AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1996
REGISTRATION NO. 333-06207
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TEJAS GAS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0263364
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1301 MCKINNEY ST., SUITE 700
HOUSTON, TEXAS 77010
(713) 658-0509
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
P. ANTHONY LANNIE
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
TEJAS GAS CORPORATION
1301 MCKINNEY ST., SUITE 700
HOUSTON, TEXAS 77010
(713) 658-0509
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
NICOLAS J. EVANOFF JOHN F. WOMBWELL
BAKER & BOTTS, L.L.P. ANDREWS & KURTH, L.L.P.
3000 ONE SHELL PLAZA 4200 TEXAS COMMERCE TOWER
HOUSTON, TEXAS 77002-4995 HOUSTON, TEXAS 77002
(713) 229-1234 (713) 220-4200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. []
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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SUBJECT TO COMPLETION DATED JULY 3, 1996
PROSPECTUS
$400,000,000
[LOGO] TEJAS GAS CORPORATION
DEBT SECURITIES
COMMON STOCK
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Tejas Gas Corporation (the "Company") may offer from time to time its
unsecured debt securities consisting of notes, debentures or other evidences of
indebtedness (the "Debt Securities"). The Company may also offer and sell from
time to time shares of Common Stock, par value $0.25 per share (the "Common
Stock"), of the Company. The aggregate initial offering price of the Debt
Securities and the Common Stock to be offered by the Company hereby (the
"Securities") will not exceed $400,000,000 or, if applicable, the equivalent
thereof in any other currency or currency unit. The Securities may be offered as
separate series in amounts, at prices and on terms to be determined in light of
market conditions at the time of sale and set forth in a Prospectus Supplement.
The terms of each series of Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, authorized denominations,
maturity, rate or rates and time or times of payment of any interest, any terms
for optional or mandatory redemption, which may include redemption at the option
of holders upon the occurrence of certain events, or payment of additional
amounts or any sinking fund provisions, any provisions with respect to
conversion (in the case of Debt Securities that may be convertible into Common
Stock of the Company), any initial public offering price, the net proceeds to
the Company and any other specific terms in connection with the offering and
sale of such series will be set forth in a Prospectus Supplement. As used
herein, the Debt Securities shall include securities denominated in United
States dollars, or, at the option of the Company if so specified in an
applicable Prospectus Supplement, in any other currency or currency unit, or in
amounts determined by reference to an index.
The Securities may be sold directly by the Company to investors, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution". If any agents of the Company or any underwriters are
involved in the sale of any Securities in respect of which this Prospectus is
being delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such sale also will be set forth in a Prospectus
Supplement.
The Common Stock is listed on the New York Stock Exchange under the Symbol
TEJ. Any Common Stock offered will be listed, subject to notice of issuance, on
such exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN
INVESTMENT IN THE SECURITIES.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1996.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING COVERED
BY THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR
TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
PAGE
----
Available Information................... 3
Incorporation of Certain Documents by
Reference............................. 3
The Company............................. 5
Risk Factors............................ 7
Use of Proceeds......................... 9
Ratio of Earnings to Fixed Charges...... 9
Description of Debt Securities.......... 9
Description of Capital Stock............ 15
Certain Anti-takeover Provisions........ 15
Plan of Distribution.................... 18
Legal Matters........................... 19
Experts................................. 19
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON ANY EXCHANGES ON WHICH THE
SECURITIES ARE LISTED, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission, 450
Fifth Street, NW, Judiciary Plaza, Washington, D.C. 20549; and at the following
regional offices of the Commission: 7 World Trade Center, New York, New York
10048; and Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, at prescribed rates. The Commission maintains an
Internet web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov). The Company's Common Stock, depositary shares
(the "9.96% Depositary Shares"), each representing a one-tenth interest in a
share of 9.96% Cumulative Preferred Stock, par value $1.00 per share (the "9.96%
Preferred Stock"), and depositary shares (the "5 1/4% Depositary Shares"), each
representing a one-fifth interest in a share of 5 1/4% Convertible Preferred
Stock, par value $1.00 per share (the "5 1/4% Preferred Stock"), are listed on
the New York Stock Exchange and such reports, proxy statements and other
information may be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act
with respect to the securities offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement, and reference is made to the
Registration Statement for further information with respect to the Company and
the securities offered hereby. Statements contained herein concerning the
provisions of any contract, agreement or any other document or exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete; with respect to each such contract, agreement or document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 0-17389), are incorporated in
this Prospectus by reference and shall be deemed to be a part hereof:
(1) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995;
(2) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;
(3) the Company's Current Report on Form 8-K filed June 18, 1996;
(4) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on December 3, 1992, as amended by
Forms 8-A/A filed on September 17, 1993 and March 18, 1994, as such
Registration Statement may be further amended from time to time for the
purpose of updating, changing or modifying such descriptions;
(5) the description of the Company's preferred stock purchase rights
associated with the Common Stock contained in the Company's Registration
Statement on Form 8-A filed on November 14, 1994, as such Registration
Statement may be amended from time to time for the purpose of updating,
changing or modifying such description;
(6) the description of the 9.96% Depositary Shares and the 9.96%
Preferred Stock contained in the Company's Registration Statement on Form
8-A filed on January 13, 1993, as amended by Form 8-A/A filed on March 25,
1993, as such Registration Statement may be further amended from time to
time for the purpose of updating, changing or modifying such description;
(7) the description of the 5 1/4% Depositary Shares and the 5 1/4%
Preferred Stock contained in the Company's Registration Statement on Form
8-A filed on September 27, 1993, as amended by Forms 8-A/A filed on
November 1, 1993 and December 23, 1993, as such Registration Statement may
be
3
further amended from time to time for the purpose of updating, changing or
modifying such description; and
(8) the Rights Agreement, dated as of November 11, 1994, between the
Company 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 the
Company's Form 8-K dated November 11, 1994).
All documents filed by the Company with the Commission pursuant to sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby (by the
filing of a post-effective amendment to the Registration Statement which
indicates that all securities offered hereby have been sold, or which
deregisters all securities then remaining unsold) shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon the written or oral request of such person, a copy of any or all documents
that have been incorporated herein by reference (not including exhibits to the
documents that have been incorporated herein by reference unless such exhibits
are specifically incorporated by reference in the documents which this
Prospectus incorporates). Requests should be directed to James W. Whalen,
Executive Vice President, Chief Financial Officer and Treasurer, Tejas Gas
Corporation, 1301 McKinney, Suite 700, Houston, Texas 77010 (telephone: (713)
658-0509).
4
THE COMPANY
GENERAL
The Company is a major intrastate natural gas pipeline company engaged in
the business of purchasing, gathering, processing, treating, transporting and
marketing natural gas. The Company is one of the largest independent intrastate
gatherers and transporters of natural gas volumes through company-owned
pipelines in the United States. The Company's operations are situated primarily
in the major gas-producing areas in Texas, Louisiana, the Texas and Louisiana
Gulf Coast regions and Oklahoma, with additional facilities located in West
Virginia. The Company is a holding company that conducts operations through four
principal subsidiaries, Tejas Gas Corp. ("Tejas Gas"), Acadian Gas Corporation
("Acadian"), Tejas Natural Gas Company ("TNGC") and, since June 1996, Transok,
Inc. ("Transok"). See " -- Transok Acquisition." In addition, the Company offers
natural gas marketing throughout North America as well as other related energy
and financial services through Coral Energy Resources, L.P. ("Coral"), a joint
venture partnership with Shell Oil Company ("Shell"). Unless the context
indicates otherwise, references to the "Company" are to Tejas Gas Corporation
and its subsidiaries.
