in an
"Offshore Transaction" as defined in Regulation S under the
Securities Act of 1933, as amended, pursuant to the exemption
from registration under the Securities Act of 1933, as amended,
provided by Regulation S thereunder.
OR
B-17
[ ] (c) This Note is being transferred by the undersigned to an
institutional investor that is an "Accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act of
1933, as amended, and that the undersigned has been advised by
the undersigned prospective purchaser that it intends to hold
such Note for investment and not for distribution, subject to any
requirement of law that the disposition of the undersigned's
property shall at all times be and remain within its control.
If none of the foregoing boxes are checked, then, so long as the accompanying
Note shall bear a legend on its face restricting resales and other transfers
thereof (except in the case of a resale or other transfer made (i) to the
Company or any of its affiliates or (ii) to, by, through, or in a transaction
approved by, one of the Placement Agents referred to in such legend), the
Issuing and Paying Agent shall not register this Note in the name of any person
other than the Registered Holder of this Note unless and until the conditions to
any such registration of transfer set forth in this Note, on the face hereof and
in Section 14 of the Issuing and Paying Agency Agreement shall have been
satisfied.
Dated:_______________________ ____________________________
NOTICE: The signature of the
Registered Holder to this
assignment must correspond
with the name as written upon
the face of the within Note
in every particular, without
alteration or enlargement or
any change whatsoever.
TO BE COMPLETED BY PURCHASER
IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that (i) it is a
"qualified institutional buyer" as defined in Rule 144A promulgated under the
Securities Act of 1933, as amended, and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information, (ii) this
instrument has been executed on behalf of the undersigned by one of its
executive officers, and (iii) it is aware that the Registered Holder of this
Note is relying upon the undersigned's foregoing representations in order to
claim the exemption from registration provided by Rule 144A.
Dated:_______________________ ____________________________
NOTICE: To be executed by an
executive officer.
TO BE COMPLETED BY PURCHASER
IF (c) ABOVE IS CHECKED:
The undersigned represents and warrants that it is an
institutional investor that is an "Accredited Investor" as defined in Rule
501(a) promulgated under the Securities Act of 1933, as
B-18
amended, and that this instrument has been executed on behalf of the undersigned
by one of its executive officers. The undersigned undertakes to hold this Note
for investment and not for distribution, subject to any requirement of law that
the disposition of the undersigned's property shall at all times be and remain
within its control.
Dated:_______________________ ____________________________
NOTICE: To be executed by an
executive officer.
Inquiries concerning the transfer of Notes or this Certificate of
Transfer should be directed to Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Merrill Lynch World Headquarters, World Financial
Center, North Tower, New York, New York 10281-1307, telephone (212) 449-4534,
attention: Mr. Chris Carmody; or to Treasurer, Transok, Inc., 2 West Sixth
Street, P.O. Box 3008, Tulsa, Oklahoma 74101, telephone (918) 583-1121; or to
John F. Parell, Director, The First Boston Corporation, Park Avenue Plaza, 55
East 52nd Street, New York, N.Y. 10055, telephone (212) 909-2000; or to Smith
Barney, Harris Upham & Co. Incorporated, 1345 Avenue of the Americas, New York,
N.Y. 10105, telephone (212) 698-3950, Attention: Manager-Capital Transactions.
B-19
Exhibit C
TRANSOK, INC.
[FORM OF FLOATING RATE MEDIUM-TERM NOTE]
THIS MEDIUM-TERM NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), AND SALES OR OTHER TRANSFERS HEREOF MAY BE MADE
ONLY TO INSTITUTIONAL INVESTORS THAT ARE "ACCREDITED INVESTORS" AS DEFINED IN
RULE 501(a) PROMULGATED UNDER THE 1933 ACT APPROVED BY MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE FIRST BOSTON CORPORATION
OR SMITH BARNEY, HARRIS UPHAM & CO. INCORPORATED (EACH A "PLACEMENT AGENT";
COLLECTIVELY, THE "PLACEMENT AGENTS") OR BY TRANSOK, INC. ("TRANSOK" OR THE
"COMPANY") OR INSTITUTIONAL INVESTORS APPROVED BY ANY APPLICABLE PLACEMENT AGENT
AND THE COMPANY (INDIVIDUALLY, AN "INSTITUTIONAL ACCREDITED INVESTOR" AND
COLLECTIVELY, "INSTITUTIONAL ACCREDITED INVESTORS") IN TRANSACTIONS EXEMPT FROM
REGISTRATION UNDER THE 1933 ACT (INCLUDING, WITHOUT LIMITATION, COMPLIANCE WITH
REGULATION S PROMULGATED UNDER THE 1933 ACT ("REGULATION S")) . THIS NOTE WILL
INITIALLY BEAR LEGENDS ("RESTRICTIVE LEGENDS") SETTING FORTH THE FOLLOWING
REPRESENTATIONS AND RESTRICTIONS ON RESALES AND OTHER TRANSFERS. BY ITS
ACCEPTANCE OF THIS NOTE BEARING A RESTRICTIVE LEGEND, THE PURCHASER WILL BE
DEEMED (A) TO HAVE REPRESENTED TO THE COMPANY AND THE PLACEMENT AGENTS (i) THAT
IT IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IS ACQUIRING THIS NOTE FOR ITS
OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO MUST BE INSTITUTIONAL ACCREDITED INVESTORS UNLESS THE
PURCHASER IS A BANK ACTING IN ITS FIDUCIARY CAPACITY) FOR INVESTMENT AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, THE DISTRIBUTION
HEREOF, OR (ii) THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A ("RULE 144A") PROMULGATED UNDER THE 1933 ACT AND IS ACQUIRING THIS NOTE FOR
ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT
FOR OTHERS (WHICH OTHERS ALSO MUST BE QUALIFIED INSTITUTIONAL BUYERS), OR (iii)
THAT IT IS AN INSTITUTIONAL ACCREDITED INVESTOR AND IS ACQUIRING THIS NOTE
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY
REGULATION S, AND (B) TO HAVE AGREED THAT, SO LONG AS THIS NOTE BEARS A
RESTRICTIVE LEGEND, ANY RESALE OR OTHER TRANSFER OF THIS NOTE OR ANY INTEREST
THEREIN WILL BE MADE ONLY (i) TO THE COMPANY OR ANY OF ITS AFFILIATES, (ii) TO,
BY, THROUGH, OR IN A TRANSACTION APPROVED BY, A PLACEMENT AGENT, (iii) DIRECTLY
TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION APPROVED BY THE
COMPANY, (iv) THROUGH A DEALER OTHER THAN A PLACEMENT AGENT TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION APPROVED BY THE COMPANY, (v) TO A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION (OTHER THAN A TRANSACTION
C-1
DESCRIBED IN CLAUSE (ii) ABOVE) THAT MEETS THE REQUIREMENTS OF RULE 144A UNDER
THE 1933 ACT, OR (vi) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION
(OTHER THAN A TRANSACTION DESCRIBED IN CLAUSE (ii) ABOVE) THAT MEETS THE
REQUIREMENTS OF REGULATION S; PROVIDED THAT THE FOREGOING AGREEMENT OF THE
PURCHASER SHALL BE SUBJECT TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF
SUCH PURCHASER'S PROPERTY SHALL AT ALL TIMES BE AND REMAIN WITHIN ITS CONTROL.
ANY RESALE OR OTHER TRANSFER DESCRIBED IN CLAUSE (iii), (iv), (v) OR (vi)
REQUIRES THE SUBMISSION TO THE ISSUING AND PAYING AGENT REFERRED TO HEREIN OF A
DULY COMPLETED NOTE OR A BOND POWER IN THE FORM ATTACHED HERETO AS EXHIBIT A TO
THE PRIVATE PLACEMENT MEMORANDUM RELATING TO THE OFFER OR SALE OF THE NOTES MOST
RECENTLY DELIVERED BY THE COMPANY TO THE ISSUING AND PAYING AGENT. ANY RESALE OR
OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER TRANSFER, OF ANY NOTE BEARING A
RESTRICTIVE LEGEND WHICH IS NOT MADE IN COMPLIANCE WITH THE RESTRICTIONS SET
FORTH THEREIN WILL NOT BE RECOGNIZED BY THE COMPANY. SUBJECT TO THE RIGHT OF THE
COMPANY TO REQUIRE AN OPINION OF THE HOLDER'S COUNSEL, SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT SUCH RESTRICTIONS ARE NO LONGER REQUIRED UNDER THE
1933 ACT, NOTES NO LONGER SUBJECT TO THE RESTRICTIONS ON RESALES OR OTHER
TRANSFERS ARISING UNDER THE 1933 ACT WITH RESPECT TO PRIVATELY PLACED SECURITIES
(WHETHER BY VIRTUE OF RULE 144 OR OTHERWISE) MAY BE SURRENDERED TO THE ISSUING
AND PAYING AGENT FOR NEW NOTES NOT BEARING A RESTRICTIVE LEGEND.
THIS NOTE AND RELATED DOCUMENTATION (INCLUDING, WITHOUT LIMITATION, THE ISSUING
AND PAYING AGENCY AGREEMENT REFERRED TO HEREIN) MAY BE AMENDED OR SUPPLEMENTED
FROM TIME TO TIME, WITHOUT THE CONSENT OF BUT UPON NOTICE TO THE REGISTERED
HOLDER OF THIS NOTE SENT TO ITS REGISTERED ADDRESS, (i) TO MODIFY THE
RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS NOTE TO
REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION
THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR OTHER TRANSFER OF RESTRICTED
SECURITIES GENERALLY AND (ii) TO ACCOMMODATE THE ISSUANCE, IF ANY, OF THIS NOTE
IN BOOK-ENTRY FORM, AS DESCRIBED HEREIN, THROUGH THE FACILITIES OF THE
DEPOSITORY TRUST COMPANY OR OTHERWISE. EACH HOLDER OF THIS NOTE SHALL BE DEEMED,
BY ITS ACCEPTANCE OF THIS NOTE, TO HAVE AGREED TO ANY SUCH AMENDMENT OR
SUPPLEMENT (EACH OF WHICH SHALL BE CONCLUSIVE AND BINDING ON SUCH HOLDER AND ALL
FUTURE HOLDERS OF THIS NOTE AND ANY NOTES ISSUED IN EXCHANGE OR SUBSTITUTION FOR
THIS NOTE WHETHER OR NOT ANY NOTATION THEREOF IS MADE THEREON).
C-2
REGISTERED PRINCIPAL AMOUNT
NO. FLR- $_______________
TRANSOK, INC.
MEDIUM-TERM NOTE
(Floating Rate)
INTEREST RATE BASIS(ES): ORIGINAL ISSUE DATE: STATED MATURITY DATE:
INDEX MATURITY: INITIAL INTEREST RATE: INTEREST PAYMENT PERIOD:
SPREAD: INITIAL INTEREST INTEREST PAYMENT DATES:
RESET DATE:
SPREAD MULTIPLIER: INTEREST RESET PERIOD: INTEREST RESET DATES:
MAXIMUM INTEREST: MINIMUM INTEREST RATE: INITIAL REDEMPTION DATE:
INITIAL REDEMPTION ANNUAL REDEMPTION HOLDER'S OPTIONAL
PERCENTAGE: PERCENTAGE REDUCTION: REPAYMENT DATE(S):
CALCULATION AGENT: _____________
(if other than Central and South West
Services, Inc.) OTHER TERMS:
TRANSOK, INC., an Oklahoma corporation (the "Company", which term
includes any successor corporation permitted by the terms hereof) for value
received, hereby promises to pay to
, or registered assigns, the principal sum of
DOLLARS on the Stated Maturity Date specified above (except to the extent
redeemed or repaid prior to the Stated Maturity Date), and to pay interest
thereon, at a rate per annum equal to the Initial Interest Rate specified above
until the Initial Interest Reset Date specified above and thereafter at a rate
per annum determined in accordance with the provisions hereof under the heading
"Determination of Commercial Paper Rate," "Determination of CD Rate,"
"Determination of Federal Funds Rate," "Determination of LIBOR," "Determination
of Prime Rate," and "Determination of Treasury Rate," depending upon whether the
Interest Rate Basis specified above is Commercial Paper Rate, CD Rate, Federal
Funds Rate, LIBOR, Prime Rate, Treasury Rate, or the lower of any two or more of
such rates, as specified above, until the principal hereof is paid or duly made
available for payment.
The Company will pay interest monthly, quarterly, semiannually or
annually as specified above under "Interest Payment Period," on each Interest
Payment Date specified above, commencing with the first Interest Payment Date
specified above next succeeding the Original Issue Date specified above, and on
the Stated Maturity Date, or any Redemption Date (as defined on the reverse
hereof) or Holder's Optional Repayment Date specified above (each such Stated
Maturity Date, Redemption Date and Holder's Optional Repayment Date are referred
to hereinafter as a "Maturity Date" with respect to principal repayable on such
date); PROVIDED, HOWEVER, that if the
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Original Issue Date occurs between a Regular Record Date (as defined below) and
the next succeeding Interest Payment Date, interest payments will commence on
the Interest Payment Date following the next Regular Record Date to the
Registered Holder (as defined below) hereof on such next Regular Record Date;
and PROVIDED, FURTHER, that if an Interest Payment Date other than the Maturity
Date is originally scheduled to occur on a day that is not a Business Day (as
defined on the reverse hereof), such Interest Payment Date shall instead be the
next succeeding day that is a Business Day, except that in the case the Interest
Rate Basis (or one of the Interest Rate Bases) specified above is LIBOR and such
next succeeding Business Day falls in the next succeeding calendar month, such
Interest Payment Date shall be the immediately preceding Business Day. If the
Maturity Date falls on a day that is not a Business Day, the related payment of
principal, premium or interest shall be made on the next succeeding Business Day
with the same force and effect as if it were made on the date on which such
payment were due, and no interest shall accrue on the amount so payable for the
period from and after such Maturity Date. Except as provided above, interest
payments shall be made on the Interest Payment Dates specified above. The
"Regular Record Date" with respect to any Interest Payment Date shall be the
fifteenth calendar day (whether or not a Business Day) immediately preceding
such Interest Payment Date. Interest on this Note will accrue from and
including, the Original Issue Date specified above at the rates determined from
time to time as specified herein, until the principal hereof has been paid or
duly made available for payment. The interest so payable or duly provided for on
any Interest Payment Date will be paid to the person in whose name this Note (or
one or more predecessor Notes) is registered (the "Registered Holder") at the
close of business on the Regular Record Date for such Interest Payment Date;
PROVIDED, HOWEVER, that interest payable on any Maturity Date shall be payable
to the person to whom the principal hereof shall be payable.
Payments of the principal of, premium, if any, and interest on,
with respect to this Note shall be made in such coin or currency of The United
States of America as at the time of payment is legal tender for the payment of
public and private debts.
The principal of, and premium, if any, and interest on this Note,
which is due on any Maturity Date, will be paid against presentation of this
Note by the Registered Holder hereof at the office of the Issuing and Paying
Agent, 1616 Woodall Rodgers Freeway, Dallas, TX 75202, Attention: Investor
Relations, or at such other office or agency of the Company as the Company shall
designate by written notice to the Registered Holder hereof. The Registered
Holder will be entitled to payment in immediately available funds PROVIDED this
Note is presented to the Issuing and Paying Agent in accordance with the
procedures set forth on the reverse hereof under the caption "Presentation of
Notes for Payment".
Payment of interest on any Interest Payment Date other than the
Maturity Date will be made on each Interest Payment Date by check mailed to the
address of the Registered Holder hereof as of the immediately preceding Regular
Record Date at such address as shall appear in the Note Register (as defined on
the reverse hereof) PROVIDED, HOWEVER, that at the option of the Issuing and
Paying Agent, payments of interest on this Note may be made by Automated
Clearinghouse ("ACH") transfer to a bank account designated by the Registered
Holder hereof. Notwithstanding the foregoing, upon receipt of written
instructions from the Registered Holder hereof of an aggregate principal amount
of Notes, including this Note, in excess of $10,000,000 having the same Interest
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Payment Date, not less than fifteen (15) calendar days prior to such Interest
Payment Date, the Issuing and Paying Agent will make such payment of interest by
the transfer of immediately available funds to such account at a bank as the
Registered Holder hereof shall have designated; PROVIDED, such bank has
appropriate facilities therefor. The Issuing and Paying Agent has agreed to
comply with all Federal income tax information reporting and withholding
requirements (including, without limitation, obtaining appropriate
certifications and remitting the same to the Company) with respect to payments
of interest (including original issue discount) on this Note.
Neither the Company nor the Issuing and Paying Agent shall be
obligated to register any transfer of this Note not made in compliance with the
restrictions set forth above, on the reverse hereof and in the Issuing and
Paying Agency Agreement referred to on the reverse hereof.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Issuing and Paying Agent under the Issuing and Paying Agency Agreement
referred to on the reverse hereof by the manual signature of one of its
authorized officers, this Note shall not be entitled to any benefit under the
Issuing and Paying Agency Agreement or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed, manually or by facsimile.
TRANSOK, INC.
By: ____________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION:
This is one of the Notes issued under the
Issuing and Paying Agency Agreement
referred to on the reverse hereof.
Dated: _______________
CENTRAL AND SOUTH WEST SERVICES, INC.,
as Issuing and Paying Agent
By: ____________________________
Authorized Officer
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[FORM OF REVERSE]
TRANSOK, INC.
