SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934
--------------------
TEL OFFSHORE TRUST
(Name of Subject Company)
--------------------
MAGNUM HUNTER RESOURCES, INC.
(Bidder)
--------------------
Units of Beneficial Interest 872382 10 6
(Title of Class of Securities) (CUSIP Number of Class of Securities)
Morgan F. Johnston, Esq.
Vice President, General
Counsel and Secretary
Magnum Hunter Resources, Inc.
600 East Las Colinas Boulevard
Suite 1200
Irving, Texas 75039
(972) 401-0752
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Bidders)
--------------------
Copies to:
David E. Morrison, Esq.
Thompson & Knight, P.C.
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
(214) 969-1700
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CALCULATION OF FILING FEE
Transaction Valuation* Amount of Filing Fee
$ 13,118,266 $ 2,623.65
- -------------------------------------------------------------------------------
* Estimated for purposes of calculating the amount of the filing fee only.
The amount assumes the purchase of 2,261,770 Units of beneficial interest
(the "Units") of TEL Offshore Trust, at a price per Unit of $5.80 in cash.
Such number of Units, together with Units owned by Bidder on the date
hereof, represents 51% of the Units issued and outstanding as of November
6, 1997.
o Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: None Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
(Continued on following pages)
(Page 1 of Pages)
<PAGE>
CUSIP No. 872382 10 6 14D-1 Page 2 of
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS: Magnum Hunter Resources, Inc.
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSONS: 87-0462881
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) o
(b) o
3 SEC USE ONLY
4 SOURCES OF FUNDS: BK
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f): N/A o
6 CITIZENSHIP OR PLACE OF ORGANIZATION State of Nevada
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON 161,500
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES N/A o
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 3.4%
10 TYPE OF REPORTING PERSON CO
- --------------------------------------------------------------------------------
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 is filed by Magnum Hunter
Resources, Inc., a Nevada corporation ("Purchaser"), in connection with the
offer by Purchaser to purchase 2,261,770 Units of beneficial interest (the
"Units"), of TEL Offshore Trust, a trust created under the laws of the State of
Texas (the "Trust"), or such other number of Units that, together with the Units
owned by Purchaser represents 51% of the Trust's outstanding Units on the date
of purchase, at $5.80 per Unit, net to the seller in cash, without interest
thereon, on the terms and subject to the conditions set forth in the Offer to
Purchase dated January 28, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal and any amendments or supplements thereto, copies of which
are attached hereto as Exhibits (a)(l) and (a)(2), respectively (which
collectively constitute the "Offer").
The item numbers and responses thereto below are in accordance with the
requirements of Schedule 14D-1.
Item 1. Security and Subject Company
(a) The name of the subject company is TEL Offshore Trust, a trust created
under the laws of the State of Texas (the "Trust"). The address of the Trust's
corporate trustee, Texas Commerce Bank National Association is 712 Main Street,
Houston, Texas 77002.
(b) The information set forth on the cover page and under "Introduction"
in the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
Item 2. Identity and Background
(a)-(d), (g)This Statement is filed by Purchaser. The information set
forth on the cover page, under "Introduction," in Section 9 and in Schedule I of
the Offer to Purchase is incorporated herein by reference.
(e)-(f) During the last five years, none of Purchaser or, to the best
knowledge of Purchaser, any of the persons listed in Schedule I to the Offer to
Purchase (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions, or Negotiations with the Subject Company
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration
(a)-(b) The information set forth in Section 10 of the Offer to Purchase
is incorporated herein by reference.
(c) Not applicable.
3
<PAGE>
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder
(a)-(e) The information set forth in Section 12 of the Offer to Purchase
is incorporated herein by reference.
(f)-(g) The information set forth in Section 7 of the Offer to Purchase is
incorporated herein by reference.
Item 6. Interest in Securities of the Subject Company
(a)-(b) The information set forth under "Introduction" and in Sections 9
and 11 of the Offer to Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect
to the Subject Company's Securities
The information set forth under "Introduction" and in Sections 9 and 11 of
the Offer to Purchase is incorporated herein by reference.
Item 8. Persons Retained, Employed or to Be Compensated
The information set forth under "Introduction" and in Section 16 of the
Offer to Purchase is incorporated herein by reference.
Item 9. Financial Statements to Certain Bidders
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
Item 10. Additional Information
(a) Not applicable.
(b)-(d) The information set forth in Section 15 of the Offer to Purchase
is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
Item 11. Material to Be Filed as Exhibits
(a)(l) Offer to Purchase, dated January 28, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Form of Summary Advertisement, dated January 28, 1998.
(a)(8) Text of Press Release, dated January 28, 1998, issued by
Purchaser.
4
<PAGE>
(a)(9) Cover Letter, dated January 28, 1998, from Purchaser to Unit
holders of the Trust.