As of June 6, 1996, following the Transok acquisition, the Company owned
and/or operated approximately 12,500 miles of intrastate natural gas pipeline
systems, including systems held in nine joint ventures. The Company's pipeline
systems consist of main lines, lateral lines and gathering lines and have
approximately 290 interconnections with both interstate and intrastate pipelines
in Texas, Oklahoma and Louisiana. Through these interconnections, the Company
can access natural gas supplies from sources not directly connected to its
pipelines and deliver natural gas to those customers who are outside of the
Company's geographical area of pipeline operations. Excluding Transok, the
Company's natural gas sales, transportation and processing activities recorded
an average total throughput of 3.2 billion cubic feet ("BCF") of natural gas per
day ("BCF/d") in 1995 and 3.5 BCF/d in the first quarter of 1996. Transok's
average total throughput was 1.8 BCF/d in 1995 and 1.7 BCF/d in the first
quarter of 1996. The Company also owns underground natural gas storage
facilities in Texas and Oklahoma and leases an underground natural gas storage
facility in Louisiana. These facilities have a combined storage capacity of 155
BCF and a withdrawal capacity of 1.1 BCF/d. In addition, the Company operates
nine owned and seven leased natural gas processing plants, which have a combined
processing capacity of approximately 725 million cubic feet ("MMCF") of natural
gas per day ("MMCF/d") and approximately 50,000 barrels of natural gas liquids
("NGLs") per day.
The Company and Shell formed Coral in order to better serve their customers
and position their consolidated natural gas marketing activities for further
growth. Coral currently ranks among the top five natural gas marketers in the
United States. Coral commenced operations with natural gas sales of 3.7 BCF/d,
1.5 BCF/d of which was natural gas purchased on the Company's systems. In
addition to volumes provided by the Company, Coral markets substantially all of
Shell's U.S. natural gas production. As of June 30, 1996, sales by Coral had
grown to approximately 4.5 BCF/d. Effective July 1, 1996, sales of natural gas
increased to approximately 5.0 BCF/d as a result of Coral's acquisition of Catex
Vitol, Inc., which markets natural gas primarily to industrial end users. Coral
is obligated to purchase all natural gas tendered by its partners at market
index prices, subject to customary notice requirements. In the future Coral will
purchase Transok volumes on comparable terms as other gas tendered by the
Company. In addition, Coral has received regulatory approval to market
electricity in wholesale markets and has begun increasing staff and taking other
administrative measures in anticipation of commencing such activities in the
third quarter of 1996.
The Company, a Delaware corporation, was organized on September 16, 1988 by
Hamilton Oil Corporation ("HOC") for the purpose of holding the capital stock of
Tejas Gas, which had been an indirect, wholly owned subsidiary of HOC or its
predecessor since 1979. Tejas Gas has been engaged in natural gas pipeline
operations and related activities since its inception in 1967. On July 1, 1988,
Tejas Gas purchased all of the outstanding capital stock of Gulf Energy Holding,
Inc., another company engaged through subsidiaries in natural gas pipeline
operations, principally in Texas. On December 27, 1988, the Company's capital
stock was distributed to the stockholders of HOC in the form of a spin-off. On
5
December 28, 1990, the Company purchased through Acadian, a wholly owned
subsidiary, all of the capital stock of several corporations comprising the
Acadian Gas Group, a group of companies engaged in natural gas pipeline
operations, principally in Louisiana. On September 15, 1993, the Company,
through a newly formed wholly owned subsidiary, TNGC, acquired from Exxon
substantially all of Exxon's Texas and Louisiana intrastate natural gas pipeline
operations as well as a significant natural gas storage facility. In January
1995, the Company transferred the capital stock of Tejas Gas, Acadian and TNGC
to its wholly owned subsidiary, Tejas-Acadian Holding Company ("TAHC"), in
connection with the amendment and consolidation of the Company's credit
facilities. The Company, through subsidiaries of Tejas Alliance Holding Company,
holds a one-third interest in Coral, a natural gas and energy marketing joint
venture. In June 1996, the Company, through a subsidiary of Tejas Transok
Holding Company, acquired Transok, an intrastate natural gas pipeline operator
and gas processor with assets located primarily in Oklahoma, from Central and
South West Corporation ("CSW").
The executive offices of the Company are located at 1301 McKinney, Suite
700, Houston, Texas 77010, and its telephone number is (713) 658-0509.
TRANSOK ACQUISITION
On June 6, 1996, the Company acquired Transok from CSW through a merger of
a recently formed wholly owned subsidiary of the Company 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 the Company.
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
BCF/d of pipeline capacity; (ii) eight operating processing plants, of which
seven are leased to Transok, with total processing capacity of 564 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. NGL production averaged 25,100 barrels per day during the first
quarter of 1996 and 22,400 barrels per day in 1995.
The total purchase price received by CSW at closing was $690 million in
cash, of which $565 million was paid by the Company 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. The Company's
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 Lessor is
leasing the Transok Plants to the Company for a five-year term with annual lease
payments of approximately $9 million. The lease agreement may be extended by the
Company, with approval by the Lessor, and provides the Company 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 Company 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 Company 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.
6
RISK FACTORS
IN EVALUATING THE COMPANY AND ITS BUSINESS, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO THE OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN.
INDEBTEDNESS, LEVERAGE AND OTHER COMMITMENTS
In connection with the Transok acquisition, the Company borrowed (i) $178
million under an existing credit facility of a wholly owned Tejas subsidiary and
(ii) $387 million, net of a voluntary prepayment, under a new $425 million
credit facility. Transok had outstanding at the time of the acquisition $200
million principal amount of medium-term notes, which remained in place following
its merger with a Tejas subsidiary. As of June 6, 1996, the Company's total debt
was approximately $1.0 billion, including debt incurred or assumed in connection
with the Transok acquisition. In addition, immediately prior to the acquisition,
an unrelated third party paid $125 million to Transok for certain gas processing
assets and is leasing these assets to the Company as described above for an
annual lease payment of approximately $9 million. See "The Company -- Transok
Acquisition." The Company is also committed to (i) maintain certain natural gas
volumes in one of its storage facilities, for which it pays a third party
supplier an estimated annual reservation fee of approximately $1.2 million, (ii)
make preferred distributions to a third party of approximately $9 million
annually through 2003 in connection with such party's capital investment in a
subsidiary of the Company and (iii) make annual rent payments of approximately
$8.4 million through September 1998 pursuant to a lease of certain pipeline
facilities. In connection with the pipeline lease, the Company has the option to
purchase the facilities for approximately $144.5 million at the end of the term
or pay a termination fee of approximately $122.8 million, subject to certain
reductions. This indebtedness and these other obligations create a risk that the
Company may be unable to service its indebtedness and pay dividends on its 5
1/4% Preferred Stock and 9.96% Preferred Stock. While the Company does not
anticipate that it will be unable to service such indebtedness or pay such
dividends, there can be no assurance in that regard.