MEDIUM-TERM NOTE
(Floating Rate)
This Note is one of a duly authorized issue of the Company's
Medium-Term Notes With Maturities of 9 Months to 30 Years from Date of Issue
(the "Notes"). The Notes are issuable under the Issuing and Paying Agency
Agreement, dated as of March 30, 1992 (the "Issuing and Paying Agency
Agreement"), between the Company and Central and South West Services, Inc., as
Issuing and Paying Agent (the "Issuing and Paying Agent," which term includes
any successor Issuing and Paying Agent under the Issuing and Paying Agency
Agreement). Reference is hereby made to such Issuing and Paying Agency Agreement
and all supplements thereto for a statement of the respective rights thereunder
of the Company, the Issuing and Paying Agent and the Registered Holders of the
Notes and the terms upon which the Notes are, and are to be, authenticated and
delivered. The Issuing and Paying Agency Agreement may be amended from time to
time in accordance with the terms thereof, but any such amendment will not
affect the rights of the Registered Holder hereof. In acting under the Issuing
and Paying Agency Agreement, the Issuing and Paying Agent is acting solely as
agent of the Company and does not assume any obligation or relationship of
agency or trust for any of the beneficial owners or Registered Holders of Notes,
except that any funds held by the Issuing and Paying Agent for payment on this
Note shall be held in trust as provided in the Issuing and Paying Agency
Agreement. The terms of individual Notes may vary with respect to interest rates
or interest rate formulas, issue dates, maturity dates, redemption, repayment
and otherwise.
This Note has been issued by the Issuing and Paying Agent on
behalf of the Company pursuant to the Issuing and Paying Agency Agreement.
Copies of the Issuing and Paying Agency Agreement and related documents are on
file at the office of the Issuing and Paying Agent and are available for
inspection during normal business hours at such office.
This Note will not be subject to any sinking fund and, unless
otherwise provided on the face hereof in accordance with the following
provisions, will not be redeemable or repayable prior to the Stated Maturity
Date.
If so provided on the face of this Note, this Note may be
redeemed by the Company on any date on and after the Initial Redemption Date, if
any, specified on the face hereof. If no Initial Redemption Date is specified on
the face hereof, this Note may not be redeemed prior to the Stated Maturity
Date. On and after the Initial Redemption Date, if any, this Note may be
redeemed at any time either in whole or from time to time in part in increments
of $1,000 (PROVIDED, that any remaining principal amount hereof shall be at
least $150,000) at the option of the Company at the applicable Redemption Price
(as defined below), together with accrued and unpaid interest hereon at the
applicable rate borne by this Note to the date of redemption (each such date a
"Redemption Date"), on written notice given by the Company to the Registered
Holder not less than 30 nor more
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than 60 calendar days prior to the Redemption Date. Whenever less than all the
Notes at any time outstanding are to be redeemed, the Notes to be redeemed shall
be selected by the Company. If less than all the Notes with identical terms at
any time outstanding are to be redeemed, the Notes to be so redeemed shall be
selected by the Issuing and Paying Agent by lot or in any usual manner approved
by it. In the event of redemption of this Note in part only, a new Note for the
unredeemed portion hereof shall be issued in the name of the Registered Holder
hereof upon the surrender hereof.
The "Redemption Price" shall initially be the Initial Redemption
Percentage specified on the face hereof of the principal amount of this Note to
be redeemed and shall decline at each anniversary of the Initial Redemption Date
specified on the face hereof by the Annual Redemption Percentage Reduction, if
any, specified on the face hereof, of the principal amount to be redeemed until
the Redemption Price is 100% of such principal amount.
This Note may be subject to repayment at the option of the
Registered Holder hereof on any Holder's Optional Repayment Date(s), if any,
specified on the face hereof. If no Holder's Optional Repayment Date(s) are set
forth on the face hereof, this Note may not be so repaid at the option of the
Registered Holder hereof prior to the Stated Maturity Date. On any Holder's
Optional Repayment Date, this Note shall be repayable in whole or in part in
increments of $1,000 (provided that any remaining principal amount hereof shall
be at least $150,000) at the option of the Registered Holder hereof at a
repayment price equal to 100% of the principal amount to be repaid, together
with accrued and unpaid interest hereon payable to the date of repayment. For
this Note to be repaid in whole or in part at the option of the Registered
Holder hereof, this Note must be received, with the form entitled "Option to
Elect Repayment" below duly completed, by the Issuing and Paying Agent at its
offices located at 1616 Woodall Rodgers Freeway, Dallas, TX 75202, Attention:
Investor Relations, or at such address as the Company shall from time to time
notify the Registered Holders of the Notes, not less than 30 nor more than 60
calendar days prior to a Holder's Optional Repayment Date. Exercise of such
repayment option by the Registered Holder hereof shall be irrevocable.
This Note will bear interest at the rate determined by reference
to the Interest Rate Basis specified on the face hereof or the lowest of two or
more Interest Rate Bases, in either case (i) plus or minus the Spread, if any,
and/or (ii) multiplied by the Spread Multiplier, if any, as specified on the
face hereof. The Interest Rate Basis will be the rate determined in accordance
with the applicable provision below. Commencing on the Initial Interest Reset
Date, the rate at which interest on this Note is payable will be reset as of
each Interest Reset Date specified on the face hereof. If any Interest Reset
Date is originally scheduled to occur on a day that is not a Business Day (as
defined below), such Interest Reset Date will instead be the next day that is a
Business Day, except that if an Interest Rate Basis specified on the face hereof
is LIBOR and such next Business Day falls in the next succeeding calendar month,
such Interest Reset Date shall be the next preceding Business Day.
Interest payable on this Note on any Interest Payment Date will
be the amount of interest accrued from, and including, the next preceding
Interest Payment Date in respect of which interest has been paid (or from, and
including, the Original Issue Date specified on the face hereof, if no interest
has been paid) to, but excluding, the related Interest Payment Date; PROVIDED,
HOWEVER, that if the Interest Reset Period with respect to this Note is daily or
weekly, interest payable on any
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Interest Payment Date will include interest accrued, from and including, the
Original Issue Date, if no interest has been paid, or from, but excluding, the
last Regular Record Date to which interest has been paid, as the case may be,
through and including the Regular Record Date next preceding the applicable
Interest Payment Date; and PROVIDED, FURTHER, that the interest payments on the
Maturity Date will include interest accrued to, but excluding, the Maturity
Date. Accrued interest hereon will be an amount calculated by multiplying the
principal amount hereof by an accrued interest factor. Such accrued interest
factor will be computed by adding the interest factor calculated for each day
from the Original Issue Date, or from the last date to which interest shall have
been paid or duly provided for, to the date for which accrued interest is being
calculated. The interest factor for each such day will be computed by dividing
the interest rate applicable to such day by 360 in the case of Notes having as
their Interest Rate Basis the Commercial Paper Rate, the CD Rate, the Federal
Funds Rate, LIBOR or the Prime Rate or by the actual number of days in the year
in the case of Notes having as their Interest Rate Basis the Treasury Rate. The
interest factor for Notes for which the interest rate is calculated with
reference to two or more Interest Rate Bases will be calculated in each period
in the same manner as if only the lowest of such Interest Rate Bases applied.
Commencing with the Initial Interest Reset Date specified on face
hereof following the Original Issue Date specified on the face hereof, the rate
at which interest on this Note is payable shall be adjusted daily, weekly,
monthly, quarterly, semiannually or annually as specified on the face hereof
under "Interest Reset Period." The interest rate in effect on each day shall be
(a) if such day is an Interest Reset Date, the interest rate determined on the
Interest Determination Date (as defined below) pertaining to such Interest Reset
Date or (b) if such day is not an Interest Reset Date, the interest rate
determined on the Interest Determination Date pertaining to the next preceding
Interest Reset Date, provided that (i) the interest rate in effect from the
Original Issue Date to the Initial Interest Reset Date shall be the Initial
Interest Rate specified on the face hereof, and (ii) the interest rate in effect
for the ten days immediately prior to the Maturity Date shall be the rate in
effect on the tenth day preceding the Maturity Date.
The "Interest Determination Date" with respect to the Commercial
Paper Rate, the CD Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day preceding each Interest Reset Date. The "Interest
Determination Date" with respect to LIBOR shall be the second London Business
Day (as defined below) preceding each Interest Reset Date. The "Interest
Determination Date" with respect to the Treasury Rate will be the day in the
week in which the related Interest Reset Date falls on which day Treasury Bills
(as defined below) are normally auctioned (Treasury Bills are normally sold at
auction on Monday of each week, unless that day is a legal holiday, in which
case the auction is normally held on the following Tuesday, except that such
auction may be held on the preceding Friday); PROVIDED, HOWEVER, that if, as a
result of a legal holiday, an auction is held on the Friday of the week
preceding the related Interest Reset Date, the related Interest Determination
Date shall be such preceding Friday; and PROVIDED, FURTHER, that if an auction
shall fall on any Interest Reset Date, then the Interest Reset Date shall
instead be the first Business Day following such auction. The Interest
Determination Date pertaining to this Note, if the interest rate hereon is
determined with reference to two or more Interest Rate Bases, will be the first
Business Day which is at least two Business Days prior to such Interest Reset
Date on which each Interest Rate Basis shall be determinable. Each Interest Rate
Basis shall be determined and
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compared on such date, and the applicable interest rate shall take effect on the
related Interest Reset Date.
The "Calculation Date" pertaining to any Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day and (ii) the Business Day prior to the Interest Payment Date on
which such accrued interest will be payable.
All percentages resulting from any calculation on this Note shall
be rounded, if necessary, to the nearest one-hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation shall be rounded to
the nearest cent (with one-half cent being rounded upward).
As used herein, "Business Day" means any day other than a
Saturday or Sunday or a day on which banks in The City of New York (or, in the
case LIBOR is an applicable Interest Rate Basis for this Note, as specified on
the face hereof, the City of London) are generally authorized or obligated by
law or executive order to close. As used herein, "London Business Day" means any
day on which dealings in deposits in U.S. dollars are transacted in the London
interbank market.
DETERMINATION OF COMMERCIAL PAPER RATE. If an Interest Rate Basis
for this Note is the Commercial Paper Rate, as specified on the face hereof, the
Commercial Paper Rate shall be determined on the applicable Interest
Determination Date (a "Commercial Paper Rate Interest Determination Date"), as
the Money Market Yield (as defined below) on such date of the rate for
commercial paper having the Index Maturity specified on the face hereof as
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication ("H.15 (519)"), under the heading "Commercial Paper." In the event
such rate is not published by 3:00 P.M., New York City time, on the related
Calculation Date, then the Commercial Paper Rate shall be the Money Market Yield
on such Commercial Paper Rate Interest Determination Date of the rate for
commercial paper having the Index Maturity specified on the face hereof as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Commercial
Paper." If by 3:00 P.M., New York City time, on the related Calculation Date
such rate is not yet published in either H.15(519) or Composite Quotations, then
the Commercial Paper Rate for such Commercial Paper Rate Interest Determination
Date will be as calculated by the Calculation Agent or such successor thereto as
is duly appointed by the Company and specified on the face hereof (the
"Calculation Agent") and will be the Money Market Yield of the arithmetic mean
of the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper (which may include an affiliate of any Placement Agent) in The
City of New York selected by the Calculation Agent for commercial paper having
the Index Maturity specified on the face hereof placed for an industrial issuer
whose bond rating is "AA," or its equivalent, from a nationally recognized
securities rating agency; PROVIDED, HOWEVER, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Commercial Paper Rate determined on such Commercial Paper Rate
Interest Determination Date
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shall be the rate determined with respect to the immediately preceding
Commercial Paper Rate Interest Determination Date or, in the case of the first
Commercial Paper Rate Interest Determination Date, the Initial Interest Rate
specified on the face hereof.
"Money Market Yield" shall be a yield calculated in accordance
with the following formula:
Money Market Yield = D X 360 x 100
----------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
DETERMINATION OF CD RATE. If an Interest Rate Basis for this Note
is the CD Rate, as indicated on the face hereof, the CD Rate shall be determined
on the applicable Interest Determination Date (a "CD Rate Interest Determination
Date") as the rate on such date for negotiable certificates of deposit having
the Index Maturity specified on the face hereof as such rate is published in
H.15(519), under the heading "CDs (Secondary Market)", or, if not so published
by 3:00 P.M., New York City time, on the related Calculation Date, the rate on
such CD Rate Interest Determination Date for negotiable certificates of deposit
of the Index Maturity specified on the face hereof as published in Composite
Quotations under the heading "Certificates of Deposit." If such rate is not yet
published in either H.15(519) or Composite Quotations by 3:00 P.M., New York
City time, on the Calculation Date, then the CD Rate with respect to such CD
Rate Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the secondary market offered rates as of 9:00
A.M., New York City time, on such CD Rate Interest Determination Date, of three
leading non-bank dealers in negotiable United States dollar certificates of
deposit in The City of New York selected by the Calculation Agent for negotiable
certificates of deposit of major United States money center banks of the highest
credit standing in the market for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity specified on the face hereof in
the denomination of $5,000,000; PROVIDED, HOWEVER, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting as set forth above, the CD
Rate determined with respect to such CD Rate Interest Determination Date will be
the CD Rate determined on the immediately preceding CD Rate Interest
Determination Date or, in the case of the first CD Rate Interest Determination
Date, the Initial Interest Rate specified on the face hereof.
DETERMINATION OF FEDERAL FUNDS RATE. If an Interest Rate Basis
for this Note is the Federal Funds Rate, as specified on the face hereof, the
Federal Funds Rate will be determined on the applicable Interest Determination
Date (a "Federal Funds Rate Interest Determination Date"), as the rate on that
date for Federal Funds as published in H.15(519) under the heading "Federal
Funds (Effective)" or, if not so published by 3:00 P.M. New York City time, on
the related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date, as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, the Federal Funds Rate for such Federal Funds Rate
Interest Determination
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Date will be calculated by the Calculation Agent and will be the arithmetic mean
of the rates as of approximately 11:00 A.M., New York City time, on such Federal
Funds Rate Interest Determination Date for the last transaction in overnight
Federal Funds arranged by three leading brokers of Federal Funds transactions in
The City of New York selected by the Calculation Agent; PROVIDED, HOWEVER, that
if the brokers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate determined on such Federal
Funds Rate Interest Determination Date shall be the Federal Funds Rate
determined on the immediately preceding Federal Funds Rate Interest
Determination Date or, in the case of the first Federal Funds Rate Interest
Determination Date, the Initial Interest Rate specified on the face hereof.
DETERMINATION OF LIBOR. If an Interest Rate Basis for this Note
is LIBOR, as specified on the face hereof, LIBOR will be determined with respect
to any applicable Interest Determination Date (a "LIBOR Interest Determination
Date") , on the basis of the offered rates for deposits in United States dollars
for the period of the Index Maturity specified on the face hereof, commencing on
the second London Business Day immediately following such LIBOR Interest
Determination Date, which appear on the Reuters Screen LIBO Page (as defined
below) at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date. If at least two such offered rates appear on the Reuters
Screen LIBO Page, LIBOR on such LIBOR Interest Determination Date will be the
arithmetic mean of such offered rates as determined by the Calculation Agent.
"Reuters Screen LIBO Page" means the display designated as Page "LIBO" on the
Reuters Monitor Money Rate Service (or such other page as may replace the LIBO
Page on that service for the purpose of displaying London interbank offered
rates of major banks).
With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page as specified
above, the Calculation Agent will request the principal London offices of each
of four major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered quotation
for deposits in United States dollars for the period of the Index Maturity,
commencing on the second London Business Day immediately following such LIBOR
Interest Determination Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination Date
and in a principal amount equal to an amount of not less than U.S.$l million and
that is representative for a single transaction in such market at such time. If
at least two such quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date shall be the arithmetic mean of such quotations as
determined by the Calculation Agent. If fewer than two quotations are provided,
LIBOR determined on such LIBOR Interest Determination Date will be calculated by
the Calculation Agent as the arithmetic mean of the rates quoted by three major
reference banks in The City of New York selected by the Calculation Agent at
approximately 11:00 A.M., New York City time, on such LIBOR Interest
Determination Date for loans in United States dollars to leading European banks
having the Index Maturity specified on the face hereof and in a principal amount
equal to an amount of not less than U.S.$1 million and that is representative
for a single transaction in such market at such time; PROVIDED, HOWEVER, that if
the banks selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR determined on such LIBOR Interest
Determination Date will be LIBOR determined on the immediately preceding LIBOR
Interest Determination Date or, in the case of the first LIBOR Interest
Determination Date, the Initial Interest Rate specified on the face hereof.
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DETERMINATION OF PRIME RATE. If an Interest Rate Basis for this
Note is the Prime Rate; as specified on the face hereof, the Prime Rate will be
determined on the applicable Interest Determination Date (a "Prime Rate Interest
Determination Date") as the arithmetic mean of the prime rates quoted on the
basis of the actual number of days in the year divided by 360 as of the close of
business on such Prime Rate Interest Determination Date by three major money
center banks in The City of New York as selected by the Calculation Agent. If
fewer than three such quotations are provided, the Prime Rate will be calculated
by the Calculation Agent and shall be determined as the arithmetic mean of the
prime rates quoted in The City of New York by three substitute banks or trust
companies organized and doing business under the laws of the United States, or
any state thereof, each having total equity capital of at least $500 million and
being subject to supervision or examination by a Federal or state authority,
selected by the Calculation Agent to quote such rate or rates; PROVIDED,
HOWEVER, that if the banks or trust companies selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Prime Rate
determined on such Prime Rate Interest Determination Date will be the Prime
Rate determined on the immediately preceding Prime Rate Interest Determination
Date or, in the case of the first Prime Rate Interest Determination Date, the
Initial Interest Rate specified on the face hereof.
DETERMINATION OF TREASURY RATE. If an Interest Rate Basis for
this Note is the Treasury Rate, as specified on the face hereof, the Treasury
Rate will be determined on the applicable Interest Determination Date (a
"Treasury Rate Interest Determination Date") as the rate applicable to the most
recent auction of direct obligations of the United States ("Treasury Bills")
having the Index Maturity specified on the face hereof, as such rate is
published in H.15 (519), under the heading "Treasury Bills -- auction average
(investment)" or, if not so published by 3:00 P.M., New York City time, on the
related Calculation Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of Treasury Bills having
the Index Maturity specified on the face hereof are not reported as provided by
3:00 P.M., New York City time, on such Calculation Date, or if no such auction
is held in a particular week, then the Treasury Rate will be calculated by the
Calculation Agent and shall will be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 P.M., New York City time, on such Treasury Rate Interest
Determination Date, of three leading primary United States government securities
dealers (which may include an affiliate of any Placement Agent) as selected by
the Calculation Agent for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified on the face hereof; PROVIDED, HOWEVER,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate shall be the Treasury
Rate determined on the immediately preceding Treasury Rate Interest
Determination Date or, in the case of the first Treasury Rate Interest
Determination Date, the Initial Interest Rate specified on the face hereof.