(b)(1) Amended and Restated Credit Agreement, dated April 30, 1997,
between Magnum Hunter Resources, Inc. and Bankers Trust
Company, et al. (Incorporated by Reference to Registration
Statement on Form S-4, File No. 333-31149)
(b)(2) First Amendment to Amended and Restated Credit Agreement dated
April 30, 1997, between Magnum Hunter Resources, Inc. and
Bankers Trust Company, et al (Incorporated by Reference to
Registration Statement on Form S-4 File No. 333-31149)
(b)(3) Second Amendment to the Amended and Restated Credit Agreement
dated April 30, 1997, between Magnum Hunter Resources, Inc.and
Bankers Trust Company, et al (Incorporated by Reference to
Form 10-QSB for the period ended September 30, 1997).
(c) None.
(d) None.
(e) Not applicable.
(f) None.
5
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: January 28, 1998
MAGNUM HUNTER RESOURCES, INC.
By: /s/ GARY C. EVANS
- -------------------------------------
Name: Gary C. Evans
Title: President and Chief Executive Officer
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit Description Page
(a)(l) Offer to Purchase, dated January 28, 1998
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
(a)(7) Form of Summary Advertisement, dated January 28, 1998
(a)(8) Text of Press Release, dated January 28, 1998, issued by Purchaser
(a)(9) Cover Letter, dated January 28, 1998, from Purchaser to Unit holders of the Trust
(b)(1) Amended and Restated Credit Agreement, dated April 30, 1997,
between Magnum Hunter Resources, Inc. and Bankers Trust
Company, et al. (Incorporated by Reference to Registration
Statement on Form S-4, File No. 333-31149)
(b)(2) First Amendment to Amended and Restated Credit Agreement dated
April 30, 1997, between Magnum Hunter Resources, Inc. and
Bankers Trust Company, et al (Incorporated by Reference to
Registration Statement on Form S-4 File No. 333-31149)
(b)(3) Second Amendment to the Amended and Restated Credit Agreement
dated April 30, 1997, between Magnum Hunter Resources, Inc.and
Bankers Trust Company, et al (Incorporated by Reference to
Form 10-QSB for the period ended September 30, 1997).
(c) None
(d) None
(e) Not applicable
(f) None
</TABLE>
Offer to Purchase for Cash
2,261,770 Units of Beneficial Interest
of
TEL OFFSHORE TRUST
at
$5.80 Net Per Unit
by
MAGNUM HUNTER RESOURCES, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 27, 1998,
UNLESS THE OFFER IS EXTENDED
--------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE 2,261,770 UNITS OR SUCH
OTHER NUMBER OF UNITS THAT, TOGETHER WITH THE UNITS THEN OWNED BY MAGNUM HUNTER
RESOURCES, INC., REPRESENTS 51% OF THE TRUST'S OUTSTANDING UNITS ON THE DATE OF
PURCHASE. THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER CONDITIONS, WHICH ARE SET
FORTH IN THIS OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1 AND 14 OF
THIS OFFER TO PURCHASE.
--------------------
IMPORTANT
Magnum Hunter Resources, Inc., a Nevada corporation ("Purchaser"), hereby
offers to purchase 2,261,770 Units of beneficial interest (the "Units") of TEL
Offshore Trust, a trust created under the laws of the State of Texas (the
"Trust"), or such other number of Units that, together with the Units then owned
by Purchaser, represents 51% of the Trust's outstanding Units on the date of
purchase, at a purchase price of $5.80 per Unit (such amount, or any greater
amount per Unit paid pursuant to the Offer (as defined below), being hereinafter
referred to as the "Offer Price"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer").
--------------------
Any Unit holder wishing to tender all or a portion of such Unit holder's
Units should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other required documents to the
Depositary (as defined herein) and either deliver the certificates for those
Units to the Depositary along with the Letter of Transmittal or tender those
Units pursuant to the procedures for book-entry transfer set forth in Section 3
hereof, or (2) request such Unit holder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for the Unit holder. Any Unit
holder whose Units are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact that broker, dealer,
commercial bank, trust company or other nominee if the Unit holder wishes to
tender such Units.
Any Unit holder who wishes to tender Units and whose certificates
representing those Units are not immediately available or who cannot comply with
the procedure for book-entry transfer on a timely basis should tender those
Units by following the procedures for guaranteed delivery set forth in Section 3
hereof.
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase, the
Letter of Transmittal, the Notice of Guaranteed Delivery and other related
materials may be directed to the Information Agent or to brokers, dealers,
commercial banks and trust companies.
January 28, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
INTRODUCTION......................................................................................................1
THE OFFER.........................................................................................................1
1. Terms of the Offer....................................................................................1
2. Acceptance for Payment and Payment for Units..........................................................3
3. Procedure for Tendering Units.........................................................................5
4. Withdrawal Rights.....................................................................................8
5. Federal Income Tax Considerations.....................................................................8
6. Price Range of the Units; Distributions on the Units.................................................12
7. Effect of the Offer on the Market for the Units, Unit Quotation and Exchange Act
Registration.........................................................................................12
8. Certain Information Concerning the Trust.............................................................13
9. Certain Information Concerning Purchaser ............................................................15
10. Source and Amount of Funds...........................................................................17
11. Background of the Offer..............................................................................18
12. Purpose of the Offer and Future Plans; No Appraisal Rights...........................................18
13. Determination of Offer Price ........................................................................19
14. Certain Conditions of the Offer......................................................................19
15. Certain Legal Matters................................................................................21
16. Fees and Expenses....................................................................................22
17. Miscellaneous........................................................................................22
SCHEDULE I: DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER......................................................I-l
</TABLE>
<PAGE>
To the Holders of Units of
TEL Offshore Trust:
INTRODUCTION
Magnum Hunter Resources, Inc., a Nevada corporation ("Purchaser"), hereby
offers to purchase 2,261,770 Units of beneficial interest (the "Units"), of TEL
Offshore Trust, a trust created under the laws of the State of Texas (the
"Trust"), or such other number of Units that, together with the Units then owned
by Purchaser, represents 51% of the Trust's outstanding Units on the date of
purchase, at a purchase price of $5.80 per Unit (such amount, or any greater
amount per Unit paid pursuant to the Offer (as defined below), being hereinafter
referred to as the "Offer Price"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer").