RELIANCE ON FUNDS FROM OPERATING SUBSIDIARIES; RESTRICTIONS ON DISTRIBUTIONS;
DIVIDENDS
The ability of the Company, as a holding company, to pay dividends on the
Common Stock will be dependent upon the payment of dividends or interest by, or
the availability of other funds from, its subsidiaries. Effective January 12,
1995, the Company amended its credit facilities to roll-up a majority of the
existing bank debt of its three principal operating subsidiaries into a single,
$455.0 million, eight-year revolving credit facility at a newly-formed
subsidiary, TAHC. Effective June 6, 1996, the Company established a new $425.0
million, revolving credit facility that matures December 31, 1997 in connection
with the Transok acquisition. The TAHC and Transok credit facilities and the
other subsidiary credit facilities restrict the amount of distributions that may
be made by the subsidiaries to the Company.
The Company does not currently intend to pay regular cash dividends on the
Common Stock. This policy will be reviewed by the Board of Directors of the
Company from time to time in light of, among other things, the Company's
earnings and financial position, capital requirements and limitations imposed by
its bank loan agreements. No dividend or distribution may be declared or paid
on, and no payment may be made on account of the purchase, redemption or
retirement of, the Common Stock unless and until all cumulative dividends on the
5 1/4% Preferred Stock and the 9.96% Preferred Stock have been declared and
either paid or funds therefor set aside for payment.
RISK OF INABILITY TO INTEGRATE TRANSOK OPERATIONS
Although the Company has previously integrated relatively large
acquisitions and expects to integrate the operations of Transok with its
existing operations, there can be no assurance that its efforts to do so will be
successful. The failure to successfully integrate Transok could adversely affect
the Company's operating results.
7
SENSITIVITY TO SHORT-TERM SUPPLY AND SALES CONTRACTS
Currently, the Company purchases, and Coral, a marketing joint venture
between the Company and Shell, resells natural gas primarily under short-term
contracts, which are subject to renegotiation of prices and volumes, usually on
a monthly basis. Although this affords the Company greater flexibility in
responding to changing market conditions, supplies and markets under such
contracts are not assured. In addition, the profitability of short-term sales is
strongly influenced by the balance of supply and demand in the marketplace. For
example, excess supplies in relation to demand may cause significant competition
for available markets, which, in turn, may result in depressed profit margins
for short-term sales.
ABILITY OF PRINCIPAL STOCKHOLDERS TO EXERCISE CONTROL
As of May 31, 1996, the amount of the Common Stock controlled by members of
the Board of Directors of the Company or their affiliates was approximately 25%.
Such stockholders, if they vote together, may be able to materially influence
the outcome of all matters submitted to a vote of the Company's stockholders.
POTENTIAL LIABILITY UNDER TAKE-OR-PAY CONTRACTS; LITIGATION
The Company is a party to certain natural gas purchase contracts containing
take-or-pay provisions, which require the Company to take a minimum amount of
natural gas or pay for such minimum quantities if not taken. The Company is a
defendant in a take-or-pay lawsuit, THE LONG TRUSTS V. TEJAS GAS CORP. ET. AL.,
in which the plaintiffs in their pleadings have alleged damages in excess of $36
million (including prejudgment interest) against the Company. In connection with
depositions taken for the suit, certain expert witnesses retained by the Long
Trusts have presented damage models purporting to show approximately $60 million
in damages for take-or-pay claims and approximately $70 million in damages for
claims that plaintiffs were prevented by actions of the Company from producing
gas ratably with other producers in a common reservoir. Management disputes the
Long Trusts' claims and believes that the Long Trusts' damage models are
seriously flawed. Plaintiffs also have added a claim for exemplary damages
treble the amount, if any, found by the court for interference and conspiracy
claims. Plaintiffs assert that the Company should be jointly liable with its
co-defendant for damages asserted against such co-defendant. In addition, the
Company is a defendant in various lawsuits that have arisen in the ordinary
course of business. Although the Company has not obtained any formal opinion,
based on discussions with outside counsel and an internal examination of such
lawsuits, management believes that it has adequate defenses or recourse to third
parties relating to such lawsuits and does not believe these matters will have a
material adverse effect on the Company's financial condition.
COMPETITION
The Company has numerous competitors in its geographic area of operations,
many of which are larger pipeline companies with more extensive pipeline
networks and greater capital resources. Accordingly, for the Company to remain
competitive it must continually meet or exceed such competitors' ability to
offer reliable services and competitive pricing. The Company also faces varying
degrees of competition from the use of energy sources, such as electricity, coal
and oil. In addition, excess industry wide supplies in relation to demand will
cause increased competition for available markets.
SEASONAL AND WEATHER VARIATIONS RESULT IN FLUCTUATIONS IN THROUGHPUT, REVENUES
AND EARNINGS
The Company's natural gas sales are affected by seasonal changes in demand
for natural gas because of weather. The Company has its greatest demands during
the winter heating season and the summer air-conditioning season so that greater
volumes, revenues and earnings from operations are usually experienced during
those periods of the year. Variations in extremes of weather from year to year
in the past resulted in significant variations in the Company's natural gas
throughput, revenues and earnings for those years.
8
NO ASSURANCE OF CONTINUED EXPANSION OPPORTUNITIES OR CONTINUED AVAILABILITY OF
FINANCING
In order for the Company to expand its business by acquiring additional
gathering and pipeline systems through either the purchase or construction of
new facilities, the Company will be required to identify expansion opportunities
and to finance such activities, using either equity or debt financing, or a
combination thereof. No assurance can be given that appropriate opportunities
for expansion at levels of profitability comparable to existing operations can
be obtained or that financing on terms acceptable to the Company can be
obtained.
RISK OF ADDITIONAL COSTS AND LIABILITIES RELATED TO ENVIRONMENTAL AND SAFETY
REGULATIONS
AND CLAIMS
The pipeline operations of the Company are subject to various federal,
state and local environmental, safety, health and other laws, which can increase
the cost of planning, designing, installing and operating such facilities. There
can be no assurance that costs and liabilities relating to compliance will not
be incurred in the future. Moreover, it is possible that other developments,
such as increasingly strict environmental and safety laws, regulations and
enforcement policies thereunder, and claims for damages to property or persons
resulting from the Company's operations, could result in additional costs to and
liabilities of the Company.
USE OF PROCEEDS
Except as otherwise described in any Prospectus Supplement or any Pricing
Supplement, the net proceeds from the sale of Securities will be used for
general corporate purposes, which may include refinancings of indebtedness,
working capital, capital expenditures, acquisitions and repurchases and
redemptions of Securities.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges... 3.17 2.55 2.49 2.37 2.71 1.83 1.58
</TABLE>
For purposes of calculating the ratios of earnings to fixed charges
"earnings" represent income from continuing operations before interest charges
and before federal and state income taxes. "Fixed charges" represent the sum of
interest charges (whether expensed or capitalized) and the portion of rental
expense representative of an interest factor.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate ("Offered Debt Securities"). The particular terms of the Offered Debt
Securities and the extent to which such general provisions may apply will be
described in a Prospectus Supplement relating to such Offered Debt Securities.