Notwithstanding the foregoing, the interest rate hereon shall not
be greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, specified on the face hereof. The Calculation Agent shall
calculate the interest rate hereon in accordance with the foregoing on or before
each Calculation Date. The interest rate on this Note shall in no event be
C-12
higher than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application.
At the request of the Registered Holder hereof, the Issuing and
Paying Agent will provide to the Registered Holder hereof the interest rate
hereon then in effect and, if determined, the interest rate which shall become
effective as of the next Interest Reset Date.
This Note, and any Note or Notes issued upon transfer or exchange
hereof, may be issued only in fully registered form, without coupons, in minimum
denominations of $150,000 and in integral multiples of $1,000 in excess thereof.
The Issuing and Paying Agent shall maintain the Note Register on
its own internal registration record-keeping system. The term "Note Register"
shall mean the definitive record in which shall be recorded the names,
addresses, addresses for payment and taxpayer identification numbers of
Registered Holders of the Notes and details with respect to the issuance,
transfer and exchange of Notes as appropriate. If any resale or transfer of this
Note is proposed to be made (i) directly to an institutional investor that is an
"Accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act of 1933, as amended (the "1933 Act") approved by a Placement Agent (as
defined hereinafter) or the Company or to an institutional investor approved by
any applicable Placement Agent and the Company (each such institutional
investor, an "Institutional Accredited Investor"), in a transaction approved by
the Company, (ii) through a dealer other than Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, The First Boston Corporation and
Smith Barney, Harris Upham & Co. Incorporated (each, a "Placement Agent and
collectively, the "Placement Agents") to an Institutional Accredited Investor in
a transaction approved by the Company, (iii) to a "qualified institutional
buyer" as defined in Rule 144A ("Rule 144A") promulgated under the 1933 Act in a
transaction (other than a transaction involving the resale or transfer to, by,
through, or in a transaction approved by, a Placement Agent) which meets the
requirements of Rule 144A or (iv) to an Institutional Accredited Investor in a
transaction (other than a transaction involving the resale or transfer to, by,
through, or in a transaction approved by, a Placement Agent) which meets the
requirements of Regulation S promulgated under the 1933 Act, the Issuing and
Paying Agent shall not register the transfer of this Note unless the Registered
Holder hereof and the prospective purchaser have completed the Certificate of
Transfer below or a Bond Power substantially in the form of EXHIBIT A to the
Company's Private Placement Memorandum relating to the offer and sale of the
Notes most recently delivered by the Company to the Issuing and Paying Agent
(the "Bond Power") and the Issuing and Paying Agent has received this Note (and
any Bond Power) at its offices at 1616 Woodall Rodgers Freeway, Dallas, TX
75202, Attention: Investor Relations, or such address as the Company shall from
time to time notify the Registered Holders of the Notes. If any resale or
transfer of this Note is proposed to be made through a Placement Agent or in a
transaction approved by a Placement Agent (other than a resale or transfer to,
or by, a Placement Agent) and a duly completed Note or Bond Power has not been
submitted to the Issuing and Paying Agent, the Issuing and Paying Agent shall
register the transfer of the Note upon receipt of written instructions from the
Company or the Placement Agent to effect such resale or transfer.
The Company agrees (i) to make available upon request of the
Registered Holder hereof or any prospective transferee, such information
required by Rule 144A under the 1933 Act
C-13
to enable resales of this Note to be made pursuant to Rule 144A and (ii) it will
otherwise use all reasonable efforts to ensure that such exemption remains
available with respect to this Note. Further, the restrictions upon resales and
other transfers of this Note, as set forth on this Note, may be modified from
time to time, without the consent of but upon notice to the Registered Holder
hereof, (A) to reflect any amendment to Rule 144A or change in the
interpretation thereof or practices thereunder and (B) to accommodate the
issuance, if any, of this Note in book-entry form and related matters.
This Note, if presented for registration of transfer, shall be
duly endorsed or shall be accompanied by a written instrument of transfer, in
form satisfactory to the Company and the Issuing and Paying Agent, duly executed
by the Registered Holder hereof or its attorney duly authorized in writing.
Subject to the conditions stated herein, the Issuing and Paying Agent shall
register the transfer of this Note and complete, countersign and deliver, in the
name of the designated transferee or transferees, one or more new Notes of any
authorized denominations having the same aggregate principal amount and the same
terms and provisions as set forth herein; PROVIDED, HOWEVER, that the Issuing
and Paying Agent shall not be required to register the transfer of this Note or
any portion hereof that has been called for redemption or repayment during the
period beginning at the opening of business fifteen (15) calendar days before
the day of mailing of a notice of such redemption or repayment and ending at the
close of business on the day of such mailing. If this Note is presented for
transfer other than between a Regular Record Date and a corresponding Interest
Payment Date, the new Note shall be dated as of the last Interest Payment Date.
If this Note is presented for transfer between a Regular Record Date and a
corresponding Interest Payment Date, the new Note shall be dated as of such
Interest Payment Date. If this Note is presented for transfer on an Interest
Payment Date, the new Note shall be dated as of such Interest Payment Date. If
no interest has been paid on this Note, the Note to be issued upon transfer
shall be dated as of the date of this Note. If interest is overdue on this Note,
the Note to be issued upon transfer shall be dated as of the last Interest
Payment Date to which interest has been paid or duly provided for.
In connection with any registration of transfer of this Note, the
Company and the Issuing and Paying Agent may require payment by the Registered
Holder hereof of a sum sufficient to cover any applicable tax or other
governmental charge.
The Company and the Issuing and Paying Agent may deem and treat
the Registered Holder hereof as the absolute owner of this Note for the purpose
of receiving payments of the principal of and premium, if any, and interest on
this Note and for all other purposes whatsoever, whether or not this Note shall
be overdue, and neither the Company nor the Issuing and Paying Agent, except as
provided herein, shall be affected by notice to the contrary.
In case this Note shall become mutilated, destroyed, lost or
stolen, the Company in its discretion may, upon the written request of the
Registered Holder hereof, execute and, upon the Company's request, the Issuing
and Paying Agent shall complete, countersign and deliver a new Note, having
identical terms and provisions and a serial number not then outstanding, payable
in the same principal amount, of like tenor, dated the same date in exchange and
in substitution for the mutilated Note or in lieu of and in substitution for the
Note destroyed, lost or stolen. In each such case, the applicant for a
substituted Note shall furnish to the Company and the Issuing and Paying
C-14
Agent such security or indemnity as may be required by them to save each of them
harmless, and, in every case of destruction, loss or theft, the applicant shall
also furnish to the Company and the Issuing and Paying Agent evidence to their
satisfaction of the destruction, loss or theft of this Note and of the ownership
hereof. The Issuing and Paying Agent is authorized to complete and countersign
any such substituted Note and deliver the same upon written request or
authorization of any authorized representative of the Company or person
designated in writing to issue instructions by such authorized representative of
the Company. Upon the issuance of any substituted Note, the Company and the
Issuing and Paying Agent may require the payment by the Registered Holder hereof
of a sum sufficient to cover any fees and expenses connected therewith. In case
this Note shall become mutilated or be destroyed, lost or stolen, after the
Stated Maturity Date hereof or within 30 calendar days of the redemption or any
Maturity Date hereof, the Company may, instead of issuing a substitute Note, pay
or authorize the payment of the same (without surrender hereof except in the
case of a mutilated Note) upon compliance by the Registered Holder hereof with
the provisions herein. The Issuing and Paying Agent shall record on the Note
Register the cancellation of any original Notes (whether or not physically
surrendered to the Issuing and Paying Agent) and the reissue of Notes in
substitution therefor due to mutilation, destruction, loss or theft.
So long as this Note is outstanding, the Company will not create
or assume, or permit to exist, any mortgage, lien or encumbrance on, pledge of,
or other security interest (collectively, a "Mortgage"), in any property or
assets of any kind (real or personal, tangible or intangible) of the Company to
secure any notes, bonds, debentures or other similar evidences of indebtedness
for money borrowed by the Company ("Debt"), without at the same time securing
this Note equally and ratably with such Debt; PROVIDED, HOWEVER, that this
covenant shall not apply to:
(a) Mortgages created to secure all or part of the purchase price
of any property (or to secure a loan made to enable the Company or any
subsidiary to acquire the property described in such Mortgage), PROVIDED
that such Mortgage shall extend only to the property so acquired, fixed
improvements thereon, replacements thereof and the income and profits
therefrom;
(b) Mortgages on property to secure (in the case of property
which is, in the opinion of the Board of Directors, substantially
unimproved for the use intended by the Company) all or part of the cost
of improvement thereof, or to secure Debt incurred to provide funds for
any such purpose;
(c) Mortgages which secure only indebtedness owing by the Company
to one or more subsidiaries of the Company;
(d) Mortgages on the property of any corporation or other entity
existing at the time such corporation or other entity becomes a
subsidiary of the Company;
(e) Mortgages on any property to secure Debt or other
indebtedness incurred in connection with the construction, installation
or financing of pollution control or abatement facilities or other forms
of industrial revenue bond financing or Debt issued or guaranteed
C-15
by the United States of America, any State, municipality, political
subdivision or any department, agency or instrumentality of any of them;
or
(f) Any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any
Mortgage referred to in the foregoing clauses (a) through (e) or of any
Debt secured thereby, provided that the principal amount of Debt so
secured thereby shall not exceed the principal amount of Debt so secured
at the time of such extension, renewal or replacement, and that such
extension, renewal or replacement Mortgage shall be limited to all or
part of substantially the same property which secured the Mortgage
extended, renewed or replaced (plus improvements on such property).
Notwithstanding the foregoing provisions, the Company may issue
Debt secured by Mortgages which would otherwise be subject to the foregoing
restrictions in an aggregate principal amount which, together with the aggregate
outstanding principal amount of all other Debt of the Company which would
otherwise be subject to the foregoing restrictions (not including Debt permitted
to be secured under clauses (a) through (f)), does not at the time of issuance
exceed 20% of the stockholders' equity in the Company and its consolidated
subsidiary companies as shown in the latest audited consolidated balance sheet
of the Company.
The following types of transactions, among others, shall not be
deemed to create Debt secured by Mortgages:
(1) The sale or other transfer of natural gas or other petroleum
hydrocarbons in place for a period of time until, or in an amount such
that, the transferee will realize therefrom a specified amount (however
determined) of money or such natural gas or other petroleum
hydrocarbons, or the sale or other transfer of any other interest in
property of the character commonly referred to as a production payment
or as an overriding royalty, and
(2) Mortgages required by any contract or statute in order to
permit the Company or a subsidiary of the Company to perform any
contract or subcontract made by it with or at the request of the United
States of America, any State, municipality, political subdivision or any
department, agency or instrumentality of any of them, or to secure
partial, progress, advance or any other payments to the Company or any
subsidiary by the United States of America, any State, municipality,
political subdivision or any department, agency or instrumentality of
any of them pursuant to the provisions of any contract or statute.
So long as this Note remains outstanding, the Company shall not
consolidate with or merge with or into, or transfer all or substantially all of
its assets to, any person unless (A) either the Company shall be the resulting
or surviving entity or the resulting or surviving entity is a corporation
organized and existing under the laws of the United States of America, a state
thereof or the District of Columbia that expressly assumes all the obligations
of the Company under the Notes (in which case all such obligations of the
Company under the Notes shall terminate upon the assumption of such obligations
by such successor) and (B) immediately before and immediately after giving
effect to such transaction (and treating any indebtedness which becomes an
obligation of the resulting or surviving entity as a result of such transaction
as having been incurred by the resulting or surviving
C-16
entity at the time of such transaction) no event shall have occurred and be
continuing which with the passing of time or the giving of notice or both would
allow the Registered Holder of any Note to accelerate the maturity of such Note.
The Registered Holder of this Note may, by notice in writing to
the Company, accelerate the maturity of this Note upon the occurrence of one or
more of the following events:
(i) default in the payment of any interest upon any of the Notes
as and when the same shall become due and payable and continuance of
such default for a period of 30 calendar days; or
(ii) default in the payment of the principal of or premium, if
any, on any of the Notes as and when the same becomes due and payable
either at maturity or otherwise; or
(iii) a decree or order by a court having jurisdiction shall have
been entered adjudging the Company a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization of the Company under
the Bankruptcy Code (Title 11, U.S. Code) or any other similar
applicable Federal or state law, and such decree or order shall have
continued undischarged and unstayed for a period of 60 calendar days; or
a decree or order of a court having jurisdiction for the appointment of
a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or its property, or for the winding up or
liquidation of its affairs, shall have been entered, and such decree or
order shall have continued undischarged and unstayed for a period of 60
calendar days; or
(iv) the Company shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against the Company, or shall file a petition or answer or
consent seeking reorganization under the Bankruptcy Code (Title 11, U.S.
Code) or any other similar applicable Federal or state law, or shall
consent to the filing of any such petition, or shall consent to the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of the Company or of its property, or shall
make an assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due; or
(v) the Company shall fail to perform or observe any other term,
covenant or agreement contained in this Note to be performed or observed
by it and any such failure shall continue and remain unremedied for at
least 30 calendar days after written notice, specifying such failure and
requesting the Company to remedy such failure, shall have been received
by the Company from the Registered Holders of at least 25% in aggregate
principal amount of the Notes outstanding affected thereby; or
(vi) the Company shall default in the payment when due (subject
to any applicable grace period), whether at stated maturity or
otherwise, of any principal of or interest on (howsoever designated) any
indebtedness for borrowed money of, or guaranteed by, the Company in the
aggregate principal amount of $10 million or more, whether such
indebtedness now exists or shall hereafter be created, which default
shall result in such
C-17
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable; PROVIDED,
HOWEVER, that if any such acceleration shall subsequently be rescinded
or annulled (including through the discharge of the accelerated
indebtedness) prior to the obtaining of any judgment or decree for the
payment of any money due on this Note or the actual payment of money due
on this Note, any acceleration of this Note consequent solely on such
other acceleration shall likewise be deemed rescinded or annulled
without further action on the part of the Registered Holder.
Upon the occurrence of any event described above, the Company
shall promptly instruct the Issuing and Paying Agent in writing to notify the
Registered Holder of this Note as to such occurrence. In addition, the Company
will, within five calendar days after the occurrence thereof, instruct the
Issuing and Paying Agent in writing to promptly notify the Registered Holders of
Notes in writing as to any event which after notice or lapse of time or both
would become an event of default pursuant to paragraph (E) above ("default").
Upon receipt of any such written instruction in respect of the occurrence of any
such event of default or default, the Issuing and Paying Agent will promptly
mail to all Registered Holders of Notes such written notice of such event of
default, unless in the case of any such default the Company shall have notified
the Issuing and Paying Agent in writing that such default shall have been cured
before the mailing of such written notice by the Issuing and Paying Agent.
All notices to the Company under this Note shall be in writing
and addressed to the Company at 2 West Sixth Street, Tulsa, Oklahoma, 74119,
Attention: Treasurer or to such other address as the Company may notify the
Registered Holder of this Note.
Any action by the Registered Holder of this Note shall bind all
future Registered Holders of this Note, and of any Note issued in exchange or
substitution herefor or in place hereof, in respect of anything done or
permitted by the Company or the Issuing and Paying Agent in pursuance of such
action.
Any moneys paid by the Company to the Issuing and Paying Agent
for the payment of the principal of, or interest or premium, if any, on any
Notes, and remaining unclaimed at the end of 90 calendar days after such
principal, interest or premium shall have become due and payable (whether at
maturity or upon call for redemption or upon repayment or otherwise), shall then
be repaid to the Company by the Issuing and Paying Agent and upon such repayment
all liability of the Issuing and Paying Agent with respect to such moneys shall
thereupon cease, without, however, limiting in any way any obligation which the
Company may have to pay the principal of or interest or premium, if any, on this
Note as the same shall become due.
No provision of this Note or of the Issuing and Paying Agency
Agreement shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, premium, if any, and interest on
this Note at the time, place, and rate, and in the manner and the coin or
currency, herein prescribed.
The Issuing and Paying Agency Agreement shall be governed by and
construed in accordance with the laws of the State of Texas applicable to
agreements made and performed in
C-18
Texas and this Note shall be governed by and construed in accordance with the
laws of the State of New York applicable to instruments entered into and
performed in New York.
All terms not otherwise defined herein which are defined in the
Issuing and Paying Agency Agreement shall have the meanings assigned to them in
the Issuing and Paying Agency Agreement.
PRESENTATION OF NOTES FOR PAYMENT
PRESENTATION OF NOTES AT MATURITY OR UPON REDEMPTION
The principal amount of, and premium, if any, and interest on
this Note due at maturity, or upon earlier redemption hereof, will be paid
against presentation of this Note by the Registered Holder hereof at the offices
of the Issuing and Paying Agent at:
Central and South West Services, Inc.
1616 Woodall Rodgers Freeway
Dallas, TX 75202
Attention: Investor Relations
The Registered Holder shall not be entitled to receive such
payment in immediately available funds unless the following conditions are met:
(1) the Registered Holder has provided in writing wire or Automated
Clearinghouse ("ACH") transfer instructions to the Issuing and
Paying Agent at the address specified above or by telecopy at
(214) 754-1223;
(2) the wire or ACH instructions are received by the Issuing and
Paying Agent no later than the second Business Day prior to the
date any such payment is due; and
(3) the bank specified to receive such transfer has appropriate
facilities therefor.