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date 2,261,770 Units or such
other number of Units that, together with the Units then owned by Purchaser,
represents 51% of the Units outstanding on the date of purchase (the "Minimum
Condition" and such number of Units being hereinafter referred to as the
"Minimum Number of Units"). The Offer also is subject to certain other
conditions. See Sections 1 and 14.
According to the Trust's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 filed with the Securities and Exchange Commission (the
"Commission"), there were 4,751,510 Units issued and outstanding as of November
6, 1997. As a result, as of such date, the Minimum Condition would be satisfied
if Purchaser acquired 2,261,770 Units after taking into account the 161,500
Units owned by Purchaser on the date hereof.
Certain federal income tax consequences of the sale of Units pursuant to
the Offer are described in Section 5 below.
Tendering Unit holders who have Units registered in their names will not
be charged brokerage fees or commissions or transfer taxes on the purchase of
their Units pursuant to the Offer. Purchaser will pay all charges and expenses
of Securities Transfer Corporation, as the depositary (the "Depositary"), and
Corporate Investor Communications, Inc., as the information agent (the
"Information Agent"), in connection with the Offer. See Section 16.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
THE OFFER
1. Terms of the Offer
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for (and thereby
purchase) the Minimum Number of Units validly tendered and not withdrawn in
accordance with Section 4 below prior to the Expiration Date. As used in the
Offer, the term
1
<PAGE>
"Expiration Date" means 12:00 midnight, New York City time, on Friday, February
27, 1998, unless and until Purchaser, in accordance with the terms of the Offer,
shall have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" means the latest time and date at which the
Offer, as so extended, expires. As used in this Offer to Purchase, "business
day" has the meaning set forth in Rule 14d-l(c)(6) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
Upon the terms and subject to the conditions of the Offer, if more than
the Minimum Number of Units is validly tendered and not withdrawn in accordance
with Section 4 of this Offer to Purchase prior to the Expiration Date, Purchaser
will accept for payment and pay for the Minimum Number of Units, on a pro rata
basis (with appropriate adjustments to avoid purchases of fractional Units)
based upon the number of Units properly tendered and not withdrawn by each Unit
holder at or prior to the Expiration Date. In the event that proration of
tendered Units is required, because of the difficulty of determining the precise
number of Units properly tendered and not withdrawn (due in part to the
guaranteed delivery procedure described in Section 3), Purchaser does not expect
that it will be able to announce the final results of such proration or pay for
any Units until at least seven business days after the Expiration Date. Unit
holders may obtain preliminary results of proration from the Information Agent
and may be able to obtain such information from their brokers.
Purchaser reserves the right (but shall not be obligated) to accept for
payment more than the Minimum Number of Units pursuant to the Offer. If a number
of additional Units in excess of two percent of the outstanding Units is to be
accepted for payment, and, at the time notice of Purchaser's decision to accept
for payment such additional Units is first published, sent or given to holders
of Units, the Offer is scheduled to expire at any time earlier than the tenth
business day from the date that such notice is so published, sent or given, the
Offer will be extended until the expiration of such period of ten business days.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition. The Offer also is subject to certain other conditions set
forth in Section 14 below. Purchaser expressly reserves the right (but will not
be obligated) to waive any or all of the conditions of the Offer. If, on or
prior to the Expiration Date, any or all of the conditions have not been
satisfied or waived, Purchaser reserves the right to (i) decline to purchase any
of the Units tendered and terminate the Offer, (ii) waive all of the unsatisfied
conditions and, subject to complying with applicable rules and regulations of
the Commission, purchase all Units validly tendered, (iii) extend the Offer and,
subject to the right of Unit holders to withdraw Units until the Expiration
Date, retain the Units that have been tendered during the period or periods for
which the Offer is extended, and/or (iv) amend the Offer.