The Debt Securities will be general unsecured obligations of the Company
and will be issued under an Indenture (the "Indenture"), between the Company and
Texas Commerce Bank, N.A., as trustee (the "Trustee"). The statements under this
caption relating to the Debt Securities and the Indenture are summaries only and
do not purport to be complete. Such summaries make use of terms defined in the
Indenture. Wherever such terms are used herein or particular provisions of the
Indenture are referred to, such terms or provisions, as the case may be, are
incorporated by reference as part of the statements made herein, and such
statements are qualified in their entirety by such reference. Certain defined
terms in the Indenture are capitalized herein. The italicized parenthetical
references below refer to the section numbers in the Indenture, unless otherwise
indicated.
9
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities which can be issued thereunder and provides that Debt Securities may
be issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by the Company prior to issuance. The
Indenture does not limit the amount of other unsecured indebtedness or
securities which may be issued by the Company.
Unless otherwise indicated in a Prospectus Supplement, the Debt Securities
will not benefit from any covenant or other provision that would afford Holders
of such Debt Securities special protection in the event of a highly leveraged
transaction involving the Company.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities, which will be issued in registered form: (i) the
title and aggregate principal amount of the Offered Debt Securities; (ii) the
date or dates on which the Offered Debt Securities will mature; (iii) the rate
or rates (which may be fixed or variable) per annum, if any, at which the
Offered Debt Securities will bear interest or the method of determining such
rate or rates; (iv) the date or dates from which such interest, if any, will
accrue and the date or dates at which such interest, if any, will be payable;
(v) the terms for redemption or early payment, if any, including any mandatory
or optional sinking fund or analogous provision; (vi) the terms for conversion
or exchange, if any, of the Offered Debt Securities; (vii) whether such Offered
Debt Securities will be issued in the form of one or more global securities and
whether such global securities are to be issuable in temporary global form or
permanent global form; (viii) if other than U.S. dollars, the currency,
currencies or currency unit or units in which such Offered Debt Securities will
be denominated and in which the principal of, and premium and interest, if any,
on, such Offered Debt Securities will be payable; (ix) whether, and the terms
and conditions on which, the Company or a Holder may elect that, or the other
circumstances under which, payment of principal of, or premium or interest, if
any, on, such Offered Debt Securities is to be made in a currency or currencies
or currency unit or units other than that in which such Offered Debt Securities
are denominated; and (x) any other specific terms of the Offered Debt
Securities. Reference is also made to the Prospectus Supplement for information
with respect to any additional covenants that may be included in the terms of
the Offered Debt Securities. (SECTION 301)
No service charge will be made for any registration of transfer or exchange
of the Debt Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
(SECTION 305)
To the extent the Company conducts its operations through Subsidiaries, the
Holders of Debt Securities will have a junior position to any creditors of the
Company's Subsidiaries.
Offered Debt Securities may be sold at a discount (which may be
substantial) below their stated principal amount bearing no interest or interest
at a rate which at the time of issuance is below market rates. Any material
United States federal income tax consequences and other special considerations
applicable thereto will be described in the Prospectus Supplement relating to
any such Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of, or premium or interest, if any, on any of
the Offered Debt Securities is payable in any foreign currency or currency unit,
the restrictions, elections, tax consequences, specific terms and other
information with respect to such Offered Debt Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT
Unless otherwise provided with respect to any series of Debt Securities,
the following are Events of Default under the Indenture with respect to the Debt
Securities of such series issued under such Indenture: (a) failure to pay
principal of (or premium, if any, on) any Debt Security of such series when due;
(b) failure to pay any interest on any Debt Security of such series when due,
continued for 30 days; (c) failure to deposit any mandatory sinking fund
payment, when due, in respect of the Debt Securities of such series,
10
continued for 30 days; (d) failure to perform any other covenant of the Company
in the Indenture (other than a covenant included in the Indenture for the
benefit of a series of Debt Securities other than such series), continued for 90
days after written notice as provided in the Indenture; (e) certain events of
bankruptcy, insolvency or reorganization; and (f) any other Event of Default as
may be specified with respect to Debt Securities of such series. (SECTION 501)
If an Event of Default with respect to any outstanding series of Debt Securities
occurs and is continuing, either the Trustee or the Holders of at least 25% in
principal amount of the outstanding Debt Securities of such series (in the case
of an Event of Default described in clause (a), (b), (c) or (f) above) or at
least 25% in principal amount of all outstanding Debt Securities under the
Indenture (in the case of other Events of Default) may declare the principal
amount of all the Debt Securities of the applicable series (or of all
outstanding Debt Securities under the Indenture, as the case may be) to be due
and payable immediately. At any time after a declaration of acceleration has
been made, but before a judgment has been obtained, the Holders of a majority in
principal amount of the outstanding Debt Securities of such series (or of all
outstanding Debt Securities under the applicable Indenture, as the case may be)
may, under certain circumstances, rescind and annul such acceleration. (SECTION
502) Depending on the terms of other indebtedness of the Company outstanding
from time to time, an Event of Default under the Indenture may give rise to
cross defaults on such other indebtedness of the Company.
The Indenture provides that the Trustee will within 90 days after the
occurrence of a default in respect of any series of Debt Securities, give to the
Holders of the Debt Securities of such series notice of all uncured and unwaived
defaults known to it, provided, however, that, except in the case of a default
in the payment of the principal of (or premium, if any) or any interest on, or
any sinking fund installment with respect to, any Debt Securities of such
series, the Trustee will be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of the
Holders of the Debt Securities of such series; and provided, further, that such
notice shall not be given until at least 30 days after the occurrence of a
default in the performance, or breach, of any covenant or warranty of the
Company under such Indenture other than for the payment of the principal of (or
premium, if any) or any interest on, or any sinking fund installment with
respect to, any Debt Securities of such series. For the purpose of this
provision, "default" with respect to Debt Securities of any series means any
event which is, or after notice or lapse of time, or both, would become, an
Event of Default with respect to the Debt Securities of such Series. (SECTION
602)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the Indenture) have the right, subject to certain limitations, to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee with
respect to the Debt Securities of such series (or of all outstanding Debt
Securities under the Indenture). (SECTION 512) The Indenture provides that in
case an Event of Default shall occur and be continuing, the Trustee shall
exercise such of its rights and powers under the applicable Indenture and use
the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(SECTION 601)Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any of the Holders of the Debt Securities unless they shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request.