PRESENTATION OF NOTES FOR HOLDER'S OPTIONAL REPAYMENT
This Note must be presented to the Issuing and Paying Agent at
its address set forth above not less than 30 nor more than 60 calendar days
prior to the Holder's Optional Repayment Date, if any, specified on the face
hereof with the "Option to Elect Repayment" form below duly completed. The
Registered Holder may receive payment for this Note in immediately available
funds PROVIDED that the conditions set forth above have been satisfied.
ALTERNATE MANNER FOR DELIVERING NOTES
The Registered Holder hereof may deliver this Note to IBJ
Schroder Bank & Trust Company (the "Drop Agent") (or at such other office or
agency of the Company as the Company
C-19
shall designate in writing to the Registered Holder of this Note) for forwarding
to the Issuing and Paying Agent at the address of the Drop Agent set forth
below:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Transfer Department
To provide for timely presentation of this Note to the Issuing
and Paying Agent, a Registered Holder must deliver this Note to the Drop Agent
no later than 12:00 noon (New York City time), two Business Days prior to the
date it must be received by the Issuing and Paying Agent. Payment on this Note,
if subsequently presented to the Drop Agent, will be made on the second Business
Day following the Drop Agent's receipt of this Note. For purposes of the
preceding sentence, receipt of this Note by the Drop Agent later than 12:00 noon
(New York City time) on any Business Day will be treated as receipt on the
following Business Day.
THE DROP AGENT IS NOT A PAYING AGENT FOR THIS NOTE AND ITS SOLE RESPONSIBILITY
SHALL BE TO FORWARD THIS NOTE TO THE ISSUING AND PAYING AGENT. THIS NOTE MUST BE
RECEIVED BY THE ISSUING AND PAYING AGENT BEFORE ANY PAYMENT HEREON WILL BE MADE.
WHETHER OR NOT THIS NOTE IS DELIVERED TO THE DROP AGENT AT THE TIMES SPECIFIED
ABOVE, NEITHER THE ISSUING AND PAYING AGENT NOR THE DROP AGENT SHALL BE LIABLE
UNDER ANY CIRCUMSTANCES FOR ANY UNTIMELY PRESENTATION OF THIS NOTE TO THE
ISSUING AND PAYING AGENT.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations.
TEN COM--as tenants in common
UNIF GIFT MIN ACT--..............Custodian............
Under Uniform Gifts to Minors Act
.................................
TEN ENT--as tenants by the entireties
JT TEN--as joint tenants with right of survivorship
and not as tenants in common
Additional abbreviations may also be used though not in the above
list.
C-20
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably request(s) and instruct(s) the
Company to repay this Note (or portion hereof specified below) pursuant to its
terms at a price equal to 100% of the principal amount hereof to be repaid,
together with accrued and unpaid interest hereon payable to the repayment date,
to the undersigned, at
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of the undersigned)
If less than the entire principal amount of this Note is to be
repaid, specify the portion hereof (which shall be increments of $1,000) which
the undersigned elects to have repaid and specify the denomination or
denominations (which shall be $150,000 or an integral multiple of $1,000 in
excess of $150,000) of the Notes to be issued to the undersigned for the portion
of this Note not being repaid (in the absence of any such specification, one
such Note will be issued for the portion not being repaid).
Principal amount to be repaid: $________________________
(if less than the entire principal
amount hereof)
No. of Notes Denomination(s)
Reissuance Instructions: $
(if needed)
Date ______________________ _____________________________
NOTICE: The signature on this
Option to Elect Repayment
must correspond with the name
as written upon the face of
this Note in every
particular, without
alteration or enlargement or
any change whatsoever.
C-21
CERTIFICATE OF TRANSFER
(NOT REQUIRED FOR RESALES OR OTHER TRANSFERS TO THE COMPANY OR ANY OF ITS
AFFILIATES OR A PLACEMENT AGENT OR RESALES OR OTHER TRANSFERS BY, THROUGH, OR IN
A TRANSACTION APPROVED BY, A PLACEMENT AGENT)
FOR VALUE RECEIVED, the undersigned Registered Holder hereby
sell(s), assign(s) and transfer(s) unto
PLEASE INSERT TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE
______________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of Assignee)
the accompanying Note and all rights thereunder, hereby irrevocably constituting
and appointing ___________________________ attorney to transfer said Note on the
books of the Company, with full power of substitution in the premises.
In connection with any resale or other transfer of this Note
occurring prior to the time the legend originally set forth on the face of this
Note (or one or more predecessor Notes) restricting resales and other transfers
thereof has been removed in accordance with the procedures set forth in the
Issuing and Paying Agency Agreement referred to therein (other than a resale or
other transfer made (i) to the Company or any of its affiliates or (ii) to, by,
through, or in a transaction approved by, one of the Placement Agents referred
to in such legend), the undersigned confirms that without utilizing any general
solicitation or general advertising:
[Check one]
[ ] (a) This Note is being transferred by the undersigned to a
"qualified institutional buyer" as defined in Rule 144A
promulgated under the Securities Act of 1933, as amended,
pursuant to the exemption from registration under the Securities
Act of 1933, as amended, provided by Rule 144A promulgated
thereunder.
OR
[ ] (b) This Note is being transferred by the undersigned in an
"Offshore Transaction" as defined in Regulation S under the
Securities Act of 1933, as amended, pursuant to the exemption
from registration under the Securities Act of 1933, as amended,
provided by Regulation S thereunder.
C-22
OR
[ ] (c) This Note is being transferred by the undersigned to an
institutional investor that is an "Accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act of
1933, as amended, and that the undersigned has been advised by
the undersigned prospective purchaser that it intends to hold
such Note for investment and not for distribution, subject to any
requirement of law that the disposition of the undersigned's
property shall at all times be and remain within its control.
If none of the foregoing boxes are checked, then, so long as the accompanying
Note shall bear a legend on its face restricting resales and other transfers
thereof (except in the case of a resale or other transfer made (i) to the
Company or any of its affiliates or (ii) to, by, through, or in a transaction
approved by, one of the Placement Agents referred to in such legend), the
Issuing and Paying Agent shall not register this Note in the name of any person
other than the Registered Holder of this Note unless and until the conditions to
any such registration of transfer set forth in this Note, on the face hereof and
in Section 14 of the Issuing and Paying Agency Agreement shall have been
satisfied.
Dated: ____________________ _____________________________
NOTICE: The signature of the
Registered Holder to this
assignment must correspond
with the name as written upon
the face of the within Note
in every particular, without
alteration or enlargement or
any change whatsoever.
TO BE COMPLETED BY PURCHASER
IF (a) ABOVE IS CHECKED:
The undersigned represents and warrants that (i) it is a
"qualified institutional buyer" as defined in Rule 144A promulgated under the
Securities Act of 1933, as amended, and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information, (ii) this
instrument has been executed on behalf of the undersigned by one of its
executive officers, and (iii) it is aware that the Registered Holder of this
Note is relying upon the undersigned's foregoing representations in order to
claim the exemption from registration provided by Rule 144A.
Dated: ____________________ _____________________________
NOTICE: To be executed by an
executive officer.
C-23
TO BE COMPLETED BY PURCHASER
IF (c) ABOVE IS CHECKED:
The undersigned represents and warrants that it is an
institutional investor that is an "Accredited Investor" as defined in Rule
501(a) promulgated under the Securities Act of 1933, as amended, and that this
instrument has been executed on behalf of the undersigned by one of its
executive officers. The undersigned undertakes to hold this Note for investment
and not for distribution, subject to any requirement of law that the disposition
of the undersigned's property shall at all times be and remain within its
control.
Dated: ____________________ _____________________________
NOTICE: To be executed by an
executive officer.
Inquiries concerning the transfer of Notes or this Certificate of
Transfer should be directed to Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Merrill Lynch World Headquarters, World Financial
Center, North Tower, New York, New York 10281-1307, telephone (212) 449-4534,
attention: Mr. Chris Carmody; or to Treasurer, Transok, Inc., 2 West Sixth
Street, P.O. Box 3008, Tulsa, Oklahoma 74101, telephone (918) 583-1121; or to
John F. Parell, Director, The First Boston Corporation, Park Avenue Plaza, 55
East 52nd Street, New York, N.Y. 10055, telephone (212) 909-2000; or to Smith
Barney, Harris Upham & Co. Incorporated, 1345 Avenue of the Americas, New York,
N.Y. 10105, telephone (212) 698-3950, Attention: Manager-Capital Transactions.
C-24
Exhibit D
TRANSOK, INC.
Central and South West
Services, Inc.
1616 Woodall Rodgers Freeway
Dallas, TX 75202
Attention: Investor Relations
Re: Issuance of Medium-Term Notes
Certificate of Authority
and Specimen Signature(s) for ____________________,
Authorized Representative[s] for the Medium-Term Notes
This certificate of authority is provided to you pursuant to
Section 3 of the Issuing and Paying Agency Agreement, dated March 30, 1992 (the
"Issuing and Paying Agency Agreement") between Transok, Inc. (the "Company") and
you, as Issuing and Paying Agent.
I, [Name], Secretary of the Company, do hereby certify that the
person[s] designated below [is] [are] the duly elected, qualified and acting
officer[s] of the Company or the duly authorized agent of the Company as
indicated opposite [his] [her] [their] name[s];
NAME OFFICE HELD SIGNATURE
---- ----------- ---------
As such officer[s] or agent[s], [this] [these] person[s] shall
serve as the [sole] Authorized Representative[s] authorized to sign the Medium
Term Notes and [act as and] designate Instructing Representatives; and that the
signature appearing above is [his] [her] [their] genuine signature[s] for your
records.
IN WITNESS WHEREOF, I have hereunto signed my name this [____]
day of [_________________], 19[___].
______________________________________
By: [Name]
Title: Secretary
Attest:
_________________________________
By:
Title:
D-1
Exhibit E
to Issuing and
Paying Agency
Agreement
Presentation of Notes for Payment
PRESENTATION OF NOTES AT MATURITY OR UPON REDEMPTION
The principal amount of, and premium, if any, and interest on
each Note which is due at maturity, or upon earlier redemption thereof, will be
paid against presentation of the Note by the Registered Holder thereof at the
offices of the Issuing and Paying Agent at:
Central and South West Services, Inc.
1616 Woodall Rodgers Freeway
Dallas, TX 75202
Attention: Investor Relations
A Registered Holder who has presented a Note for payment shall
not be entitled to receive such payment in immediately available funds unless
the following conditions are met:
(1) the Registered Holder has provided in writing wire or
Automated Clearinghouse ("ACH") transfer instructions to
the Issuing and Paying Agent at the address specified
above or by telecopy at (214) 754-1223;
(2) the wire or ACH instructions are received by the Issuing
and Paying Agent no later than the second Business Day
prior to the date any such payment is due; and
(3) the bank specified to receive such transfer has
appropriate facilities therefor.
PRESENTATION OF NOTES FOR HOLDER'S OPTIONAL REPAYMENT
Notes which are to be presented for payment on any Holder's
Optional Repayment Date must be presented to the Issuing and Paying Agent at its
address set forth above not less than 30 nor more than 60 calendar days prior to
such Holder's Optional Repayment Date. A Registered Holder may receive payment
for such Notes in immediately available funds PROVIDED, that the conditions set
forth above have been satisfied.
E-1
ALTERNATE MANNER FOR DELIVERING NOTES
A Registered Holder may deliver a Note to IBJ Schroder Bank &
Trust Company (the "Drop Agent") (or at such other office or agency of the
Company as the Company shall designate in writing to the Registered Holders of
the Notes) for forwarding to the Issuing and Paying Agent at the address of the
Drop Agent set forth below:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Transfer Department
To provide for timely presentation of a Note to the Issuing and
Paying Agent, a Registered Holder must deliver a Note to the Drop Agent no later
than 12:00 noon (New York City time), two Business Days prior to the date
payment on such Note is to be made. Payment on any Note subsequently presented
to the Drop Agent will be made on the second Business Day following the Drop
Agent's receipt of such Note. For the purposes of the preceding sentence, any
Note received by the Drop Agent later than 12:00 noon (New York City time) on
any Business Day will be treated as having been received on the following
Business Day.
THE DROP AGENT IS NOT A PAYING AGENT FOR THE NOTES AND ITS SOLE RESPONSIBILITY
SHALL BE TO FORWARD NOTES TO THE ISSUING AND PAYING AGENT. NOTES MUST BE
RECEIVED BY THE ISSUING AND PAYING AGENT BEFORE ANY PAYMENT THEREON WILL BE
MADE. WHETHER OR NOT NOTES ARE DELIVERED TO THE DROP AGENT AT THE TIMES
SPECIFIED ABOVE, NEITHER THE ISSUING AND PAYING AGENT NOR THE DROP AGENT SHALL
BE LIABLE UNDER ANY CIRCUMSTANCES FOR ANY UNTIMELY PRESENTATION OF A NOTE TO THE
ISSUING AND PAYING AGENT.
E-2
EXHIBIT 10.1
FIRST AMENDMENT AGREEMENT TO THE LIMITED PARTNERSHIP
AGREEMENT OF CORAL ENERGY RESOURCES, L.P.
THIS FIRST AMENDMENT AGREEMENT ("Agreement") to the Limited Partnership
Agreement of Coral Energy Resources, L.P. (the "Partnership"), dated as of
November 1, 1995, (the "Effective Date") is entered into by and between SHELL
CORAL RESOURCES GP COMPANY, ("Shell GP"), formerly known as Shell Gas Marketing
Company, a Delaware corporation, SHELL GAS TRADING COMPANY ("SGTC"), a Delaware
corporation, SHELL CORAL INVESTMENT COMPANY, ("SCIC") formerly known as Shell
Gas Investment Company, a Delaware corporation, SHELL CORAL RESOURCES COMPANY
("SCRC") a Delaware corporation, TEJAS ALLIANCE GP COMPANY, ("Tejas GP"), a
Delaware corporation, TEJAS ALLIANCE RESOURCES COMPANY ("TARC") a Delaware
corporation, and TEJAS ALLIANCE ENERGY COMPANY ("TAEC") a Delaware corporation,
(together the "Parties").
RECITALS:
WHEREAS, subsidiaries and affiliates of, respectively, Tejas Gas
Corporation and Shell Oil Company, as more specifically described in
Exhibit A to this Agreement, have formed the Partnership pursuant to the
terms of the Limited Partnership Agreement (the "Partnership Agreement")
of the Partnership dated as of September 1, 1995, for the purpose of
buying and selling natural gas, natural gas liquids and electricity,
engaging in the derivatives business and the financing of natural gas,
natural gas liquids, and electricity development projects, all of the
foregoing to be pursued throughout the United States, Canada, and
Mexico;
WHEREAS, Shell GP and Tejas GP are the general partners in the
Partnership as of the Effective Date;
WHEREAS, with effect from November 1, 1995, SOI and SWEPI each
transferred their limited partnership Interests in the Partnership to
Shell Coral Resources Holdings Inc. ("SCRHI");
WHEREAS, with effect from November 1, 1995, SCRHI transferred its
limited partnership Interest in the Partnership to SGTC;
WHEREAS, with effect from December 31, 1995, the entities comprising
Tejas LP1, as such term is defined in Exhibit A to this Agreement, each
transferred their respective limited partnership Interests in the
Partnership to Tejas Alliance Holding Company ("TAHC");
WHEREAS, with effect from December 31, 1995, TAHC transferred its
limited partnership Interest in the Partnership to TAEC;
-1-
WHEREAS, with effect from December 31, 1995, SGTC transferred its
Interest in profits, but not capital, arising from its limited
partnership interest in the Partnership to SCRC;
WHEREAS, the Limited Partners in the Partnership as of the Effective
Date therefore SGTC, SCIC, SCRC, TARC and TAEC;
WHEREAS, to facilitate the more effective operation and management of
the Partnership, the Parties have agreed by this Agreement to amend
certain provisions of the Partnership Agreement as detailed in Sections
2.1 to 2.10 inclusive of this Agreement below.
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the Parties undertake and agree as follows:
ARTICLE I
Definitions
Capitalized terms shall have the meanings set forth above and in Exhibit
A to this Agreement. Except as otherwise defined in this Agreement,
capitalized terms that have been defined in the Partnership Agreement
shall have the same meanings herein as are assigned to such terms in the
Partnership Agreement.
ARTICLE II
Amendments
2.1 Amendment to Section 2.3 of the Partnership Agreement. In accordance
with the provisions of Section 12.8 of the Partnership Agreement, the last
sentence of Section 2.3 of the Partnership Agreement shall, with effect from the
Effective Date, be amended to read in its entirety as follows:
"The Partnership may do anything necessary or appropriate to the
foregoing including, without limitation, engaging in activities
(such as the buying of natural gas, liquefied natural gas,
natural gas liquids or liquefiables) outside the United States,
Canada, and Mexico that are incidental to, or that further, the
activities of the Partnership (such as the sale of natural gas,
liquefied natural gas, natural gas liquids or liquefiables)
within the United States, Canada, and Mexico."
-2-
2.2 Clarification of Section 3.3 (b) of the Partnership Agreement.
For the avoidance of doubt, the Parties confirm the following:
If the Partnership (in accordance with the terms of Section 3 (a) of
the Volumetric Support Agreement (the "Support Agreement") entered
into between SWEPI, Shell Oil Company and the Partnership as of March
29,1996)deems by means of a Deemed Delivery Election, as defined in
the Support Agreement, that specified volumes of natural gas delivered
to the Partnership by SWEPI or deliverable to the Partnership by SWEPI
under the Shell Supply Agreement, as defined in the Partnership
Agreement, constitute deliveries of natural gas by SWEPI in
satisfaction of SWEPI's performance obligations under the Support
Agreement, then such volumes shall nonetheless still be treated as
volumes supplied by SWEPI to the Partnership for the purposes of
determining the Shell True-up Amount in accordance with SECTION 3.3
(B) of the Partnership Agreement. For purposes of determining the
Shell True-up Amount in accordance with SECTION 3.3 (B) of the
Partnership Agreement, volumes of natural gas deemed to be delivered
by means of a Deemed Delivery Election under the Support Agreement
shall be deemed to have been delivered at a price equal to the
Contract Price (as defined in the Shell Supply Agreement) that
otherwise would have been applicable under the Shell Supply Agreement.