Purchaser expressly reserves the right, subject to applicable law, to
extend the period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary and by making a public
announcement of such extension. There can be no assurance that Purchaser will
extend the Offer. Purchaser also expressly reserves the right, subject to
applicable law (including applicable rules and regulations of the Commission) at
any time or from time to time, to (i) delay acceptance for payment of, or
payment for, any Units, regardless of whether the Units were theretofore
accepted for payment, or to terminate the Offer and not accept for payment or
pay for any Units not theretofore accepted for payment or paid for, upon the
occurrence of any of the conditions specified in Section 14 below by giving oral
or written notice of such delay in payment or termination to the Depositary and
(ii) waive any conditions or otherwise amend the Offer in any respect, by giving
oral or written notice to the Depositary. Any extension, delay in payment,
termination or amendment will be followed as promptly as practical by public
announcement, the announcement in the case of an extension to be issued no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which
Purchaser may choose to make any public announcement, Purchaser will have no
obligation to publish, advertise or otherwise communicate any such announcement,
other than by issuing
2
<PAGE>
a release to the Dow Jones News Service or as otherwise required by law. The
reservation by Purchaser of the right to delay acceptance for payment of, or
payment for, Units is subject to the provisions of Rule 14e-l(c) under the
Exchange Act, which requires that Purchaser pay consideration offered or return
the Units deposited by or on behalf of Unit holders promptly after the
termination or withdrawal of the Offer.
Purchaser expressly reserves the right to increase the price per Unit
payable in the Offer or to make any other changes in the terms and conditions of
the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. If Purchaser
decides to increase or decrease the consideration in the Offer, to make a change
in the percentage of Units sought or to change or waive the Minimum Condition
and, if at the time that notice of any such change or waiver is first published,
sent or given to Unit holders, the Offer is scheduled to expire at any time
earlier than the tenth business day after (and including) the date of that
notice, the Offer will be extended at least until the expiration of that period
of ten business days.
This Offer to Purchase, the related Letter of Transmittal and, if
required, other relevant materials are being mailed by Purchaser to record
holders of Units and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the Trust's Unit holder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Units.
2. Acceptance for Payment and Payment for Units
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and will pay for the Minimum
Number of Units that are validly tendered on or prior to the Expiration Date,
and not properly withdrawn in accordance with Section 4 below, promptly after
the later to occur of (i) the Expiration Date and (ii) the satisfaction or
waiver of the conditions to the Offer set forth in Section 14. All questions as
to the satisfaction of such terms and conditions will be determined by Purchaser
in its sole discretion, which determination will be final and binding. Subject
to the applicable rules of the Commission, Purchaser expressly reserves the
right to delay acceptance for payment of, or payment for, Units in order to
comply, in whole or in part, with any other applicable law or government
regulation. Any such delays will be effected in compliance with Rule 14e-l(c)
under the Exchange Act (relating to a bidder's obligation to pay for or return
tendered securities promptly after the termination or withdrawal of such
bidder's offer). See Section 15 below.
In all cases, Units accepted for payment pursuant to the Offer will be
paid for only after timely receipt by the Depositary of (i) certificates
evidencing (or a timely Book-Entry Confirmation (as defined in Section 3 below)
with respect to) such Units, (ii) a Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message (as defined below), and (iii) any other documents required by the Letter
of Transmittal. See Section 3 below.
3
<PAGE>
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility (as defined in Section 3 below) to, and received by, the
Depositary and forming part of a Book-Entry Confirmation, which states that (i)
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering Units which are
the subject of such Book Entry Confirmation, (ii) such participant has received
and agrees to be bound by the terms of the Letter of Transmittal, and (iii)
Purchaser may enforce such agreement against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Units properly tendered to Purchaser and not
withdrawn, if and when Purchaser gives oral or written notice to the Depositary
of Purchaser's acceptance of such Units. In all cases, payment for Units
accepted for payment pursuant to the Offer will be made by deposit of the Offer
Price therefor with the Depositary, which will act as agent for tendering Unit
holders for the purpose of receiving payment from Purchaser and transmitting
payment to tendering Unit holders. Upon the deposit of funds with the Depositary
for the purpose of making payments to tendering Unit holders, Purchaser's
obligation to make such payment shall be satisfied, and tendering Unit holders
must thereafter look solely to the Depositary for payment of amounts owed to
them by reason of the acceptance for payment of Units pursuant to the Offer.
If, for any reason, acceptance for payment of any Units tendered pursuant
to the Offer is delayed, or Purchaser is unable to accept for payment Units
tendered pursuant to the Offer, then, without prejudice to Purchaser's rights
under the Offer (but subject to Rule 14e-l(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Units, and
such Units may not be withdrawn, except to the extent that the tendering Unit
holders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4 below. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON
THE PURCHASE PRICE OF UNITS TO BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Units are not purchased pursuant to the Offer for any
reason (including due to proration if more than the Minimum Number of Units is
tendered) or if certificates are submitted for more Units than are tendered,
certificates for Units not purchased or tendered will be returned pursuant to
the instructions of the tendering Unit holder without expense to the tendering
Unit holder (or, in the case of Units delivered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3 below, the Units will be credited to an
account maintained at the Book-Entry Transfer Facility) as promptly as
practicable following the expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Unit pursuant to the Offer, Purchaser will pay the increased
consideration for all Units purchased pursuant to the Offer, whether or not such
Units were tendered prior to the increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more direct wholly owned subsidiaries of Purchaser,
the right to purchase Units tendered pursuant to the Offer, but any such
transfer or assignment will not relieve Purchaser of its obligations under the
Offer and will in no way prejudice the rights of tendering Unit holders to
receive payment for Units validly tendered and accepted for payment pursuant to
the Offer.