(SECTION 603)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the Indenture) may on behalf of the Holders of all Debt Securities of such
series (or of all outstanding Debt Securities under the Indenture) waive any
past default under the Indenture, except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security or in respect
of a provision which under the applicable Indenture cannot be modified or
amended without the consent of the Holder of each outstanding Debt Security
affected. (SECTION 513) The Holders of a majority in principal amount of the
outstanding Debt Securities affected thereby may on behalf of the Holders of all
such Debt Securities waive compliance by the Company with certain restrictive
provisions of the Indenture. (SECTION 1006)
11
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under each
Indenture and as to any default in such performance. (SECTION 1005)
MODIFICATION
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the outstanding Debt Securities under the Indenture affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each outstanding Debt Security affected thereby, (a)
change the stated maturity date of the principal of, or any installment of
interest on, any Debt Security, (b) reduce the principal amount of, or the
premium (if any) or interest on, any Debt Security, (c) change the place or
currency, currencies, or currency unit or units of payment of principal of, or
premium (if any) or interest on, any Debt Security, (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security or (e) reduce the percentage in principal amount of outstanding Debt
Securities the consent of the Holders of which is required for modification or
amendment of the Indenture or for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults. (SECTION 902)
The Indenture provides that the Company and the Trustee may, without the
consent of any Holders of Debt Securities, enter into supplemental indentures
for the purposes, among other things, of adding to the Company's covenants,
adding additional Events of Default, establishing the form or terms of Debt
Securities or curing ambiguities or inconsistencies in the Indenture, provided
that such action to cure ambiguities or inconsistencies shall not adversely
affect the interests of the Holders of the Debt Securities in any material
respect.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of outstanding Debt
Securities, may consolidate with or merge into, or convey, transfer or lease its
assets substantially as an entirety to, any Person, provided that (i) the Person
formed by such consolidation or into which the Company is merged or which
acquires or leases the assets of the Company substantially as an entirety is a
Person which assumes by supplemental indenture the Company's obligations on the
Debt Securities and under the Indenture, (ii) after giving effect to the
transaction, no Event of Default and no event which, after notice or lapse of
time or both, would become an Event of Default shall have occurred and be
continuing, and (iii) certain other conditions are met. Upon compliance with
these provisions by a successor Person, the Company will (except in the case of
a lease) be relieved of its obligations under the Indenture and the Debt
Securities. (ARTICLE EIGHT)
DISCHARGE AND DEFEASANCE
The Company may terminate its obligations under the Indenture, other than
its obligation to pay the principal of (and premium, if any) and interest on the
Debt Securities of any series and certain other obligations, if it (i)
irrevocably deposits or causes to be irrevocably deposited with the Trustee as
trust funds money or U.S. Government Obligations maturing as to principal and
interest sufficient to pay the principal of, any interest on, and any mandatory
sinking funds in respect of, all outstanding Debt Securities of such series on
the stated maturity of such payments or on any redemption date and (ii) complies
with any additional conditions specified to be applicable with respect to the
covenant defeasance of Debt Securities of such series. (SECTION 401)
The terms of any series of Debt Securities may also provide for legal
defeasance pursuant to each Indenture. In such case, if the Company (i)
irrevocably deposits or causes to be irrevocably deposited money or U.S.
Government Obligations as described above, (ii) makes a request to the Trustee
to be discharged from its obligations on the Debt Securities of such series and
(iii) complies with any additional conditions specified to be applicable with
respect to legal defeasance of Debt Securities of such series, then the Company
shall be deemed to have paid and discharged the entire indebtedness on all the
outstanding Debt Securities of such series and the obligations of the Company
under the Indenture and the Debt
12
Securities of such series to pay the principal of (and premium, if any) and
interest on the Debt Securities of such series shall cease, terminate and be
completely discharged, and the Holders thereof shall thereafter be entitled only
to payment out of the money or U.S. Government Obligations deposited with the
Trustee as aforesaid, unless the Company's obligations are revived and
reinstated because the Trustee is unable to apply such trust fund by reason of
any legal proceeding, order or judgment. (SECTIONS 403 AND 404)
"U.S. Government Obligations" is defined in the Indenture as direct
noncallable obligations of, or noncallable obligations the payment of principal
of and interest on which is guaranteed by, the United States of America, or to
the payment of which obligations or guarantees the full faith and credit of the
United States of America is pledged, or beneficial interests in a trust the
corpus of which consists exclusively of money or such obligations or a
combination thereof. (SECTION 101)
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities are issuable in definitive form as Registered Debt
Securities. (SECTION 301)Reference is made to the Prospectus Supplement for the
terms relating to the form, exchange, registration and transfer of Debt
Securities issuable in temporary or permanent global forms.
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations.
Registered Debt Securities may be presented for registration of transfer
(with the form of transfer endorsed thereon duly executed), at the office of the
Security Registrar or at the office of any transfer agent designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the Person making the request. The Company
has appointed the Trustee as Security Registrar. (SECTION 305) If a Prospectus
Supplement refers to any transfer agents (in addition to the Security Registrar)
initially designated by the Company with respect to any series of Debt
Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
solely as Registered Debt Securities, the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities. (SECTION 1002)
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Registered Debt Securities of
any series during a period beginning at the opening of business 15 days prior to
the selection of Debt Securities of that series for redemption and ending on the
close of business on the day of mailing of the relevant notice of redemption; or
(ii) register the transfer of or exchange any Registered Debt Security, or
portion thereof, called for redemption, except the unredeemed portion of any
Registered Debt Security being redeemed in part. (SECTION 305)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Debt Securities will
be made in the designated currency or currency unit at the office of such Paying
Agent or Paying Agents as the Company may designate from time to time, except
that, at the option of the Company, payment of any interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Registered Debt
Securities will be made to the Person in whose name such Registered Debt
Security is registered at the close of business on the Regular Record Date for
such interest. (SECTION 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee in Houston, Texas will be designated as a
Paying Agent for the Company for payments with respect to Debt Securities which
are issuable solely as Registered Debt Securities. The Company may at any time
13
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that the Company will be required to maintain a Paying Agent in each
Place of Payment for such series. (SECTION 1002)
All moneys paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed at the end of three years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Company, and the Holder of such Debt Security or any coupon will
thereafter look only to the Company for payment thereof. (SECTION 1003)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued, in whole or in part, in the
form of one or more global Debt Securities that would be deposited with a
depositary or its nominee identified in the applicable Prospectus Supplement.
The specific terms of any depositary arrangement with respect to any portion of
a series of Debt Securities and the rights of, and limitations on, owners of
beneficial interests in any such global Debt Security representing all or a
portion of a series of Debt Securities will be described in the applicable
Prospectus Supplement. (SECTION 204)
MEETINGS
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series. (SECTION 1301) A meeting may be called at any time
by the Trustee, and also, upon request, by the Company or the Holders of at
least 10% in principal amount of the Outstanding Debt Securities of such series,
in any such case upon notice given as described under "Notices" below. (SECTION
1302) Except for any consent that must be given by the Holder of each
Outstanding Debt Security affected thereby, as described under "Modification"
above, any resolution presented at a meeting or adjourned meeting at which a
quorum is present may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Debt Securities of that series;
provided, however, that, except for any consent that must be given by the Holder
of each Outstanding Debt Security affected thereby, as described under
"Modification" above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority in principal amount of the Outstanding Debt Securities of a
series, may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Debt Securities of
that series. Subject to the proviso set forth above, any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any series duly
held in accordance with the Indenture will be binding on all Holders of Debt
Securities of that series and any related coupons. The quorum at any meeting
called to adopt a resolution, and at any reconvened meeting, will be Persons
holding or representing a majority in principal amount of the Outstanding Debt
Securities of a series. (SECTION 1304)
NOTICES
Notices to Holders of Registered Debt Securities will be given by mail to
the addresses of such Holders as they appear in the Security Register. (SECTION
107)
THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, as
a creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. (SECTION 613) The Trustee is permitted to engage in other
transactions, except that, if it acquires any conflicting interest (as defined),
it must eliminate such conflict or resign. (SECTION 608)
The Trustee has made loans to the Company and its subsidiaries and
affiliates from time to time in the ordinary course of business and at
prevailing interest rates under agreements with commercial bank groups.