2.3 Allocation of Amortization. In accordance with the provisions of
Section 12.8 of the Partnership Agreement, the following provisions of the
Partnership Agreement shall be amended as described below with effect from the
Effective Date:
(i) The definition of "Pre-Reset Closing Date Retained Earnings Amount"
in paragraph (bm) of Section 1.1 shall be amended by substituting the following
wording for the existing phrase in parenthesis which appears in the second and
third lines of the current definition:
"(based on its Partnership Percentage as adjusted to take account of the
allocation of gross income and amortization from Exhibit C or Exhibit D
contracts, as appropriate, in accordance with Section 5.6 (e))";
(ii) Section 3.6 (e) shall be amended by the insertion of the following
phrase in parenthesis after the word "Earnings" and before the word
"attributable" in the seventh line of the existing wording:
"(without adjustment for the allocation of amortization of Exhibit C
contracts as described in Section 5.6 (e))";
(iii) Section 3.7 (d) shall be amended by the insertion of the following
phrase in parenthesis after the word "Earnings" and before the word
"attributable" in the seventh line of the existing wording:
-3-
"(without adjustment for the allocation of amortization of Exhibit C
contracts as described in Section 5.6 (e))"; and
(iv) Section 5.1 of the Partnership Agreement shall be amended by the
addition of the following new wording immediately following the word "period" at
the end of the existing Section 5.1:
"and amortization from Exhibit C and Exhibit D contracts shall be
allocated to Shell LP1 and to Tejas LP1 respectively in the same manner
as is described in Section 5.6(e) for allocations of amortization for
tax purposes in respect of those contracts."
(v) Section 5.6 of the Partnership Agreement shall be amended by the
addition of the following new sub-section (e):
"(e) Gross income, as defined under the Code, arising from natural gas
contracts described in Exhibit C and Exhibit D shall be allocated, based
on each LP1 Partner's percentage interest (excluding any LP2 interest an
LP1 Partner may acquire) over the total original LP1 Partner's
percentage interest, to the profits interest of Shell LP1 and Tejas LP1.
Amortization from Exhibit C contracts shall be entirely allocated to
Shell LP1's Capital Account, except as adjusted for any Shell LP1
Interest acquired by any member of the Tejas Partner Group from Shell
LP1. Amortization from Exhibit D contracts shall be entirely allocated
to Tejas LP1's Capital Account. The manner in which the specimen Equity
Redetermination Procedure is described in the example calculation
attached to the letter Agreement dated September 18, 1995, between Shell
Oil Company and Tejas Gas Corporation shall be deemed to be amended
accordingly to take account of the amortization allocation described in
this paragraph (e)."
2.4 Amendment to Section 6.1 (c) of the Partnership Agreement. In
accordance with the provisions of Section 12.8 of the Partnership Agreement, the
fourth sentence of Section 6.1 (c) of the Partnership Agreement shall be deleted
from the Partnership Agreement with effect from the Effective Date and replaced
in its entirety by the following sentences:
"A quorum shall exist for any meeting of the Board if at least two
members of the Board are in attendance provided that such quorum
includes at least one Board member designated by Shell GP and one Board
member designated by Tejas GP. Attendance at any such meeting by any
director designated by Tejas GP shall constitute a waiver of notice of
such meeting by all directors designated by Tejas GP, and attendance at
any such meeting by any director designated by Shell GP shall constitute
a waiver of notice of such meeting by all directors appointed by Shell
GP."
-4-
2.5 Amendment to Section 6.1 (f) (xxi) of the Partnership Agreement. In
accordance with the provisions of Section 12.8 of the Partnership Agreement the
existing text of Section 6.1 (f) (xxi) of the Partnership Agreement shall be
amended with effect from the Effective Date so that it shall read in its
entirety as follows:
"(xxi) the indemnification of any Person by the Partnership against
liabilities and contingencies to the extent permitted by law other than
in respect of any contracts, conveyances or other instruments entered
into in the ordinary course of the Partnership's business;"
2.6 Amendment to Section 6.1 (f) (xxiv) of the Partnership Agreement. In
accordance with the provisions of Section 12.8 of the Partnership Agreement the
text of Section 6.1 (f) (xxiv) of the Partnership Agreement shall be deleted
from the Partnership Agreement with effect from the Effective Date and replaced
in its entirety by the following text:
"(xxiv) the authorization and approval of contracts for the sale or
purchase of natural gas, electricity, liquefied natural gas or natural
gas liquids or liquefiables, having a term in excess of five years or
requiring a guarantee pursuant to SECTION 12.1 (except renewals or
extensions of contracts previously guaranteed);"
2.7 Amendment to Section 6.2 (b) (iv) of the Partnership Agreement. In
accordance with the provisions of Section 12.8 of the Partnership Agreement the
text of Section 6.2 (b) (iv) of the Partnership Agreement shall be deleted from
the Partnership Agreement with effect from the Effective Date and replaced in
its entirety by the following text:
"(iv) the negotiation, execution and performance of any contracts,
conveyances or other instruments in the ordinary course of the
Partnership's business, subject to prior approval by the Board of
contracts for the sale or purchase of natural gas, electricity,
liquefied natural gas or natural gas liquids or liquefiables, having a
term in excess of five years or for the sale or purchase of natural gas
in excess of 150 million cubic feet per day or requiring a guarantee
pursuant to SECTION 12.1 (except renewals or extensions of contracts
previously guaranteed);"
2.8 Amendment to Sections 6.2 (b) (v), (vi) and (vii) of the Partnership
Agreement. In accordance with the provisions of Section 12.8 of the Partnership
Agreement, Section 6.2 (b) of the Partnership Agreement shall be amended with
effect from the Effective Date as follows:
-5-
a. The following text shall be inserted as a new sub-Section (vii):
"(vii) the issuance of guarantees by the Partnership to secure
the contractual obligations of majority interest ventures that it
holds to the same extent as would be permissible were such
contractual obligations undertaken by the Partnership itself."
b. The current sub-Section (v) shall be amended by the deletion of
the word "and" following the semi-colon at its end and
sub-Section (vi) shall be amended to end in a semi-colon,
followed by the word "and".
2.9 Amendment to Section 12.1 (a) of the Partnership Agreement. In
accordance with the provisions of Section 12.8 of the Partnership Agreement, the
text of Section 12.1 (a) of the Partnership Agreement shall be amended with
effect from the Effective Date by deleting the reference in the fifth line to
"SECTION 6.1(F)(XXV) OR 6.2(B)(IV)" and replacing it by a reference to "SECTION
6.1(F)(XXIV) OR 6.2(B)(IV)".
2.10 Amendment to Exhibit B to the Partnership Agreement. In accordance
with the provisions of Section 12.8 of the Partnership Agreement, items 6, 8 and
9 of Exhibit B to the Partnership Agreement shall be amended with effect from
the Effective Date to change the name of each "Sales Administration Agreement"
to "Services Administration Agreement".
2.11 No Change to Remainder of the Partnership Agreement. Subject to the
changes to the Partnership Agreement described in Sections 2.1 to 2.10 inclusive
above, all other terms and provisions of the Partnership Agreement shall remain
in full force and effect and shall not be in any way modified or affected by
this Agreement.
2.12 Counterparts. This Agreement and all amendments and supplements to
it may be executed in counterparts, and all counterparts together shall be
construed as one document.
2.13 Deemed Incorporation. This Agreement shall be deemed to be
incorporated into the Partnership Agreement and it shall be governed by, and
construed in accordance with, the same terms and conditions as pertain to the
Partnership Agreement.
-6-
IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties
as of April 3, 1996.
SHELL CORAL RESOURCES GP
COMPANY
By: /s/ JACK E. LITTLE
Name: JACK E. LITTLE
Title: PRESIDENT
TEJAS ALLIANCE GP COMPANY
By: /s/ JAMES W. WHALEN
Name: JAMES W. WHALEN
Title: EXECUTIVE VICE PRESIDENT
SHELL CORAL INVESTMENT
COMPANY
By: /s/ SCOTT H. NISSON
Name: SCOTT H. NISSON
Title: VICE PRESIDENT - TAX
TEJAS ALLIANCE RESOURCES
COMPANY
By: /s/ JAMES W. WHALEN
Name: JAMES W. WHALEN
Title: EXECUTIVE VICE PRESIDENT
-7-
SHELL CORAL RESOURCES
COMPANY
By: /s/ SCOTT H. NISSON
Name: SCOTT H. NISSON
Title: VICE PRESIDENT - TAX
TEJAS ALLIANCE ENERGY
COMPANY
By: /s/ JAMES W. WHALEN
Name: JAMES W. WHALEN
Title: EXECUTIVE VICE PRESIDENT
SHELL GAS TRADING
COMPANY
By: /s/ GEORGE L. CARLSON
Name: GEORGE L. CARLSON
Title: PRESIDENT
-8-
EXHIBIT A
ORIGINAL PARTNERS IN THE PARTNERSHIP AS OF SEPTEMBER 1, 1995.
GENERAL PARTNERS:
Shell Gas Marketing Company (now known as Shell Coral Resources GP
Company)
Tejas Alliance GP Company
LIMITED PARTNERS:
Shell Gas Investment Company (now known as Shell Coral Investment
Company)
Shell Gas Trading Company
Shell Offshore Inc. ("SOI")
Shell Western E&P Inc. ("SWEPI")
Tejas Alliance Resources Company
Tejas Alliance Energy Company
and:
Tejas Gas Corp.
Tejas-Gulf Corporation
Tejas Hydrocarbons Company
Gulf Energy Pipeline Company
Gulf Energy Marketing Company
LEDCO Inc.
Louisiana State Gas Corporation
Acadian Gas Pipeline System
Pontchartrain Natural Gas System
Calcasieu Gas Gathering System
Spindletop Gas Distribution System
Cypress Gas Pipeline Company
Tejas Gas Marketing Company
Tejas Gas Pipeline Company
Tejas Gas Transmission Company (together "Tejas LP1")
-9-
EXHIBIT 10.2
SECOND AMENDMENT AGREEMENT TO THE LIMITED PARTNERSHIP
AGREEMENT OF CORAL ENERGY RESOURCES, L.P.
THIS SECOND AMENDMENT AGREEMENT ("Agreement") to the Limited Partnership
Agreement of Coral Energy Resources, L.P. (the "Partnership") dated as of
November 1, 1995, (the "Effective Date") is entered into by and between SHELL
CORAL RESOURCES GP COMPANY, SHELL GAS TRADING COMPANY, SHELL CORAL INVESTMENT
COMPANY, SHELL CORAL RESOURCES COMPANY, TEJAS ALLIANCE GP COMPANY, TEJAS
ALLIANCE RESOURCES COMPANY, and TEJAS ALLIANCE ENERGY COMPANY (all of the
foregoing are Delaware corporations, together comprise all of the current
Partners in the Partnership and are together referred to in this Agreement as
the "Parties").
RECITALS:
WHEREAS, subsidiaries and affiliates of, respectively, Tejas Gas
Corporation and Shell Oil Company have formed the Partnership pursuant
to the terms of the Limited Partnership Agreement (the "Partnership
Agreement") of the Partnership dated as of September 1, 1995;
WHEREAS, the Parties entered into a First Amendment Agreement (the
"First Amendment Agreement") to the Partnership Agreement dated as of
April 3, 1996, amending certain of the provisions of the Partnership
Agreement with effect from the Effective Date.
WHEREAS, to facilitate the more effective operation and management of
the Partnership, the Parties have agreed by this Agreement to amend one
provision of the Partnership Agreement as detailed in Section 2.1 of
this Agreement below.
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the Parties undertake and agree as follows:
ARTICLE I
Definitions
Capitalized terms shall have the meanings set forth above. Except as
otherwise defined in this Agreement, capitalized terms that have been
defined in the Partnership Agreement or the First Amendment Agreement
shall have the same meanings in this Agreement as are assigned to such
terms in the Partnership Agreement or First Amendment Agreement as
appropriate.
-1-
ARTICLE II
Amendments
2.1 Change to Section 5.6 (e). In accordance with the provisions of
Section 12.8 of the Partnership Agreement, Section 5.6 (e) of the Partnership
Agreement, as inserted by the First Amendment Agreement, shall be amended by the
insertion of the additional text set out below following the end of the first
sentence of sub-section (e) with effect from the Effective Date:
"Gross income specially allocated to the LP1 Partners shall be further
adjusted for True-up payments made by the LP1 Partners (the "True-up
Adjustment"). The True-up Adjustment occurs after the special allocation
described in the first sentence of this Section 5.6 (e). Shell LP1's
gross income allocation will be increased by, and Tejas LP1's gross
income allocation will be decreased by, Shell LP1's percentage interest
(excluding any LP2 interest an LP1 Partner may acquire) over the total
original LP1 Partner's Partnership Percentage times the True-up payment
to be made by Tejas to the Partnership. Tejas LP1's gross income
allocation shall be increased by, and Shell LP1's gross income
allocation will be decreased by, Tejas LP1's percentage interest
(excluding any LP2 interest an LP1 Partner may acquire) over the total
original LP1 Partner's Partnership percentage interest times the True-up
payment to be made by Shell to the Partnership."
The remainder of Section 5.6 (e) shall remain unchanged.
2.2 No Change to Remainder of the Partnership Agreement. Subject to the
change to the Partnership Agreement described in Section 2.1 above, all other
terms and provisions of the Partnership Agreement, as amended by the First
Amendment Agreement, shall remain in full force and effect and shall not be in
any way modified or affected by this Agreement.
2.3 Counterparts. This Agreement and all amendments and supplements to
it may be executed in counterparts, and all counterparts together shall be
construed as one document.
2.4 Deemed Incorporation. This Agreement shall be deemed to be
incorporated into the Partnership Agreement, as amended by the First Amendment
Agreement, and it shall be governed by, and construed in accordance with, the
same terms and conditions as pertain to the Partnership Agreement as amended by
the First Amendment Agreement.
-2-
IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties as of
April 10, 1996.
SHELL CORAL RESOURCES GP
COMPANY
By: /s/ JACK E. LITTLE
Name: Jack E. Little
Title: President
TEJAS ALLIANCE GP COMPANY
By: /s/ JAMES W. WHALEN
Name: James W. Whalen
Title: Executive Vice President
SHELL CORAL INVESTMENT
COMPANY
By: /s/ SCOTT H. NISSON
Name: Scott H. Nisson
Title: Vice President - Tax
TEJAS ALLIANCE RESOURCES COMPANY
By: /s/ JAMES W. WHALEN
Name: James W. Whalen
Title: Executive Vice President
-3-
SHELL CORAL RESOURCES COMPANY
By: /s/ SCOTT H. NISSON
Name: Scott H. Nisson
Title: Vice President - Tax
TEJAS ALLIANCE ENERGY COMPANY
By: /s/ JAMES W. WHALEN
Name: James W. Whalen
Title: Executive Vice President
SHELL GAS TRADING COMPANY
By: /s/ GEORGE L. CARLSON
Name: George L. Carlson
Title: President
-4-
EXHIBIT 10.3
THIRD AMENDMENT AGREEMENT TO THE LIMITED PARTNERSHIP
AGREEMENT OF CORAL ENERGY RESOURCES, L.P.
THIS THIRD AMENDMENT AGREEMENT ("Agreement") to the Limited Partnership
Agreement of Coral Energy Resources, L.P. (the "Partnership") dated as of June
3, 1996, (the "Effective Date") is entered into by and between SHELL CORAL
RESOURCES GP COMPANY, SHELL GAS TRADING COMPANY, SHELL CORAL INVESTMENT COMPANY,
SHELL CORAL RESOURCES COMPANY, TEJAS ALLIANCE GP COMPANY, TEJAS ALLIANCE
RESOURCES COMPANY, and TEJAS ALLIANCE ENERGY COMPANY (all of the foregoing are
Delaware corporations and together comprise all of the current Partners in the
Partnership and are together referred to in this Agreement as the "Parties").
RECITALS:
WHEREAS, subsidiaries and affiliates of, respectively, Tejas Gas
Corporation and Shell Oil Company have formed the Partnership pursuant to the
terms of the Limited Partnership Agreement (the "Partnership Agreement") of the
Partnership dated as of September 1, 1995;
WHEREAS, the Parties entered into a First Amendment Agreement (the
"First Amendment Agreement") to the Partnership Agreement dated as of April 3,
1996, amending certain of the provisions of the Partnership Agreement with
effect from November 1, 1995.
WHEREAS, the Parties entered into a Second Amendment Agreement (the
"Second Amendment Agreement") to the Partnership Agreement dated as of April 10,
1996, amending certain of the provisions of the Partnership Agreement with
effect from November 1, 1995.
WHEREAS, in order to change the name of the Partnership, the Parties
have agreed by this Agreement to amend Section 2.2 of the Partnership Agreement
and other references in the Partnership Agreement to the name of the Partnership
as detailed in Sections 2.1 and 2.2 of this Agreement with effect from the
Effective Date.
NOW, THEREFORE, in consideration of their mutual undertakings and agreements
hereunder, the Parties undertake and agree as follows:
1
ARTICLE I
Definitions
Capitalized terms shall have the meanings set forth above. Except as
otherwise defined in this Agreement, capitalized terms that have been defined in
the Partnership Agreement, the First Amendment Agreement or the Second Amendment
Agreement shall have the same meanings in this Agreement as are assigned to such
terms in the Partnership Agreement, the First Amendment Agreement or the Second
Amendment Agreement as appropriate.
ARTICLE II
Amendments
2.1 Amendment to Section 2.2. In accordance with the provisions of
Section 12.8 of the Partnership Agreement, Section 2.2 of the Partnership
Agreement shall be amended with effect from the Effective Date to read in its
entirety as follows:
"2.2 PARTNERSHIP NAME. The name of the Partnership shall be Coral
Energy, L.P. and all business of the Partnership shall be conducted in
such name or such other name as the Board shall select by unanimous
vote."