4
<PAGE>
3. Procedure for Tendering Units
Valid Tenders. For a Unit holder validly to tender pursuant to the Offer,
either (i) a Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date and
either (a) certificates evidencing Units must be received by the Depositary at
either of such addresses prior to the Expiration Date or (b) the Units must be
delivered pursuant to the procedures for book-entry transfer set forth below and
a Book-Entry Confirmation must be received by the Depositary prior to the
Expiration Date; or (ii) the tendering Unit holder must comply with the
guaranteed delivery procedures set forth below. No alternative, conditional or
contingent tenders will be accepted.
Book-Entry Transfer. The Depositary will establish accounts with respect
to the Units at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of Units by
causing the Book-Entry Transfer Facility to transfer such Units into the
Depositary's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for such transfer. However, although
delivery of Units may be effected through book-entry transfer into the
Depositary's account at the BookEntry Transfer Facility, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message, and any other required
documents, must, in any case, be transmitted to, and received by, the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date, or the tendering Unit holder must comply with the
guaranteed delivery procedures described below. The confirmation of a book-entry
transfer of Units into the Depositary's account at a Book-Entry Transfer
Facility as described above is referred to as a "Book-Entry Confirmation."
DELIVERY OF DOCUMENTS TO THE BOOKENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE
BOOK ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
THE METHOD OF DELIVERY OF CERTIFICATES EVIDENCING UNITS, THE LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF
THE TENDERING UNIT HOLDERS, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
the Book-Entry Transfer Facility's system whose name appears on a security
position listing as the owner of the Units) of Units tendered therewith and such
registered holder has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal; or (ii) if such Units are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of
the Letter of Transmittal. If the certificates representing Units are registered
in the name of a person other than the signer of the Letter of Transmittal or if
payment is to be made or certificates for
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Units not tendered or not accepted for payment are to be returned to a person
other than the registered holder of the certificates surrendered, then the
tendered certificates evidencing Units must be endorsed or accompanied by
appropriate stock powers, in each case signed exactly as the name or names of
the registered holder or owners appear on the certificates, with the signatures
on the certificates or stock powers guaranteed as described above and as
provided in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a Unit holder desires to tender Units pursuant to
the Offer and such Unit holder's certificates for Units are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such Unit holder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary (as provided below) prior to the Expiration Date; and
(iii) the certificates for all tendered Units in proper form for
transfer (or a Book-Entry Confirmation with respect to all such tendered
Units) together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile) with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
and any other documents required by the Letter of Transmittal are received
by the Depositary within three American Stock Exchange, Inc. trading days
after the date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mailed to the Depositary and must include
a guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
IN ALL CASES, UNITS SHALL NOT BE DEEMED VALIDLY TENDERED UNLESS A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED
FACSIMILE THEREOF) OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE,
IS TIMELY RECEIVED BY THE DEPOSITARY.
Notwithstanding any other provision of this Offer to Purchase, payment for
Units accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of certificates for (or a timely
Book-Entry Confirmation with respect to) such Units, a Letter of Transmittal (or
a facsimile), properly completed and duly executed, with any required signature
guarantees, an Agent's Message (in the case of a book-entry transfer) and any
other documents required by the Letter of Transmittal (or in the case of a
book-entry transfer, an Agent's Message).
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Units pursuant to any of the procedures described above will be
determined by Purchaser in its sole discretion, which determination shall be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of Units determined not to be in proper form or the
acceptance of or payment for which may, in the opinion of Purchaser's counsel,
be unlawful. Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of any Units of any particular Unit holder whether or
not similar defects or irregularities are waived in the case of other Unit
holders. Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and its instructions) will be final and
binding
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on all parties. No tender of Units will be deemed to have been validly made
until all defects and irregularities have been cured or waived. None of
Purchaser, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in tenders
or incur any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent backup federal income
tax withholding of 31% of the payments made to Unit holders with respect to the
purchase price of Units purchased pursuant to the Offer, a Unit holder must
provide the Depositary with his or her correct taxpayer identification number
and certify that he or she is not subject to backup federal income tax
withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal. A Non-U.S. Unit holder (as defined in Section 5) should obtain and
file a Form W-8 to certify that he or she is not subject to backup federal
income tax withholding. See Instruction 10 of the Letter of Transmittal. See
Section 5 below.
A tender of Units pursuant to any of the procedures described above will
constitute the tendering Unit holder's acceptance of the terms and conditions of
the Offer, as well as the tendering Unit holder's representation and warranty to
Purchaser that (i) the Unit holder has a net long position in the Units being
tendered, within the meaning of Rule 14e-4 under the Exchange Act ("Rule
14e-4"), and (ii) the tender of Units complies with Rule 14e-4. It is a
violation of Rule 14e-4 for a person, directly or indirectly, to tender Units
for such person's own account, unless, at the time of tender and at the end of
the proration period, the person so tendering (i) has a net long position equal
to or greater than the amount of (a) Units tendered or (b) other securities
immediately convertible into or exchangeable or exercisable for Units tendered
and that person will acquire the Units for tender by conversion, exchange or
exercise and (ii) will cause Units to be delivered in accordance with the terms
of the Offer. Rule 14e-4 provides a similar restriction applicable to the tender
or guarantee of a tender on behalf of another person. Purchaser's acceptance for
payment of Units tendered pursuant to the Offer will constitute a binding
agreement between the tendering Unit holder and Purchaser upon the terms and
conditions of the Offer.