14
In addition, the Trustee may from time to time serve as a depositary of funds
of, and perform other services for, the Company.
DESCRIPTION OF CAPITAL STOCK
The Certificate of Incorporation of the Company, as amended (the
"Charter"), provides that the aggregate number of shares of all classes of stock
that the Company has authority to issue is 36,000,000 shares, divided into two
classes consisting of 30,000,000 shares of Common Stock and 6,000,000 shares of
Preferred Stock. Additional shares of authorized capital stock may be issued
without stockholder approval. The following description of the capital stock of
the Company is intended as a summary only and is qualified in its entirety by
reference to the Charter and the By-Laws of the Company, the Certificate of
Designation for the Company's 9.96% Preferred Stock, the Certificate of
Designation for the Company's 5 1/4% Preferred Stock and the Certificate of
Designation for the Company's Series C Junior Participating Preferred Stock.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share on all
matters on which stockholders generally are entitled to vote, including
elections of directors, and, except as otherwise required by law or by the terms
of any series of preferred stock of the Company, the holders of Common Stock
exclusively possess all voting power. The Charter does not provide for
cumulative voting for the election of directors; therefore, the holders of a
majority of the voting power of the total number of outstanding shares of Common
Stock are able to elect the entire Board of Directors of the Company.
Subject to any preferential rights of any outstanding series of preferred
stock of the Company designated from time to time by the Board of Directors or,
to the extent permitted by law, a committee of the Board of Directors, the
holders of Common Stock are entitled to such dividends as may be declared from
time to time by the Board of Directors from funds legally available therefor
and, upon liquidation, dissolution or winding up, will be entitled to receive
pro rata all assets of the Company available for distribution to such holders.
No holder of Common Stock has any preemptive right to subscribe to any kind or
class of securities of the Company. As of May 31, 1996, 17,408,651 shares of
Common Stock were issued and outstanding.
PREFERRED STOCK
The Board of Directors is empowered without stockholder approval to issue
up to 6,000,000 shares of preferred stock of the Company, from time to time, in
series and with respect to each series to determine (1) the number of shares
constituting such series, (2) the dividend rate on the shares of each series,
whether such dividends shall be cumulative and the relation of such dividends
payable on any other class or series of stock, (3) whether the shares of each
series shall be redeemable and the terms thereof, (4) whether the shares shall
be convertible into Common Stock and the terms thereof, (5) the amount per share
payable on each series, or other rights of holders of such shares on liquidation
or dissolution of the Company, (6) the voting rights, if any, of shares of each
series and (7) generally, any other rights and privileges consistent with the
Charter for each series and any qualifications, limitations or restrictions. As
of May 31, 1996, the Company had outstanding (a) 200,000 shares of 9.96%
Preferred Stock represented by 2,000,000 issued and outstanding 9.96% Depositary
Shares and (b) 260,000 shares of 5 1/4% Preferred Stock represented by 1,300,000
issued and outstanding 5 1/4% Depositary Shares. In addition, the Board of
Directors has authorized the issuance of up to 300,000 shares of Series C Junior
Participating Preferred Stock pursuant to a stockholder rights plan, none of
which are outstanding. See "Certain Anti-takeover Provisions -- Stockholder
Rights Plan."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Charter and By-laws of the Company contain provisions which may have
the effect of delaying, deferring or preventing a change in control. The
following description of certain provisions of the Charter
15
and By-laws is intended as a summary only and is qualified in its entirety by
reference to the Charter and the By-laws of the Company.
NUMBER OF DIRECTORS, REMOVAL OF DIRECTORS AND FILLING VACANCIES ON THE BOARD OF
DIRECTORS
The Company's By-laws provide that the number of directors shall be fixed
by the Board of Directors. The Board of Directors, and not the stockholders, has
the authority to determine the number of directors and could prevent any
stockholder from obtaining majority representation by enlarging the Board of
Directors and filling the new directorships with its own nominees. Moreover, the
Charter provides for removal of directors by the stockholders only for cause and
that the affirmative vote of the holders of at least 75% of the voting power of
the outstanding securities entitled to vote generally for the election of
directors (the "Voting Shares") would be required to remove a director from
office. The Charter and the By-laws provide that a vacancy on the Board of
Directors occurring during the course of the year, including a vacancy created
by an increase in the authorized number of directors, may be filled by the
remaining directors. Subject to applicable law and the rights of holders of any
series of preferred stock, the Charter and the By-laws do not provide for the
filling of vacancies by the stockholders.
CLASSIFIED BOARD OF DIRECTORS
The Board of Directors of the Company is divided into three classes of
directors serving staggered terms. One class of directors is elected at each
annual meeting of stockholders for a three-year term.
ANNUAL AND SPECIAL MEETINGS
Under the Charter and By-laws, subject to the rights of holders of any
series of preferred stock, stockholders are not permitted to call an annual or
special meeting of stockholders. Only the Board of Directors, the Chairman, the
President or Chief Executive Officer will be able to call an annual or special
meeting. Generally, stockholder action may be taken only at an annual or special
meeting of stockholders and may not be taken by written consent. Moreover, the
business to be conducted at any special meeting of stockholders is limited to
business brought before the meeting by the Board of Directors unless a
stockholder complies with the requirements for advance notification.
RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS
The Charter and Delaware Law impose various conditions on the consummation
of certain transactions between the Company or its stockholders and a
stockholder who acquires beneficial ownership of a specified number of shares.
The Charter imposes conditions on transactions involving "Interested
Stockholders." Interested Stockholders include, generally, holders of more than
10% of the Company's outstanding voting stock who acquired more than 5% of the
Company's outstanding voting stock within the two previous years. Excepted from
the definition, however, are stockholders who owned more than 600,000 shares of
voting stock on any day on which the Company was a majority owned subsidiary of
HOC, stockholders who owned more than 5% of the outstanding voting stock on the
first day on which the Company was not a majority owned subsidiary of HOC, and
any stockholder who purchased 5% or more of the outstanding voting stock with
the approval of the Board of Directors within 15 days of such date. Because the
affirmative vote of at least 75% of the total votes entitled to be cast would be
required to approve business combinations (mergers, consolidations and certain
other transactions) involving Interested Stockholders, holders of a minority of
the number of shares of Common Stock may prevent the consummation of a
transaction favored by holders of a majority of the number of shares of Common
Stock. In addition, the failure of a sufficient number of stockholders to vote
could also result in the defeat of a proposed transaction.