2.2 Amendment of Other References to Partnership Name. In accordance
with the provisions of Section 12.8 of the Partnership Agreement, all other
references in the Partnership Agreement to the name "Coral Energy Resources,
L.P." shall be amended to read "Coral Energy, L.P." with effect from the
Effective Date.
2.3 No Change to Remainder of the Partnership Agreement. Subject to the
changes to the Partnership Agreement described in Sections 2.1 and 2.2 above,
all other terms and provisions of the Partnership Agreement, as amended in turn
by the First Amendment Agreement and the Second Amendment Agreement, shall
remain in full force and effect and shall not be in any way modified or affected
by this Agreement.
2.4 Counterparts. This Agreement and all amendments and supplements to
it may be executed in counterparts, and all counterparts together shall be
construed as one document.
2.5 Deemed Incorporation. This Agreement shall be deemed to be
incorporated into the Partnership Agreement, as amended in turn by the First
Amendment Agreement and by the Second Amendment Agreement, and it shall be
governed by, and construed in accordance with, the same terms and conditions as
pertain to the Partnership Agreement as amended by the First Amendment Agreement
and by the Second Amendment Agreement respectively.
2
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Parties as of June 3, 1996.
SHELL CORAL RESOURCES GP
COMPANY
By: /s/ JACK E. LITTLE
Name: Jack E. Little
Title: PRESIDENT
TEJAS ALLIANCE GP COMPANY
By: /s/ JAMES W. WHALEN
Name: JAMES W. WHALEN
Title: Executive Vice President
SHELL CORAL INVESTMENT
COMPANY
By: /s/ HENRY E. BLECHL
Name: Henry E. Blechl
Title: Predident
TEJAS ALLIANCE RESOURCES COMPANY
By: /s/ W. DAVID POPE III
Name: W. David Pope III
Title: President
3
SHELL CORAL RESOURCES
COMPANY
By: /s/ HENRY E. BLECHL
Name: Henry E. Blechl
Title: President
TEJAS ALLIANCE ENERGY COMPANY
By: /s/ W. DAVID POPE III
Name: W. David Pope III
Title: President
SHELL GAS TRADING
COMPANY
By: /s/ GEORGE L. CARLSON
Name: George L. Carlson
Title: President
4
EXHIBIT 10.4
SIXTH AMENDMENT TO THE
TEJAS GAS CORPORATION THRIFT PLAN
(as amended and restated July, 1993)
- --------------------------------------------------------------------------------
WHEREAS, Tejas Gas Corporation (the "Company") has adopted and maintains
the Tejas Gas Corporation Thrift Plan, originally effective January 1, 1989, and
as amended and restated July 1993, and as subsequently amended by the First
through Fifth Amendments (the "Plan"); and
WHEREAS, the Company is acquiring Transok, Inc. on June 6, 1996; and
WHEREAS, the Company wishes to amend the Plan to provide that Transok,
Inc. is a participating employer under the Plan, to grant service credit for
eligibility and vesting purposes for employment with Transok, and to eliminate
separate participant direction with respect to dividends paid on Company
preferred stock; and
WHEREAS, pursuant to Section 11.3 of the Plan, the Company has reserved
the right to amend the Plan at any time.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, the Plan is amended in
the following respects:
1. Section 1.10 (Definition of Company) is amended, effective June 1,
1996, to reletter subparagraph (f) as (g), to add the following new subparagraph
(f) after subparagraph (e), and to delete the "and" at the end of subparagraph
(e):
"(f) On or after June 6, 1996, Transok, Inc., an Oklahoma
corporation; and".
2. Section 2.1 (Participation) is amended, effective June 6, 1996, to
add the following new subparagraph (f) and to reletter the existing subparagraph
(f) as subparagraph (g):
1
"(f) Employees who are employed by Transok, Inc., on June 6,
1996, shall become Participants on June 6, 1996."
3. Paragraph (d)(vi) (Period of Service) of Section 5.5 (Years of
Service) is amended, effective June 6, 1996, to add the following new
subparagraph (J) at the end thereof, to delete the "and" at the end of
subparagraph (H), and to substitute "; and" for the period at the end of
subparagraph (I):
"(J) Service with Transok, Inc. prior to June 6, 1996, for
employees who were employed by Transok, Inc. on June 6, 1996."
4. Section 9.1(d) (Investment Elections) is amended, effective July 1,
1996, by changing the first sentence to read as follows:
"Participant investment elections pursuant to subsection (a)
shall apply separately to: (i) Account balances, and (ii) future
contributions."
5. Section 12.2 (Right to Make Rollover Contributions to this Plan) is
amended, effective June 6, 1996, by substituting the following for subparagraph
(e) thereof:
"(e) consist of cash, and other investments which the Committee
determines in its Discretion to be appropriate."
IN WITNESS WHEREOF, the Company has caused this Sixth Amendment to the
Tejas Gas Corporation Thrift Plan as amended and restated July 1993, to be
executed by its duly authorized officer on this 6th day of June, 1996.
TEJAS GAS CORPORATION
ATTEST
/s/ JAMES W. WHALEN
/s/ P. ANTHONY LANNIE By: James W. Whalen
P. Anthony Lannie Its: Executive Vice President
2
EXHIBIT 10.5
AMENDED AND RESTATED FIRM INTRASTATE SERVICE AGREEMENT
This Agreement is made and entered into as of the 12th day of March, 1996, by
and between TRANSOK, INC., an Oklahoma corporation, hereinafter referred to as
"TRANSPORTER" and "PUBLIC SERVICE COMPANY OF OKLAHOMA", an Oklahoma corporation,
hereinafter referred to as "SHIPPER".
RECITALS
A. TRANSPORTER and SHIPPER have previously entered into a certain Agreement
dated July 21, 1981, which agreement was amended and restated on numerous
occasions and most recently by that certain Agreement Dated July 21, 1981 as
Amended and Restated Effective at 7:00 a.m.
January 1, 1994 (the "Prior Agreement").
B. The Prior Agreement obligated TRANSPORTER to transport all of SHIPPER's gas
requirements for its electric generation plants in Oklahoma up to the maximum
quantities stated therein until December 31, 2002.
C. Due to a substantial change in circumstances occurring since the date of the
Prior Agreement, including the possibility that either TRANSPORTER will be sold
by its parent company or TRANSPORTER will sell its transmission system, SHIPPER
and TRANSPORTER desire to again amend and restate their contractual
relationship, as hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto covenant and agree as follows.
Article I
Quantity
1.1 TRANSPORTER agrees to deliver such quantities of gas as SHIPPER
shall require at each of the Delivery Points described in Exhibit B, attached
hereto, each day not to exceed the lesser of (a) a quantity which after
reduction for the Company Use Charge is equal to the total of (i) the quantities
of gas nominated at the Receipt Points by SHIPPER and confirmed by TRANSPORTER,
which quantities (after an assumed reduction of 10% of the wellhead nominated
Receipt Point quantities in recognition of projected wellhead shortfalls and any
other changes in nominations at wellhead Receipt Points that operators make) are
referred to as the "Confirmed Nomination Quantity", plus (i) the Imbalance
Quantity (defined in Section 1.4 below) or (b) the Maximum Daily Quantity
("MDQ"), with "MDQ" meaning 546,000 MMBTU per day prior to
January 1, 1998. Effective January 1, 1998, "MDQ" shall mean the quantity
designated by SHIPPER pursuant to Section 1.3 below. Prior to January 1, 1998,
subject to the maximum daily delivery limitation described above, if required by
SHIPPER, TRANSPORTER shall deliver up to 91,000 MMBTU per four (4) hour period
but limited to the actual physical capacity under normal operating conditions
and pressures on TRANSPORTER's system. On or after January 1, 1998, subject to
the applicable maximum daily delivery limitation described above, if required by
SHIPPER, TRANSPORTER shall deliver in any hour up to 1/16th of the sum of
SHIPPER's Confirmed Nomination Quantity and the Imbalance Quantity.
1.2 SHIPPER shall arrange for the delivery to the Receipt Points of the
Confirmed Nomination Quantity, plus quantities sufficient to cover the Company
Use Charge. SHIPPER shall have the prior right to the daily capacity at each of
the Receipt Points designated as a Primary Receipt Point on Exhibit "A" up to
SHIPPER's maximum daily quantity for each such point as designated on Exhibit
"A," PROVIDED, HOWEVER, SHIPPER's prior rights to such capacity shall not be
construed to permit the utilization of such capacity on any day in amounts which
collectively exceed the MDQ, adjusted upward for the Company Use Charge. SHIPPER
may utilize for next day delivery nominations any other Receipt Points on
TRANSPORTER's Intrastate Master Receipt Point List, attached hereto as Exhibit
C, as "Secondary Receipt Points." Transportation from Secondary Receipt
Point(s), when nominated according to the provisions herein, shall receive
priority above any interruptible shippers using capacity at such point(s), but
shall be subject to the capacity at such Secondary Receipt Point(s) not being
committed to another firm shipper which (i) is using such capacity at the time
of SHIPPER's nomination, or (h) nominates such capacity during the period of
SHIPPER's nomination. Upon ten work days prior written notice to TRANSPORTER
prior to a calendar month, SHIPPER may (i) change the quantities assigned to any
Primary Receipt Point to the extent not otherwise committed to another firm
shipper, or (ii) change a Secondary Receipt Point (excluding any "paper pool
point" established pursuant to an agreement with a party providing for the
aggregation of gas supplies on the system) to a Primary Receipt Point under this
Agreement if no firm shipper has firm rights regarding the requested capacity at
such Receipt Point; PROVIDED, HOWEVER, that no such change shall serve to
increase the total quantity available to SHIPPER at all Primary Receipt Points
above that designated on Exhibit "A." TRANSPORTER shall respond to SHIPPER
within two work days after receipt of such requested change in Primary Receipt
Points, and failure to respond within the required period shall be deemed
approval of SHIPPER's request.
1.3 On or before July 1, 1997, SHIPPER shall have the right, by giving written
notice to TRANSPORTER, to designate the MDQ effective as of January 1, 1998, at
any quantity from 165,000 MMBTU per day to 255,000 MMBTU per day. The failure to
give such notice shall be deemed to be a designation of 165,000 MMBTU per day.
If SHIPPER elects a quantity greater than 165,000 MMBTU per day, then SHIPPER
may increase its priority capacity rights at the Receipt Points up to the new
MDQ; provided, however, that SHIPPER shall not appropriate capacity at any
Primary Receipt Point dedicated to a firm shipper and SHIPPER may change
Secondary Receipt Points to Primary Receipt Points in accordance with the
provisions for changing Secondary Receipt Points to Primary Receipt Points
specified in Section 1.2. The consideration for the option
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to increase the MDQ as provided above is $450,000, one-half of which ($225,000)
is payable upon the effective date of this Agreement, and the other one-half
($225,000) is payable July 1, 1997.
1.4 Prior to January 1, 1998, the term "Imbalance Quantity," when used herein,
shall mean 75,000 MMBTU per day and after January 1, 1998, it shall mean 55,000
MMBTU per day. Notwithstanding any other provision of this Agreement (other than
Section XII of Exhibit E), and without nomination, SHIPPER shall have the right
in any day of the term hereof to receive from TRANSPORTER at the Delivery Points
a quantity of gas in excess of the Confirmed Nomination Quantity on such day as
SHIPPER shall require at the Delivery Points, such excess quantities being
limited daily to the Imbalance Quantity. SHIPPER shall also have the right to
deliver to TRANSPORTER at the Receipt Points in any day a quantity in excess of
the volume required by SHIPPER for delivery at the Delivery Points, not to
exceed the Imbalance Quantity adjusted upward for the Company Use Charge. Unless
authorized by TRANSPORTER pursuant to Section 4.1 hereof, the rights of SHIPPER
as described in this Section 1.4 shall not be construed to increase the MDQ at
the Delivery Points or the quantity limitations at any Primary Receipt Points.
1.5 Notwithstanding any other provision hereof (other than Section XII of
Exhibit E and Section 1.6), SHIPPER can require delivery of gas to Delivery
Points in excess of any volume limitations hereunder on ten (10) days during
calendar year 1996 and ten (10) days during calendar year 1997 without any fee
or penalty resulting therefrom, provided that TRANSPORTER has the available
physical capacity.
1.6 TRANSPORTER shall not under any circumstances be obligated to deliver
quantities in excess of the Allowed Quantity (defined in Section 4.1 below) on
any day if such delivery would create or increase a Negative Imbalance (defined
in Section 5.2) for that day.
Article II
Term
2.1 This Agreement shall be effective on the first to occur of (i) the effective
date of the sale of the TRANSPORTER's transmission system, (ii) the effective
date of the sale of 100% of the stock of TRANSPORTER by its parent or (iii) 7:00
a.m. January 1, 1998, and shall continue to 7:00 a.m. January 1, 2003. If the
effective date of the sale of TRANSPORTER stock or transmission system is not on
the first day of a month, then this Agreement will be effective 7:00 a.m. on the
first day of the next following month.
Article III
Rates and Charges
3.1 In consideration of the services to be performed by TRANSOK hereunder,
SHIPPER agrees to pay TRANSPORTER $2,545,000.00 each month through December
1997. Each month during the remainder of the term, SHIPPER shall pay TRANSPORTER
a (i) Reservation Charge for
3
transportation service computed at $5.17 multiplied by the number of MMBTU in
the MDQ, and (ii) Commodity Charge of $0.16 multiplied by each MMBTU actually
delivered to the Delivery Points during such month. In addition to the monthly
charges referred to above in this Section 3.1, SHIPPER agrees to pay TRANSPORTER
each month, during the term of this Agreement the following Rates and Charges:
1) a Company Use Charge (measured as a reduction in MMBTU delivered
to SHIPPER) equal to the actual compressor fuel charge plus
one-half percent (0.5%) of volumes received as a fixed
allocation of quantities presumed to be lost-and- unaccounted
for gas,
2) overrun charges as described in Article IV,
3) the cash out value of the Daily Financial Imbalance, as
described in Section 5.3,
4) the costs billable to SHIPPER pursuant to Article IX hereof, and
5) such other charges or credits permitted or required by the terms
of this Agreement.
3.2 If TRANSPORTER fails to deliver quantities of gas on any day that it is
required to deliver hereunder for any reason up to the MDQ, including without
limitation force majeure events described in Section XII of Exhibit "E", then a
portion of the monthly charge shall be refunded to SHIPPER. Such refund amount
shall be $0.33 before January 1, 1998 and $0.17 on and after January 1, 1998
multiplied by such quantities as TRANSPORTER shall have failed to deliver,
provided that such refund shall be 50% of the calculated amount when Section XII
of Exhibit E is in effect. Such refundable amount may be set off against any
amounts due TRANSPORTER under this Agreement unless the invoices delivered to
SHIPPER reflect an appropriate credit. Any such refund of charges shall not
limit or affect any other remedies of SHIPPER.
3.3 If TRANSPORTER is the successful bidder for any portion of the
transportation capacity in excess of 165,000 Mcf/d being offered by SHIPPER by
competitive bid pursuant to Oklahoma Corporation Commission Order No. 390696,
and such successfully bid service is determined to be "comparable transportation
services" as such phrase is used in Paragraph 5 of the Joint Settlement approved
in such order, then the rates and charges provided for herein for the period
after December 31, 1997 shall be adjusted as of the date required by such Order
to equal the average per unit cost applicable to such bid service. The foregoing
portions of this Section 3.3 shall not be effective if paragraph 5 of the Joint
Settlement approved in Order No. 390696 ceases to be effective regarding
SHIPPER's ability to recover TRANSPORTER's costs.
4
Article IV
Overrun Charges
4.1 AUTHORIZED OVERRUNS. TRANSPORTER will, at the request of SHIPPER, transport
and deliver on any day quantities in excess of the then applicable quantity
specified in Section 1.1 (the "Allowed Quantity") when, and to the extent, in
TRANSPORTER's reasonable judgment, the delivery capacity of its system so
permits without impairing the ability of TRANSPORTER to meet its obligations to
any other scheduled services. If SHIPPER requests excess deliveries and
TRANSPORTER fails to respond, the additional deliveries shall be deemed
authorized. The Charge for such service ("authorized overruns") shall be $0.33
per MMBTU. Such overrun deliveries shall not interrupt any other firm service
and shall have the same priority of other dedicated interruptible shippers on
TRANSPORTER's system.
4.2 UNAUTHORIZED OVERRUNS. Should deliveries to SHIPPER exceed the Allowed
Quantity on any given day and such excess quantities taken by SHIPPER are not
authorized or deemed to be authorized under Section 4.1, TRANSPORTER shall
charge and SHIPPER shall pay $0.33, plus the Index Price (defined in Section
5.3), per MMBTU, as modified by the Index Factors set forth below, for such
excess quantities:
QUANTITIES INDEX FACTOR
Up to Allowed Quantity plus 5,000 $0
Allowed Quantity plus 5,001
to Allowed Quantity plus 15,000 greater of $5 or 2X Index
Allowed Quantity plus 15,001
to Allowed Quantity plus 25,000 greater of $10 or 3X Index
Above Allowed Quantity plus 25,001 greater of $15 or 4X Index
4.3 The payment of any fee or penalty under this Article IV shall not relieve
SHIPPER from any obligations set forth in Article V below.
4.4 Nothing in this Article IV shall be deemed to be inconsistent with or limit
in any way the right of SHIPPER under Section 1.5 hereof.
Article V
Imbalances
5.1 It is recognized that because of Section 1.4 and because of dispatching and
other variations operational imbalances will occur between the quantities of gas
delivered hereunder to TRANSPORTER by or for the account of SHIPPER and the
quantities of gas delivered hereunder by TRANSPORTER. Such imbalances shall be
corrected in accordance with the following terms.