Appointment as Proxy. By executing a Letter of Transmittal, a tendering
Unit holder irrevocably appoints designees of Purchaser as such Unit holder's
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such Unit holder's
rights with respect to Units tendered by such Unit holder and purchased by
Purchaser and with respect to any and all other Units or other securities issued
or issuable in respect of those Units, on or after the date of the Offer. All
such powers of attorney and proxies will be considered coupled with an interest
in the tendered Units. Such appointment will be effective when, and only to the
extent that, Purchaser accepts such purchased Units for payment. Upon acceptance
for payment, all prior powers of attorney, proxies or consents given by the Unit
holder with respect to the Units (and any other Units or other securities so
issued in respect of such purchased Units) will be revoked, without further
action, and no subsequent powers of attorney and proxies may be given (and, if
given, will not be deemed effective) by the Unit holder. The designees of
Purchaser will be empowered to exercise all voting and other rights of the Unit
holder with respect to such Units (and any other Units or securities so issued
in respect of such purchased Units) as they in their sole discretion may deem
proper, including, without limitation, in respect of any annual or special
meeting of the Unit holders, or any adjournment or postponement of any such
meeting, or in connection with any action by written consent in lieu of any such
meeting or otherwise. Purchaser reserves the absolute right to require that, in
order for Units to be validly tendered, immediately upon Purchaser's acceptance
for payment of the Units, Purchaser must be able to exercise full voting and
other rights of a record and beneficial owner with respect to the Units,
including voting at any meeting of Unit holders then scheduled.
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4. Withdrawal Rights
Tenders of Units made pursuant to the Offer are irrevocable, except as
otherwise provided in this Section 4. Units tendered pursuant to the Offer may
be withdrawn pursuant to the procedures set forth below at any time prior to the
Expiration Date and, unless theretofore accepted for payment and paid for by
Purchaser pursuant to the Offer, may also be withdrawn at any time after March
28, 1998 (or such later date as may apply if the Offer is extended). If
Purchaser extends the Offer, is delayed in its purchase of or payment for Units
or is unable to purchase or pay for Units for any reason then, without prejudice
to the rights of Purchaser, tendered Units may be retained by the Depositary on
behalf of Purchaser and may not be withdrawn, except to the extent that
tendering Unit holders are entitled to withdrawal rights as set forth in this
Section 4. The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Units is subject to the provisions of Rule 14e-l(c)
under the Exchange Act, which requires Purchaser to pay the consideration
offered or return the Units deposited by or on behalf of Unit holders promptly
after the termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Units to be withdrawn, the number of Units to be withdrawn and the name of the
registered holder, if different from that of the person who tendered the Units.
If certificates evidencing Units have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such certificates, the
tendering Unit holder must also submit to the Depositary the serial numbers
shown on the particular certificates evidencing the Units to be withdrawn, and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Units tendered for the account of an Eligible
Institution). If Units have been tendered pursuant to the procedure for
book-entry transfer set forth in Section 3 above, the notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Units and otherwise comply with such
Book-Entry Transfer Facility's procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding on all parties. No withdrawal of
Units will be deemed to have been properly made until all defects and
irregularities have been cured or waived. None of Purchaser, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failing to give such notification.
Any Units properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3 above.
5. Federal Income Tax Considerations
The following discussion addresses certain federal income tax
considerations applicable to a Unit holder who sells Units pursuant to the Offer
but does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This discussion is based on the Internal
Revenue Code of 1986, as amended (the "Code"), final, temporary, and proposed
Treasury regulations promulgated thereunder, Internal Revenue Service ("IRS")
rulings and judicial decisions now in effect, all of which are subject to change
(possibly with retroactive effect) or different interpretations. This discussion
does not deal with all aspects of federal income taxation that may be relevant
to particular Unit holders in light of their specific circumstances or to
certain types of Unit holders subject to special treatment under the federal
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<PAGE>
income tax laws (for example, traders or dealers in securities, insurance
companies, financial institutions, tax-exempt organizations, and taxpayers
subject to the alternative minimum tax), nor does it discuss the effect of any
state, local, foreign or other tax laws. Purchaser has not sought any ruling
from the IRS with respect to the statements made and the conclusions reached in
the following discussion, and there can be no assurance that the IRS will agree
with such statements and conclusions.
UNIT HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL,
STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF SELLING OR NOT SELLING UNITS
PURSUANT TO THE OFFER, AND THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY
HAVE ON SUCH TAX CONSEQUENCES. THE PURCHASER HAS HAD VERY LIMITED ACCESS TO TAX
INFORMATION WITH RESPECT TO THE TRUST, AND THE STATEMENTS CONTAINED HEREIN MAY
BE SUBJECT TO CHANGE OR SUPPLEMENTAL DISCUSSION BASED ON A MORE COMPLETE REVIEW
OF SUCH TAX INFORMATION.