VOTE REQUIRED TO AMEND OR REPEAL CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION AND THE BY-LAWS
Unless declared advisable by the affirmative vote of two-thirds of the
total number of directors which the Company would have if there were no
vacancies on the Board of Directors and, if there is an Interested Stockholder,
a majority of the Continuing Directors, the affirmative vote of the holders of
(i) at least 75% of
16
the then outstanding Voting Shares and (ii) if there is an Interested
Stockholder, at least a majority of the voting power of the then outstanding
Voting Shares not beneficially owned by such person, will be required to amend,
repeal or adopt any provision inconsistent with the provisions of the Charter or
By-Laws discussed above. Continuing Directors include, generally, members of the
Board of Directors who are not affiliated with or were not nominated by an
Interested Stockholder and who were members of the Board of Directors prior to
the time such person became an Interested Stockholder.
REQUIREMENT FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS OR PROPOSALS
The Charter and By-Laws provide that advance notice of stockholder
nominations for the election of directors must be received by the Secretary of
the Company. A notice regarding any nomination must contain certain information
including information concerning the nominating stockholder and any information
required to be included in a proxy statement had the nominee been nominated by
the Board of Directors. In addition, each stockholder giving such notice must
provide all other information reasonably requested by the Company.
EVALUATION OF CERTAIN TRANSACTIONS
The Charter provides that a director, when evaluating any tender or
exchange offer or business combination, may, in addition to considering the
effects of any action on the Company's stockholders, consider any other factors
the director considers pertinent, including: applicable law; the amount and type
of consideration; alternative transactions; the business and financial condition
of the acquiring person; the competence and integrity of the acquiring person;
and the social, legal and economic effects, of the proposed transaction on
employees, suppliers and customers of the Company and on the communities in
which the Company conducts its business.
STOCKHOLDER RIGHTS PLAN
On November 11, 1994, the Company adopted a stockholder rights plan and
declared a dividend of one right (a "Right") for each share of Common Stock
outstanding as of the close of business on November 22, 1994. The Rights, which
under certain circumstances entitle their holders to purchase one one-hundredth
of a share of Series C Junior Participating Preferred Stock, par value $1.00 per
share, for an exercise price of $200, will expire on November 11, 2004.
The Rights are not exercisable until the earlier to occur of (i) 10 days
following the first date of public announcement that a person or group of
affiliated persons (an "Acquiring Person") has acquired beneficial ownership of
15% or more of the outstanding shares of Common Stock or such earlier date as a
majority of the Board of Directors shall become aware of the existence of an
Acquiring Person (the "Stock Acquisition Date") or (ii) 10 business days (or
such later date as may be determined by action of the Board of Directors prior
to such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement of, or announcement of an intention to make,
a tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of Common Stock.
In the event that any person becomes an Acquiring Person, each holder of a
Right, other than Rights beneficially owned by the Acquiring Person (which will
thereupon become void), will thereafter have the right to receive upon exercise
of a Right at the then current exercise price of the Right, that number of
shares of Common Stock having a market value of two times the exercise price of
the Right. In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
each holder of a Right other than Rights beneficially owned by an Acquiring
Person (which will have become void) will thereafter have the right to receive,
upon the exercise of the Right at the then current exercise price of the Right,
that number of shares of common stock of the person with whom the Company has
engaged in the foregoing transaction which number of shares at the time of such
transaction will have a market value of two times the exercise price of the
Right.
17
At any time until 10 days following the Stock Acquisition Date (subject to
extension by the Board of Directors), the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right.
PLAN OF DISTRIBUTION
The Company may sell the Securities in and/or outside the United States:
(i) through underwriters or dealers; (ii) directly to a limited number of
purchasers or to a single purchaser; or (iii) through agents. The Prospectus
Supplement with respect to the Securities offered thereby (the "Offered
Securities") will set forth the terms of the offering of the Offered Securities,
including the name or names of any underwriters or agents, the purchase price of
the Offered Securities and the proceeds to the Company from such sale, any
delayed delivery arrangements, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Securities to be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters to
purchase the Offered Securities will be subject to conditions precedent and the
underwriters will be obligated to purchase all the Offered Securities if any are
purchased.
If dealers are utilized in the sale of Offered Securities in respect of
which this Prospectus is delivered, the Company will sell such Offered
Securities to dealers as principals. The dealers may then resell such Offered
Securities to the public at varying prices to be determined by such dealers at
the time of resale. The names of the dealers and the terms of the transaction
will be set forth in the Prospectus Supplement relating thereto.
The Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Offered Securities in respect to which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will be
set forth, in the Prospectus Supplement arising thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
The Securities may be sold directly by the Company to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any sale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
18
The Securities may or may not be listed on a national securities exchange.
No assurances can be given that there will be a market for the Securities.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Company by Baker & Botts, L.L.P., Houston, Texas and for
any underwriters or agents by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements and related financial statement
schedule of the Company contained in its Annual Report on Form 10-K incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Transok, Inc. as of December 31,
1995 and 1994, and for each of the three years in the period ended December 31,
1995, incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by the
Company in connection with the offering described in this Registration
Statement.
Registration fee........................ $ 137,931
Printing expenses....................... 200,000
Accounting fees and expenses............ 225,000
Legal fees and expenses................. 275,000
Blue Sky fees and expenses.............. 35,000
Trustee fees and expenses............... 10,000
Transfer Agent Fees..................... 5,000
Rating agency fees...................... 150,000
Miscellaneous........................... 162,069
----------
Total.............................. $1,200,000
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Ninth of the Company's Charter provides that to the fullest extent
that the General Corporation Law of the State of Delaware permits the limitation
or elimination of the liability of directors, no director of the Company shall
be personally liable to the Company or its stockholders for damages for breach
of fiduciary duty as a director. Notwithstanding the foregoing, a director shall
be liable to the extent provided by applicable law (1) for any breach of the
director's duty of loyalty to the Company or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (3) for any willful or negligent declaration of an unlawful
dividend, stock purchase or redemption or (4) for any transaction from which the
director derived any improper personal benefit.
Article Tenth of the Company's Charter provides that the Company shall
indemnify each person who was or is made a party or is threatened to be made a
party to or is involved in any threatened, pending or completed action, suit or
proceeding, by reason of the fact that he or she is or was a director or officer
of the Company, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or alleged action in any other
capacity while serving as a director, officer, employee or agent, to the maximum
extent authorized by the General Corporation Law of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware
authorizes the indemnification of directors and officers against liability
incurred by reason of being a director or officer and against expenses
(including attorneys' fees) in connection with defending any action seeking to
establish such liability, in the case of third-party claims, if the officer or
director acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and in the case of actions
by or in the right of the corporation, if the officer or director acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and if such officer or director shall not have been
adjudged liable to the corporation, unless a court otherwise determines.
Indemnification is also authorized with respect to any criminal action or
proceeding where the officer or director had no reasonable cause to believe his
conduct was unlawful.
The Company has purchased a liability insurance policy covering its
directors and officers against certain losses.
II-1
ITEM 16. EXHIBITS
EXHIBIT NO.