5
5.2 If the thermal content of the volumes actually received by TRANSPORTER, as
measured by billing meters, for the account of SHIPPER, less Company Use Charge
quantities, is more or less than the thermal content of the volumes actually
delivered at all Delivery Points, such conditions shall be referred to as a
"Positive Imbalance" or "Negative Imbalance" respectively.
5.3 TRANSPORTER shall issue on the 10th work day of the month following each
production month a written notice to SHIPPER setting forth the Daily Financial
Imbalance for each day of the preceding month, with the Daily Financial
Imbalance being calculated according to the following chart, with each tiered
increment of the Imbalance Level being "cashed out" at the respective premium,
if any, above or discount below, if any, the Index Price, as indicated:
IMBALANCE LEVEL IN MMBTUS NEGATIVE IMBALANCE POSITIVE IMBALANCE
(plus or minus)
0 to 5000 Index Price Index Price
5001 to 15,000 Index Price + $.05 Index Price - $.05
15,001 to 30,000 Index Price + $.40 Index Price - $.40
(greater than)30,000 Index Price + $1.20 Index Price - $1.20
(but not less than $0)
The Index Price for determining the Daily Financial Imbalance each day will be
determined by adding the following four prices from the Oklahoma indices in the
Daily Price Summary as published by Pasha Publications, Inc. in GAS DAILY and
dividing the sum thereof by four: (i) the high for NorAm (North/South), (ii) the
low for NorAm (North/South), (iii) the high for PEPL, and (iv) the low for PEPL.
The price for each day will be determined by the next GAS DAILY edition that
lists prices for such day. The price for each day for which prices are not
listed by GAS DAILY (E.G., holidays, Saturdays and Sundays) shall be prices for
the last day preceding such day for which GAS DAILY listed prices. For example,
the prices for Saturday and Sunday will typically be the prices for the
preceding Friday as published in the Monday edition of GAS DAILY. Should the GAS
DAILY report be discontinued or materially modified, its successor shall be used
or in the absence of a successor, the parties will meet to select a new
publication that enables calculation of an index price most closely comparable
to the report previously used. In the event the parties do not reach agreement,
the successor shall be determined by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
SHIPPER shall owe TRANSPORTER the Daily Financial Imbalance resulting for each
day there is a Negative Imbalance and TRANSPORTER shall owe SHIPPER the Daily
Financial Imbalance resulting for each day there is a Positive Imbalance. The
report generated by TRANSPORTER pursuant to this Section 5.3 shall reflect the
net result of offsetting the amounts due for each day that month by SHIPPER and
TRANSPORTER to the other and set forth the net amount due by the party that
owes. SHIPPER and TRANSPORTER agree to make payments in settlement each month of
the cash amount due. Any retroactive adjustments or reallocations will be
settled at the Index Price (without premium or discount) for the relevant day to
which the adjustment or reallocation pertains.
6
All such amounts due and any adjustments or reallocation thereof shall be
reflected as a debit or credit to the monthly charges as described in Section
3.1 hereof.
5.4 In addition to information furnished pursuant Exhibit E and that which may
be available to SHIPPER through electronic data links, TRANSPORTER shall provide
SHIPPER daily written reports on work days (with Monday's report reflecting the
information for the preceding Friday and weekend) of the estimated quantity
actually received at the Receipt Points and estimated quantity actually
delivered at the Delivery Points for the preceding day, as such quantities are
measured through TRANSPORTER's measurement equipment, which includes the real
time SCADA measurement, and daily projections that are performed by
TRANSPORTER's personnel on Receipt Points where real-time measurement does not
exist. The reports of TRANSPORTER's projections where real-time data is not
available shall be made using current month chart information and historical
flow information that is projected forward through the current date and through
the end of the month. TRANSPORTER shall not assess a premium or discount to the
Index Price if SHIPPER's failure to take corrective action is (a) caused by
force majeure conditions on TRANSPORTER's system as defined in Section XII of
Exhibit "E," or (b) by TRANSPORTER's inability or failure to provide the
notifications required by this Section 5.4 and Exhibit "E," or (c) to extent the
imbalances are caused by or not corrected because of inaccurate information
provided by TRANSPORTER.
Article VI
No-Notice Service
The service provided hereunder shall be firm and without interruption during the
entire term of this Agreement. In addition, the service for the movement of the
Imbalance Quantity shall be available on a "no-notice" basis, allowing SHIPPER
to receive unscheduled quantities of natural gas at the Delivery Points for the
daily and hourly swings related to the generation of electricity. TRANSPORTER
represents and warrants, except as noted below, that the transportation service
to be provided hereunder is TRANSPORTER's highest priority firm service and that
the capacity required for the performance hereof is not dedicated to any other
party nor subject to interruption or curtailment for any reason not specifically
permitted by the terms of this Agreement, provided, that SHIPPER's priority
status in any Secondary Receipt Point which has been converted to a Primary
Receipt Point in accordance with the Agreement shall, with respect to the
capacity of such Receipt Point, be equal to that of any existing firm SHIPPER
holding capacity at such Receipt Point. In addition, SHIPPER recognizes that
TRANSPORTER is subject to FERC's orders on curtailment of firm service which is
specified at 54 FERC 61,229 and 656 FERC 61,275. TRANSPORTER shall not be liable
to SHIPPER for curtailment of SHIPPER in accordance with such orders to the
extent they continue to apply.
7
Article VII
General Terms and Notices
The General Terms and Conditions attached hereto as Exhibit "E" are hereby
incorporated into this Agreement and made a part hereof for all purposes.
Notices under this Agreement are to be made to the persons designated by each
party on Exhibit "D," hereby incorporated into this Agreement, until each party
designates other persons to receive such notices.
Article VIII
Government Regulation
8.1 Each Parties' rights and obligations hereunder shall be subject to all valid
laws and regulations which may be lawfully applicable to it.
8.2 Nothing in this Agreement contained shall be construed as constituting
TRANSPORTER as a common carrier.
Article IX
Administrative Services
9.1 The parties acknowledge that SHIPPER is a party to certain gas purchase
contracts and other contracts all as more particularly identified on Exhibit F
attached hereto. Pursuant to the Prior Agreement, TRANSPORTER has performed
certain functions, as therein described, acting as SHIPPER's "Gas Supply
Administrator". The parties desire that TRANSPORTER continue to perform certain
administrative and other functions related to the Exhibit F contracts (including
all existing amendments thereto and amendments that are compelled by such
contracts), all as hereafter described in this Article IX.
9.2 It is the intention of SHIPPER that the obligations of each of such Exhibit
F contracts shall be fully and completely performed by SHIPPER and by each other
party bound by such contracts. TRANSPORTER agrees that an adequate number of
employees shall be assigned to the administration of such contracts consistent
with SHIPPER's objective of assuring full and complete performance and that such
employees be experienced in the administration of such contracts and in the
performance of the duties assigned to TRANSPORTER hereunder.
9.3 TRANSPORTER shall perform the following duties and functions consistent with
the terms of this agreement and such supplemental instructions as are provided,
in writing, by SHIPPER from time to time:
(a) By the 10th work day of each month, SHIPPER shall advise TRANSPORTER
of the total quantity of gas which SHIPPER desires to purchase from all of the
gas purchase contracts covered hereby in the next ensuing production month. On
the basis of such information,
8
TRANSPORTER shall nominate from individual wells or other sources of supply,
consistent with the terms of the relevant gas purchase contracts and
TRANSPORTER's nomination and allocation requirements. If the total quantity
designated by SHIPPER is less than the total available deliverability from all
such wells and sources of supply, TRANSPORTER shall allocate and nominate such
quantity from individual wells or other sources of supply in the manner best
calculated to meet SHIPPER's minimum purchase obligation applicable to such well
or source of supply for the Accounting Year or other period designated by the
applicable contract. At such time as TRANSPORTER believes such minimum purchase
obligation has been fulfilled, it shall discontinue purchases from such well or
other source of supply for the balance of the Accounting Year (or other
designated period) unless the continuation of purchases is required by
applicable laws, rules or regulations of regulatory authorities having
jurisdiction or it is otherwise instructed, in writing, by SHIPPER.
(b) TRANSPORTER agrees to provide to each party selling gas to SHIPPER
an appropriate "Owner Gas Statement" in accordance with SHIPPER's historical
accounting practice and to pay for all gas actually delivered to SHIPPER and all
taxes and royalties thereon in accordance with the terms of the applicable gas
purchase contracts, division orders, and applicable laws, rules and regulations.
TRANSPORTER shall further pay such third party transportation fees and other
charges required pursuant to the terms of any agreement described on Exhibit F.
TRANSPORTER's checks in payment of such amounts shall be reflected in the
monthly invoice to SHIPPER described in Section 3.1 hereof and shall be paid by
SHIPPER in accordance with the terms of this Agreement. Any retroactive
adjustment affecting such payments shall be billed or credited to SHIPPER, as
appropriate, on such monthly invoice at the earliest practicable date after such
adjustment has been made.
(c) TRANSPORTER shall schedule and conduct deliverability tests in
accordance with the terms of the gas purchase contracts for which such tests are
being conducted. Every well or other source of supply for which a deliverability
test is contemplated by the applicable gas purchase contract shall be tested at
least four times per "Accounting Year" or "Contract Year" as defined in the
applicable contract. In the absence of a defined Accounting Year or Contract
Year, TRANSPORTER shall seek instructions from SHIPPER concerning the frequency
of required testing. Unless required by the terms of the relevant contract,
however, such testing shall not occur more frequently than four times per year.
SHIPPER shall advise each relevant contracted party of the results of such test
in accordance with the terms of the applicable gas purchase contract.
(d) TRANSPORTER shall monitor the quality and BTU content of the gas
purchased under such gas purchase contracts. TRANSPORTER shall inform SHIPPER
when such gas fails to meet the quality requirements of the applicable gas
purchase contract but shall not reject such gas for the account of SHIPPER
unless TRANSPORTER shall receive written instructions from SHIPPER concerning
such rejection. Nothing herein shall be inconsistent with the rights of
TRANSPORTER to reject gas which does not meet the quality requirements
applicable to the transportation of such gas by TRANSPORTER pursuant to the
terms of this Agreement.
9
(e) TRANSPORTER agrees to monitor and notify, in accordance with the
terms of the applicable contract, appropriate parties under each Exhibit F
contract of any force majeure condition affecting SHIPPER's obligations under
such contract, provided that TRANSPORTER shall not be obligated to make such
notification of a force majeure event not affecting TRANSPORTER's system unless
TRANSPORTER has actual knowledge of such event.
(f) TRANSPORTER agrees to promptly provide notice to SHIPPER by
facsimile transmission of any communication whether oral or in writing of any
material complaint, claim or assertion by any party concerning SHIPPER's
performance of any Exhibit F contract or of any attempted cancellation, price
redetermination or other pricing action or any other material action by a party
to any such contract. TRANSPORTER shall cooperate with SHIPPER in the analysis
and investigation thereof. If such complaint, claim or assertion involves the
failure of SHIPPER to purchase the minimum volume of gas required by the terms
of any such contract, TRANSPORTER will, upon the written request of SHIPPER,
promptly prepare calculations in accordance with SHIPPER's instructions.
(g) TRANSPORTER shall inform SHIPPER, in writing, with respect to any
express contractual right or option which may be exercised by or available to
SHIPPER in adequate time to exercise such contractual right or option in
accordance with the terms of the applicable contract, including, but not limited
to the right to cancel or terminate any contract, to reduce the applicable
contract price or to disconnect or discontinue purchases from any well.
TRANSPORTER shall also promptly provide SHIPPER with any information available
to TRANSPORTER concerning the performance, failure to perform or other action of
any other party to any Exhibit F contract which might give rise to a claim,
contractual remedy or other action by SHIPPER with respect to such party. Unless
specifically so instructed by SHIPPER, in writing, TRANSPORTER shall take no
further action on SHIPPER's behalf with respect to such matters.
(h) Notwithstanding its record retention policy, TRANSPORTER agrees to
retain all files currently in existence on the date of this Agreement pertaining
to any contract between SHIPPER and any other party and turn over to SHIPPER
promptly after the expiration or termination of TRANSPORTER's administrative
functions pursuant to this Article IX the original of all such files, including
but not limited to such contract files, correspondence files, and well files as
SHIPPER shall request. For the purposes hereof a copy of any file on Viewstar or
comparable system shall suffice if the original file is not otherwise available.
TRANSPORTER may retain copies of such non-confidential files as it shall deem
necessary or appropriate. Until turned over to SHIPPER, TRANSPORTER agrees to
maintain all such files in a current status consistent with sound business
practice and to promptly provide SHIPPER, or SHIPPER's legal counsel with copies
of such files as SHIPPER shall request. During the term of this administration
agreement (set forth in Section 9.9) and for a reasonable time thereafter,
TRANSPORTER agrees to reasonably cooperate with SHIPPER and its legal counsel in
the administration or supervision of the administration of Exhibit F contracts
and in the prosecution or defense of any litigation or potential litigation
involving any contract (including the Exhibit F contracts) for which TRANSPORTER
has relevant information
10
including, without limitation, providing access during normal business hours to
files, reports, electronic data, microfilm and to such of TRANSPORTER's
personnel as shall have relevant information concerning the matter in dispute.
SHIPPER agrees to compensate TRANSPORTER for the reasonable cost of copying any
document or file requested by SHIPPER or its legal counsel.
9.4 To facilitate communications between the parties concerning TRANSPORTER's
functions under this Article IX, each party shall designate, in writing, two
persons who shall be the primary contacts with respect to any issue arising
under this Article. TRANSPORTER shall, through the primary contacts, have the
right to seek written instruction from SHIPPER with respect to any issue or
matter involving or necessary to the administration of any Exhibit F contract.
Such written instructions shall be promptly provided and TRANSPORTER shall
comply with and may fully rely on any written instructions so received.
9.5 TRANSPORTER expressly acknowledges that for the purposes of this Article IX
it is acting in the capacity of an independent contractor and that it has no
power or authority to execute agreements on behalf of SHIPPER or otherwise bind
SHIPPER to any obligation or duty whatsoever. TRANSPORTER agrees that it will
not make any representation to any person inconsistent with this Section 9.5 and
will fully disclose the absence of such power or authority if required under the
circumstances. If requested so to do by SHIPPER, TRANSPORTER will send to all
parties to the Exhibit F contracts a notification, prepared by SHIPPER,
describing TRANSPORTER's duties and limitations as described in this Article.
9.6 TRANSPORTER shall fully disclose to SHIPPER any conflict of interest or
potential for a conflict of interest in the administration of the Exhibit F
contracts, including, but limited to, its ownership, control or affiliation with
any party to an Exhibit F contract or with any person having an economic
interest in production or services covered by any such contract. Contractual
relationships with a party to an Exhibit F contract providing for the sale and
purchase of goods and services unrelated to the Exhibit F contracts will not be
deemed to create a potential conflict of interest.
9.7 TRANSPORTER will upon written request of SHIPPER promptly prepare and
provide to SHIPPER reports of remaining contracted reserves then covered by any
Exhibit F contract.
9.8 SHIPPER shall have the right, at any time, and from time to time, to
terminate TRANSPORTER's duties and obligations under this Article with respect
to any one or more of the Exhibit F contracts, effective at 7:00 a.m. on the
first day of any month preceding January, 1998, by providing TRANSPORTER at
least thirty (30) days prior written notice of its election so to do. Any such
election by SHIPPER shall not reduce the payments due to TRANSPORTER under
Section 3.1. With respect to any Exhibit F contract still being administered by
TRANSPORTER, TRANSPORTER's duties and obligations under this Article shall
automatically expire following the performance of all duties and obligations
hereunder for the production month of December, 1997 but no later than 7:00 a.m.
February 1, 1998.
11
9.9 SHIPPER shall indemnify and hold TRANSPORTER harmless from all costs, losses
and damages (including without limitation reasonable attorney's fees) arising
from or related to the performance of the obligations herein to the extent they
are in accordance with the terms of this Article IX or with specific written
instructions from SHIPPER. TRANSPORTER shall indemnify and hold SHIPPER harmless
from all costs, losses and damages (including without limitation, reasonable
attorney's fees) arising from or related to actions by TRANSPORTER related to
the Exhibit F contracts which are not authorized under this Article IX or by
SHIPPER's specific written instructions or which are inconsistent with
TRANSPORTER's obligations hereunder.
Article X
Miscellaneous
10.1 The parties hereto agree there are no agreements, representations (oral or
otherwise), or covenants of any kind or type whatever not contained herein which
form a part of this Agreement, which exist with respect to the subject matter of
this Agreement or which form a condition to execution of this Agreement. All
prior representations, negotiations, and agreements leading to this Agreement,
and not set forth herein, are hereby agreed to be null and void.
10.2 The failure of either party hereto to exercise any right granted hereunder
shall not impair nor be deemed as a waiver of such party's privilege of
exercising such right at any subsequent time or times.
10.3 No modification or amendment to this Agreement shall be effective, unless
such modification or amendment is in writing and signed by duly authorized
representatives of both parties.
10.4 The headings and subheadings contained in this Agreement are used solely
for convenience and shall not constitute a part of the Agreement between the
parties, or be used or aid in any manner, in construing the terms of this
Agreement.
10.5 Should any conflict appear or exist between this Agreement and its
Exhibits, this Agreement shall govern.
10.6 Any quantities of gas transported by TRANSPORTER for SHIPPER to the
Delivery Points herein pursuant to Section 311 of the NGPA shall be governed by
separate transportation agreements between the parties and, at the election of
SHIPPER, the quantities actually transported thereunder shall count toward the
MDQ. The transportation service shall be provided on a nondiscriminatory basis,
consistent with FERC regulations and orders. If quantities of gas shipped under
Section 311 are treated as a portion of the MDQ hereunder, the commodity fee per
MMBTU paid for such Section 311 transportation shall be credited against the
Reservation Charge under Section 3.1 hereof only to the extent the rate for such
Section 311 service exceeds SHIPPER's Commodity Charge in Section 3.1 hereof and
then only for the amount exceeding the Commodity
12
Charge. Any daily imbalance quantities created under the agreements for Section
311 service shall be combined with any imbalance quantities created under this
Agreement and cashed out in the same manner as though received and delivered
hereunder.