Assumptions
According to publicly available information prepared by, or on behalf of,
the Trust, the IRS has ruled (i) that the Trust is a grantor trust, (ii) that
the Partnership (as defined in Section 8) is a partnership for federal income
tax purposes, and (iii) that the Royalty (as defined in Section 8) is a
non-operating economic interest giving rise to income subject to depletion.
Based on these rulings, the following discussion assumes that the Trust incurs
no federal tax liability, that each Unit holder is treated as owning an interest
in the Partnership, and that the Royalty is treated as a single property giving
rise to income subject to depletion. The following discussion also assumes
either (i) that the Partnership is not a publicly traded partnership within the
meaning of Section 7704 of the Code or (ii) that the Partnership, if a publicly
traded partnership, is not treated as a corporation. This discussion also
assumes that Unit holders hold Units as capital assets within the meaning of
Section 1221 of the Code.
Consequences to a Tendering U.S. Unit Holder
The following discussion is limited to the federal income tax consequences
relevant to a Unit holder that is (i) a citizen or resident (as defined in
Section 7701(b)(1) of the Code) of the United States, (ii) a corporation or
partnership created or organized under the laws of the United States or any
state (including the District of Columbia) (but excluding a partnership that is
not treated as a United States person under any applicable U.S. Treasury
regulations), (iii) an estate or trust described in Section 7701(a)(30) of the
Code, or (iv) a person whose worldwide income or gain is otherwise subject to
U.S. federal income taxation on a net income basis (a "U.S. Unit holder").
A sale of Units pursuant to the Offer will be a taxable transaction for
federal income tax purposes. A U.S. Unit holder will recognize gain or loss on
the sale of a Unit measured by the difference between the "amount realized" on
the sale and the U.S. Unit holder's "adjusted tax basis" in the Unit. The
"amount realized" on the sale of a Unit generally will equal the sum of the
amount of cash received by the U.S. Unit holder pursuant to the Offer (i.e., the
Offer Price) plus the amount of the U.S. Unit holder's share of the
Partnership's liabilities (as determined under Code Section 752). A U.S. Unit
holder's "adjusted tax basis" in a Unit generally will equal the cost of the
Unit to such U.S. Unit holder increased by the amount of income and gain
(including the amount by which depletion deductions exceed the U.S. Unit
holder's proportionate share of the adjusted basis of the property) allocated to
the U.S. Unit holder for the current and all prior taxable years and decreased
(but not below zero) by the amount of loss and deductions (including depletion
to the extent such deduction does not exceed the U.S. Unit holder's
proportionate share of the adjusted basis of the property) allocated to the U.S.
Unit holder for the current
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and all prior taxable years and by the amount of cash and the adjusted basis of
property distributed by the Partnership to the U.S. Unit holder for the current
and all prior taxable years. A U.S. Unit holder will be allocated a pro rata
share of the Trust's items of income, gain, loss, and deduction for the year of
sale in accordance with the provisions of the Partnership Agreement concerning
transfers of interests. Such allocations and the amount of cash distributed, if
any, by the Trust to such U.S. Unit holder for such year will affect the U.S.
Unit holder's adjusted tax basis in a Unit and, therefore, the amount of such
U.S. Unit holder's taxable gain or loss upon a sale of Units pursuant to the
Offer.
Except for recapture items discussed below, the gain or loss recognized by
a U.S. Unit holder on a sale of Units pursuant to the Offer will be capital gain
or loss. For non-corporate U.S. Unit holders who have held the Units for more
than one year but not more than 18 months, capital gain from the sale of Units
will be taxed at a maximum rate of 28%. For non-corporate U.S. Unit holders who
have held the Units for more than 18 months, capital gain from the sale of Units
will be taxed at a maximum rate of 20%. Capital losses are deductible only to
the extent of capital gains, except that non-corporate taxpayers may deduct up
to an additional $3,000 of capital losses. Any capital losses not deducted
generally can be carried forward to succeeding years (a corporation's carry
forward period is five years and a non-corporate taxpayer can carry forward such
losses indefinitely); in addition, corporations are allowed to carry back
capital losses to the three preceding taxable years.
If any portion of the amount realized by a U.S. Unit holder from the sale
of a Unit is attributable to "unrealized receivables" (which includes
depreciation recapture, depletion recapture, and intangible drilling and
development cost recapture) or "inventory items," then all or a portion of the
U.S. Unit holder's gain or loss may be treated as ordinary income rather than as
capital gain or loss. The amount of gain or loss that will be treated as
ordinary income will be measured by the difference between the amount realized
attributable to unrealized receivables and inventory items and the adjusted
basis attributable to unrealized receivables and inventory items. The portion of
the amount realized attributable to unrealized receivables will include the U.S.
Unit holder's allocable share of deductions for intangible drilling and
development costs and depletion related to property placed in service after
December 31, 1986, to the extent that such deductions reduced the adjusted basis
of Partnership property attributable to the U.S. Unit holder's Unit. It is
possible that the allocation rules of Section 751 of the Code may result in a
U.S. Unit holder recognizing ordinary income with respect to the portion of its
Unit attributable to unrealized receivables and inventory items when the U.S.