- ------------------------
*4 -- Form of Indenture between the Company and Texas Commerce Bank,
N.A., as trustee
5 -- Opinion of Baker & Botts, L.L.P. as to the validity of the Offered
Securities
*12 -- Statement of Computation of ratio of earnings to fixed charges
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Arthur Andersen LLP
23.3 -- Consent of Baker & Botts, L.L.P. (included in Exhibit 5)
*24 -- Powers of Attorney
*25 -- Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Texas Commerce Bank, N.A., as trustee,
is bound separately on Form T-1
------------
* Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) of the Securities Act if, in
the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the
II-2
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF HOUSTON, THE STATE OF TEXAS, ON JULY 3, 1996.
TEJAS GAS CORPORATION
By: /s/ JAY A. PRECOURT
JAY A. PRECOURT,
VICE CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON JULY 3,
1996.
SIGNATURE TITLE
- ------------------------------------ ------------------------------------------
*
Chairman of the Board of Directors
FREDERIC C. HAMILTON
/s/JAY A. PRECOURT Vice Chairman and Chief Executive Officer
JAY A. PRECOURT
(PRINCIPAL EXECUTIVE OFFICER)
/s/CHARLES R. CRISP President and Director
CHARLES R. CRISP
/s/JAMES W. WHALEN Executive Vice President,
JAMES W. WHALEN Chief Financial Officer and Treasurer
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
*
Director
CHARLES C. GATES
*
Director
ARTHUR L. KELLY
*
Director
A. J. MILLER
*
Director
ROBERT G. STONE, JR.
*
Director
RONALD F. WALKER
*By: /s/JAMES W. WHALEN
JAMES W. WHALEN
ATTORNEY IN FACT
II-4
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT PAGES
*4 -- Form of Indenture between the Company
and Texas Commerce Bank, N.A., as
trustee
5 -- Opinion of Baker & Botts, L.L.P. as
to the validity of the Offered
Securities
*12 -- Statement of Computation of ratio of
earnings to fixed charges
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Arthur Andersen LLP
23.3 -- Consent of Baker & Botts, L.L.P.
(included in Exhibit 5)
*24 -- Powers of Attorney
*25 -- Statement of Eligibility and
Qualification under the Trust
Indenture Act of 1939 of Texas
Commerce Bank, N.A., as trustee, is
bound separately on Form T-1
- ------------
* Previously filed.
Exhibit 5
Baker & Botts, L.L.P.
910 Louisiana
One Shell Plaza
Houston, Texas 77002-4995
(713) 229-1234
00D447.0141 July 3, 1996
Tejas Gas Corporation
1301 McKinney Street
Suite 700
Houston, Texas 77010
Gentlemen:
As set forth in the Registration Statement on Form S-3 (Reg.
No. 333-06207) filed with the Securities and Exchange Commission (the
"Commission") on June 18, 1996 (the "Registration Statement") by Tejas Gas
Corporation, a Delaware corporation (the "Company"), under the Securities Act of
1993, as amended (the "Act"), relating to (i) unsecured debt securities of the
Company ("Debt Securities") and (ii) shares of common stock, par value $0.8325
per share, of the Company ("Common Stock") (the Debt Securities and Common Stock
are collectively referred to herein as the "Securities"), to be issued and sold
by the Company from time to time pursuant to Rule 415 under the Act for an
aggregate initial offering price not to exceed $400,000,000, certain legal
matters in connection with the Securities are being passed upon for you by us.
In our capacity as your counsel in the connection referred to
above, we have examined (i) the Certificate of Incorporation and By-Laws of the
Company, each as amended to date; (ii) the Certificate of Designation of the
Company's 9.96% Cumulative Preferred Stock dated January 26, 1993; (iii) the
Certificate of Designation of the Company's 5 1/4% Convertible Preferred Stock
dated November 2, 1993 and the Certificate of Designation of the Company's
Series C Junior Participating Preferred Stock dated November 11, 1994, each as
filed with the Delaware Secretary of State; (iv) the Rights Agreement dated
November 11, 1994 between the Company and Harris Trust and Savings Bank; (v) the
Indenture in the form of Exhibit 4 to the Registration Statement to be executed
by the Company and Texas Commerce Bank National Association, as trustee (the
"Indenture"), pursuant to which Debt Securities may be issued; and (vi) the
originals, or copies certified or otherwise identified, of corporate records of
the Company, certificates of public officials and of representatives of the
Company, statutes and other instruments and documents as a basis for the
opinions hereafter expressed.
Tejas Gas Corporation July 3, 1996
-2-
In connection with this opinion, we have assumed that (i) the
Registration Statement, and any amendments thereto (including post-effective
amendments), will have become effective; (ii) a Prospectus Supplement will have
been prepared and filed with the Commission describing the Securities offered
thereby; (iii) all Securities will be issued and sold in compliance with
applicable federal and state securities laws and in the manner stated in the
Registration Statement and the appropriate Prospectus Supplement; and (iv) a
definitive purchase, underwriting or similar agreement with respect to any
Securities offered will have been duly authorized and validly executed and
delivered by the Company and the other parties thereto.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware.
2. With respect to shares of Common Stock, when (i) the Board
of Directors of the Company or, to the extent permitted by Section 141(c) of the
General Corporation Law of the State of Delaware, a duly constituted and acting
committee thereof (such Board of Directors or committee being hereinafter
referred to as the "Board"), has taken all necessary corporate action to approve
the issuance of and the terms of the offering of the shares of Common Stock and
related matters; and (ii) certificates representing the shares of Common Stock
have been duly executed, countersigned, registered and delivered in accordance
with the applicable definitive purchase, underwriting or similar agreement
approved by the Board upon payment of the consideration therefor (not less than
the par value of the Common Stock) provided for therein, the shares of Common
Stock will be duly authorized, validly issued, fully paid and non-assessable.
3. With respect to Debt Securities to be issued under the
Indenture, when (i) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended; (ii) the Board has taken all necessary
corporate action to approve the issuance and terms of such Debt Securities, the
terms of the offering thereof and related matters; and (iii) such Debt
Securities have been duly executed, authenticated, issued and delivered in
accordance with the provisions of the Indenture and the applicable definitive
purchase, underwriting or similar agreement approved by the Board upon payment
of the consideration therefor provided for therein, such Debt Securities will be
legally issued and will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as such
enforcement is subject to (i) any applicable bankruptcy, insolvency,
reorganization or other law relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
We hereby consent to the filing of this opinion of counsel as
Exhibit 5 to the Registration Statement. We also consent to the reference to our
Firm under the heading "Legal Matters" in the prospectus forming a part of the
Registration Statement. In giving this consent, we
Tejas Gas Corporation July 3, 1996
-3-
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act.
Very truly yours,
/s/ BAKER & BOTTS L.L.P.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of Tejas Gas Corporation on Form S-3 of our report dated
February 14, 1996, appearing in the Annual Report on Form 10-K of Tejas Gas
Corporation for the year ended December 31, 1995 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this Amendment
No. 1 to the Registration Statement.
DELOITTE & TOUCHE LLP
Houston, Texas
July 2, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
July 2, 1996