10.7 The parties stipulate and agree that this Agreement shall be deemed and
considered for all purposes as prepared through the joint efforts of the
parties, and shall not be construed against one party or the other as a result
of the preparation, submittal or other event of negotiation, drafting or
execution thereof.
10.8 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF OKLAHOMA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
10.9 It is understood and agreed that there shall be no third-party beneficiary
of this Agreement, and that the provisions hereof do not impart enforceable
rights in anyone who is not a party or a successor or assignee of a party
hereto.
10.10 This Agreement may not be assigned by either party without the prior
written consent of the other party. The assignment of this Agreement to an
affiliate of a party hereto or to a third party who is acquiring all or
substantially all of the assets of the party hereto shall not be prohibited
provided the assignee has assumed in writing all obligations of the assignor
hereunder. Any assignment in accordance with the above shall extend to and be
binding upon the successors and assigns of the parties hereto.
10.11 TRANSPORTER and SHIPPER hereby consent and agree to either the District
Court of Tulsa County, State of Oklahoma, or the United States District Court
for the Northern District of Oklahoma as the exclusive jurisdiction for any
proceeding brought in connection with this Agreement.
10.12 The parties agree that to the extent any payments required by Article IV
or Article V may be later interpreted as liquidated damages, each party agrees
that (i) it would be impractical or extremely difficult to determine the actual
damages sustained by the party to receive the payment, (ii) the charges herein
are not disproportionate to the probable actual harm, and (iii) such charges are
not penalties as disallowed under Oklahoma law.
13
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate originals as of the date first herein above written.
ATTEST: TRANSOK, INC.
("TRANSPORTER")
/S/ MICHAEL D. PALMER /S/ GLENN R. POWELL
Assistant Secretary Title:
ATTEST: PUBLIC SERVICE COMPANY OF
OKLAHOMA ("SHIPPER")
/S/ FREDERIC L. FRAUHER /S/ SCOTT WIEDERMAN
Secretary Authorized Agent
Exhibit A - Primary Receipt Points
Exhibit B - Delivery Points
Exhibit C - Master Receipt Point List
Exhibit D - Notices
Exhibit E - General Terms and Conditions
Exhibit F - Gas Contracts
14
AMENDMENT
This agreement is made and entered into as of the 6th day of June, 1996 by and
between TRANSOK, INC., an Oklahoma corporation, hereinafter referred to as
"TRANSPORTER" and PUBLIC SERVICE COMPANY OF OKLAHOMA, an Oklahoma corporation,
hereinafter referred to as "SHIPPER".
RECITALS
WHEREAS, TRANSPORTER and SHIPPER have previously entered into that certain
AMENDED AND RESTATED FIRM INTRASTATE SERVICE AGREEMENT dated March 12, 1996, and
WHEREAS, the parties now desire to amend said agreement in the manner
hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual benefits accruing to each of the
parties, the receipt and adequacy of which is hereby acknowledged, it is agreed
the AMENDED AND RESTATED FIRM INTRASTATE SERVICE AGREEMENT dated March 12, 1996
shall be amended as follows:
1. By adding to Exhibit F thereto the following two (2) additional contracts as
number "928" and "929" respectively:
CONTRACT NUMBER SELLER NAME CONTRACT DATE
02 IND 002 INDIAN OIL COMPANY 7/30/92
02 GTC 001 NIMROD NATURAL GAS CORP. 9/25/77
2. It is understood by the parties the sale of 100% of the stock of TRANSPORTER
by its parent will occur on June 6, 1996. If such sale shall occur on June 6,
1996 or on any date prior to June 30, 1996, it is agreed Section 2.1 shall be
deleted in its entirety and the following substituted in lieu thereof:
"2.1 This agreement shall be effective at 7:00 a.m. on the first day of
June, 1996. Notwithstanding the provisions of Article V hereof, for the
period from the effective date of this agreement to the effective date
of sale of 100% of the stock of TRANSPORTER by its parent, TRANSPORTER
shall not assess a premium or discount to the Index Price in the
calculation of the Daily Financial Imbalance. TRANSPORTER further agrees
to waive all overrun charges or other penalties for such period."
The Foregoing amendments shall be effective upon the effective date of the
agreement being hereby amended.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed in
duplicate originals as of the date first hereinabove written.
TRANSOK, INC.
/S/ RICHARD ZIEREN
TITLE: Vice President and General Counsel
PUBLIC SERVICE COMPANY OF
OKLAHOMA
/S/ JAMES L. WRIGHT
Title: Director, CSW Fuel Services
2
EXHIBIT 10.6
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into as of June 6,
1996, by and between Public Service Company of Oklahoma, an Oklahoma corporation
("PSO"), and Transok, Inc., an Oklahoma corporation ("Transok").
RECITALS
WHEREAS, PSO and Transok are parties to that certain Agreement dated
July 21, 1981, related to the supply of gas to PSO by Transok; and
WHEREAS, said Agreement has been amended on several occasions, most
recently being amended and restated by that certain Amended and Restated Firm
Interstate Service Agreement dated March 12, 1996 (said Agreement, as in effect,
from time to time, since July 21, 1981, and amended to date being hereinafter
referred to as the "Supply Agreement"); and
WHEREAS, the Supply Agreement provides for the administration on behalf
of PSO of certain gas purchase contracts and that PSO shall indemnify Transok
and hold Transok harmless from all costs, losses and damages arising from or
related to the performance of Transok's administrative service obligations under
the Supply Agreement to the extent those obligations are properly performed; and
WHEREAS, certain third party claims have been asserted against Transok
in connection with the performance of its administrative service obligations
under the Supply Agreement which may be subject to said indemnification; and
WHEREAS, at the date hereof, each of PSO and Transok are wholly owned
subsidiaries of Central and South West Corporation ("CSW"); and
WHEREAS, CSW is considering the sale of Transok pursuant to the terms of
that certain Agreement of Merger (as amended through the date hereof, the
"Agreement of Merger") made and entered into on May 9, 1996, by and between CSW
and Tejas Gas Corporation, a Delaware corporation, and, in connection with that
sale, CSW (as the parent of PSO) and Transok desire to clarify the
indemnification rights of Transok under the Supply Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained in this Agreement, PSO and Transok hereby covenant and agree
as follows:
1. DEFINITIONS. The following terms as used in this Agreement shall have
the meanings ascribed to them in this Section.
(a) "Agreement of Merger" shall have the meaning ascribed to such
term in the recitals to this Agreement.
(b) "Closing" shall have the meaning ascribed to such term in the
Agreement of Merger.
(c) "CSW" shall have the meaning ascribed to such term in the
recitals to this Agreement.
(d) "Final Purchase Price" shall have the meaning ascribed to
such term in the Agreement of Merger.
(e) "Gas Supply Administrator" shall have the meaning ascribed to
such term in the Supply Agreement.
(f) "Indemnifiable Event" shall mean (i) any act, omission,
event, or occurrence arising out of Transok's performance of its administrative
service obligations under the Supply Agreement to the extent that such
performance is authorized by, in accordance with, and not in breach of, the
terms of the Supply Agreement or written instructions from PSO, and (ii) the
failure of PSO to perform its obligations under those gas purchase contracts
identified on Exhibit F to the Supply Agreement and under other gas purchase
contracts entered into prior to Closing in respect of which Transok acted as the
Gas Supply Administrator or the agent of PSO pursuant to the Supply Agreement.
Those alleged acts that are the basis of recovery against Transok in the
following cases (the "Pending Cases") shall be Indemnifiable Events: W.P.
LERBLANCE, District Court of Pittsburgh County, Oklahoma, Case No. C-92-637,
CAROLYN L. SHOGRIN, District Court of Pittsburgh County, Oklahoma, Case No.
C-94-1195 and in TGX CORPORATION, District Court of Dewey County, Oklahoma, Case
No. CJ-96-50.
(g) "Indemnified Parties" shall have the meaning given such term
in Section 2.
(h) "Losses" shall have the meaning ascribed to such term in
Section 2.
(i) "Pending Cases" shall have the meaning ascribed to such term
in Section 1(f).
(j) "Proceedings" shall have the meaning ascribed to such term in
Section 2.
(k) "PSO" shall have the meaning ascribed to such term in the
introductory paragraph of this Agreement.
(l) "Supply Agreement" shall have the meaning ascribed to such
term in the recitals to this Agreement.
-2-
(m) "Transok" shall have the meaning ascribed to such term in the
introductory paragraph of this Agreement.
2. INDEMNIFICATION. Subject to the terms and provisions of this
Agreement, PSO hereby agrees, from and after the Closing, to indemnify and hold
harmless Transok and its subsidiaries (the "Indemnified Parties") against any
losses, damages or liabilities arising from any claim or cause of action against
the Indemnified Parties ("Losses") which the Indemnified Parties shall actually
incur, to the extent that such Losses (or actions, suits or proceedings in
respect thereof ("Proceedings")), arise out of or are based upon an
Indemnifiable Event occurring prior to the Closing.
3. INDEMNIFICATION PROCEDURE.
(a) Promptly after receipt by an Indemnified Party of notice of a
Loss or the commencement of any Proceeding which it believes could result in a
Loss against which it is indemnified under this Agreement, the Indemnified Party
shall notify PSO in writing thereof; PROVIDED, HOWEVER, that the omission so to
notify PSO shall not relieve PSO from any liability which it may have to the
Indemnified Party to the extent that PSO is not prejudiced by such omission.
(b) PSO shall, within thirty (30) days after receipt of a notice
of Loss or Proceeding given pursuant to subsection (a) of this Section, either
(i) acknowledge liability, as between PSO and the Indemnified Party, for such
Loss or the amount in controversy in such Proceeding and pay the Indemnified
Party the amount of such Loss or the amount in controversy in such Proceeding in
cash or other immediately available funds (or establish by agreement with the
Indemnified Party an alternative payment schedule), (ii) acknowledge liability,
as between PSO and the Indemnified Party, for such Loss or the amount in
controversy in such Proceeding, disavow the validity of the Loss or Proceeding
or the amount thereof and, to the extent that it shall so desire in accordance
with subsection (c) of this Section, assume the legal defense thereof, or (iii)
object (or reserve the right to object until additional information is obtained)
to the claim for indemnification or the amount thereof, setting forth the
grounds therefor in reasonable detail; PROVIDED that, if PSO objects (or
reserves its right to object) within such 30-day period as provided in this
clause (iii), then the Indemnified Party may bring suit (in the same Proceeding
or otherwise) to resolve the dispute and, pending final resolution of such
dispute, the Indemnified Party may proceed as though PSO had responded in
accordance with clause (i) above. If PSO does not respond to the Indemnified
Party as provided in this subsection within such 30-day period, PSO shall be
deemed to have acknowledged its liability for such indemnification claim in
accordance with clause (i) of this subsection and the Indemnified Party may
exercise any and all of its rights under applicable law to collect such amount.
PSO acknowledges that the Pending Cases are subject to clause (ii) of this
subsection.
(c) If any Proceeding shall be brought against an Indemnified
Party and it shall notify PSO thereof in accordance with subsection (a) of this
Section, PSO shall, if it shall have responded to such notice in accordance with
clause (ii) of subsection (b) of this Section, be entitled to assume the legal
defense thereof with counsel reasonably satisfactory to the Indemnified Party.
-3-
As to the Pending Cases, PSO has assumed such defense and Transok consents to
the continuation thereof. After notice from PSO to the Indemnified Party of its
election to assume the defense of such claim or such action, PSO shall not be
liable to the Indemnified Party under this Agreement for any attorney's fees or
other expenses (except reasonable costs of investigation) subsequently incurred
by the Indemnified Party in connection with the defense thereof. If PSO does not
assume the defense of a Proceeding as to which it has acknowledged liability, as
between itself and the Indemnified Party, pursuant to clause (ii) of subsection
(b) of this Section, the Indemnified Party may require PSO to reimburse it on a
current basis for its reasonable expenses of investigation, reasonable
attorney's fees and expenses and reasonable out-of-pocket expenses incurred in
the defense thereof and, subject to the provisions of subsection (d) of this
Section, PSO shall be bound by the result obtained with respect thereto by the
Indemnified Party.
(d) PSO will not, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened Proceeding in respect of which indemnification or contribution may
be sought hereunder (whether or not the Indemnified Party is an actual or
potential party to such Proceeding) unless such settlement, compromise or
consent includes an unconditional release of the Indemnified Party from all
liability arising out of such Proceeding. If PSO has responded to the
Indemnified Party pursuant to clause (i) of subsection (b) of this Section, the
Indemnified Party may settle or compromise or consent to the entry of any
judgment with respect to the Proceeding that was the subject of notice to PSO
pursuant to subsection (a) of this Section without the consent of PSO. The
Indemnified Party will not otherwise, without the prior written consent of PSO
(which consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
Proceeding, but, if such Proceeding is settled or compromised or if there is
entered any judgment with respect to any such Proceeding, in either case with
the consent of PSO, or if there be a final judgment of the plaintiff in any such
Proceeding, PSO agrees to indemnify and hold harmless the Indemnified Party from
and against any loss or liability by reason of such settlement, compromise or
judgment.
4. AMENDMENTS. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any provision of this Agreement shall be effective unless
in a writing signed by the party granting the waiver after the Closing. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not similar) nor
shall that waiver constitute a continuing waiver.
5. OTHER SOURCES. An Indemnified Party shall not be required to exercise
any rights that the Indemnified Party may have against any other person (for
example, under an insurance policy) before the Indemnified Party enforces its
rights under this Agreement. However, to the extent PSO actually indemnifies the
Indemnified Party, PSO shall be subrogated to the rights of the Indemnified
Party and shall be entitled to enforce any such rights which the Indemnified
Party may have against third parties. The Indemnified Party shall assist PSO in
enforcing those rights. If the Indemnified
-4-
Party is actually indemnified for Losses arising out of or based upon an
Indemnifiable Event by any third party, then, for so long as the Indemnified
Party is not required to disgorge the amounts so received, to that extent PSO
shall be relieved of its obligation to indemnify or reimburse the Indemnified
Party therefor.
6. ASSIGNMENT. This Agreement may not be assigned by either party
without the prior written consent of the other party. The assignment of this
Agreement to an affiliate of a party hereto or to a third party who is acquiring
all or substantially all of the assets of the party hereto shall not be
prohibited provided the assignee has assumed in writing all obligations of the
assignor hereunder. Any assignment in accordance with the above shall extend to
and be binding upon the successors and assigns of the parties hereto; PROVIDED,
HOWEVER, that no such assignment shall relieve the assignor of its obligations
hereunder without a written release from the other party hereto.
7. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas.
8. SURVIVAL. The indemnification rights set forth in this Agreement
shall survive the Closing until the expiration of the statute of limitations
(including any and all periods of extension or tolling thereof) applicable to
the claims giving rise to the Losses indemnified against herein.
9. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10. NOTICES. All notices and other communications hereunder to a party
hereto shall be in writing and shall be deemed to be properly given if delivered
personally, telecopied (subject to confirmation) or mailed to it by registered
or certified mail (return receipt requested), in the case of PSO, to:
Public Service Company of Oklahoma
212 East Sixth Street
Tulsa, Oklahoma 74119-1212
Attention: President
and in the case of an Indemnified Party, to:
Transok, Inc.
110 West 7th Street
Tulsa, Oklahoma 74119
Telecopy Number: (918) 591-2555
Attention: President
-5-
with copy to:
Tejas Gas Corporation
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attention: General Counsel
or at such other address as shall be specified by like notice.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
EXECUTED as of the date first written above.
PUBLIC SERVICE COMPANY OF OKLAHOMA
By: /s/ SCOTT WIEDERMANN
Scott Wiedermann
Authorized Agent
TRANSOK, INC.
By: /s/ A. DEAN FULLER
A. Dean Fuller
President
-6-
EXHIBIT 11.1
TEJAS GAS CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding ................................................ 17,407 17,346 17,406 17,343
Incremental common shares resulting from
assumed exercise of stock options based
on the stock's daily average market price .................. -- -- -- --
------- ------- ------- -------
Weighted average number of common shares
outstanding and common equivalent
shares for primary calculation ............................. 17,407 17,346 17,406 17,343
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 ..................................... 17,407 17,346 17,406 17,343
======= ======= ======= =======
Net Earnings Applicable to Common Stock ........................ $ 5,917 $ 5,012 $14,757 $11,093
======= ======= ======= =======
Earnings per common and common
equivalent share:
Primary ........................................................ $ 0.34 $ 0.29 $ 0.85 $ 0.64
Fully-diluted .................................................. $ 0.34 $ 0.29 $ 0.85 $ 0.64
======= ======= ======= =======
</TABLE>
NOTE: Weighted average number of Common Shares outstanding and primary and
fully-diluted earnings per common share have been restated to reflect the
following: (i) a three-for-two split of the Common Stock effected in the form
of a stock dividend payable to stockholders of record as of April 26, 1996 and
(ii) a dividend of one-tenth of one share of Common Stock payable to
stockholders of record as of July 27, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,679
<SECURITIES> 0
<RECEIVABLES> 254,667
<ALLOWANCES> 0
<INVENTORY> 31,204
<CURRENT-ASSETS> 316,465
<PP&E> 1,547,738
<DEPRECIATION> 196,119
<TOTAL-ASSETS> 1,768,242
<CURRENT-LIABILITIES> 335,643
<BONDS> 1,011,275
53,246
460
<COMMON> 4,351
<OTHER-SE> 312,542
<TOTAL-LIABILITY-AND-EQUITY> 1,768,242
<SALES> 419,284
<TOTAL-REVENUES> 419,284
<CGS> 372,793
<TOTAL-COSTS> 394,832
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,384
<INCOME-PRETAX> 12,631
<INCOME-TAX> 4,616
<INCOME-CONTINUING> 8,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,015
<EPS-PRIMARY> 34
<EPS-DILUTED> 0
</TABLE>