Unit holder has an overall loss on the sale of the Unit or in a U.S. Unit holder
recognizing a capital loss with respect to the portion of the Unit not
attributable to unrealized receivables and inventory items when the U.S. Unit
holder has an overall gain on the sale of the Unit.
Under Section 469 of the Code, a non-corporate taxpayer, a closely held C
corporation, or a personal service corporation may not deduct passive activity
losses against "portfolio" income, such as royalty income or gain from property
producing royalty income. According to publicly available information prepared
by, or on behalf of, the Trust, all income from the Partnership is royalty
income. Therefore, a U.S. Unit holder that is either not a corporation or that
is a closely held C corporation or personal service corporation may not deduct
passive activity losses against its gain from the sale of a Unit. Any loss from
the sale of a Unit may be deducted, subject to other applicable limitations, and
offset against income from any source.
Non-U.S. Unit Holders
The publicly traded Trust is treated as a United States real property
holding corporation within the meaning of Section 897 the Code. Therefore, a
person who is not a U.S. Unit holder (a "Non-U.S. Unit holder") and who owns
more than 5% of the outstanding Units (or more than approximately 237,575 Units)
at the time of the sale or at any time during the preceding five years will be
subject to United States income
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tax on the gain on the sale of its Units. A Non-U.S. Unit holder who does not
own more than 5% of the outstanding Units at the time of the sale or at any time
during the preceding five years generally will not be subject to United States
income tax on the gain on the disposition of its Units.
Information Reporting and Backup Withholding Tax
Information reporting and backup withholding may apply to the payment of
proceeds from the sale of Units if Units are sold through a broker. The Treasury
regulations define a broker as including all persons who, in the ordinary course
of their business, stand ready to effect sales made by others, such as a stock
transfer agent or depositary trust. Under this definition, the Depositary will
be a broker. The payment of proceeds from the sale of Units generally will be
subject to backup withholding at a rate of 31% unless the Unit holder (i) is a
corporation or exempt foreign person or comes within certain other exempt
categories and, when required, demonstrates its exemption, or (ii) provides a
correct taxpayer identification, certified under penalties of perjury, and
certain other information. Such a sale generally must also be reported by the
Depositary to the IRS unless the seller is an exempt recipient.
A Unit holder who does not provide the Depositary with the Unit holder's
correct taxpayer identification number may be subject to penalties imposed by
the IRS. Any amounts withheld under the backup withholding rules from a payment
to a Unit holder will be allowed as a credit against the Unit holder's federal
income tax.
Consequences to a Non-Tendering Unit Holder
Purchaser does not anticipate that a Unit holder who does not tender his
or her Units will realize any material tax consequences as a result of the
election not to tender. However, if as a result of the Offer there is a sale or
exchange of 50% or more of the total interests in Partnership capital and
profits within a 12 month period, a termination of the Partnership for federal
income tax purposes would occur. If the Partnership is treated as terminated for
federal income tax purposes, the Partnership would be treated as contributing
all of its assets and liabilities to a new partnership in exchange for an
interest in the new partnership, and the Partnership would be treated as
distributing interests in the new partnership to the Purchaser and the remaining
Unit holders in proportion to their respective interests in the Partnership in
liquidation of the Partnership. A termination of the Partnership would cause the
Partnership's taxable year to close, the Partnership's tax elections to
terminate, the basis of the Partnership's property attributable to the
Purchaser's interest in the Partnership to be adjusted if the Partnership has a
Section 754 election in effect, and possibly other consequences caused by the
treatment of the new partnership as a new taxpayer.
In addition, a termination of the Partnership could cause the Partnership to
become subject to unfavorable statutory or regulatory tax changes enacted or
issued prior to the termination but previously not applicable to the Partnership
because of protective transitional rules.
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6. Price Range of the Units; Distributions on the Units
The Units were traded on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") SmallCap Market under the symbol TELOZ
prior to October 22, 1996. On October 22, 1996, the Units were delisted from the
NASDAQ SmallCap Market. Purchaser understands that the Trust has been advised by
NASDAQ that the Units are being traded on the OTC Bulletin Board. The Units may
also be traded on pink sheets. The high and low bid price as reported by NASDAQ
and the OTC Bulletin Board, as applicable, for each quarter for the years ended
December 31, 1996 and 1997, were as follows:
High Low
---------- -------
Fiscal Year Ended December 31, 1996
First Quarter................................ $1.000 $0.750
Second Quarter............................... 1.313 0.750
Third Quarter................................ 1.438 0.750
Fourth Quarter............................... 1.500 0.875
Fiscal Year Ended December 31, 1997
First Quarter................................ 1.672 1.250
Second Quarter............................... 3.750 1.422
Third Quarter................................ 4.500 2.375
Fourth Quarter............................... 5.375 4.297
Sales prices on the OTC Bulletin Board reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
On January 15, 1998, the closing price per Unit on the OTC Bulletin Board
was $4.625. Unit holders are urged to obtain current market quotations for the
Units.
The distributions per Unit paid each quarter for the years ended December
31, 1996 (as reported in the Trust's Form 10-K for the year ended December 31,
1996) and 1997 (as reported in press releases issued by the Trust), were as
follows:
Distribution Paid Per Unit
------------------------------
Quarter 1996 1997
------- ----------------- -----------
First..................................... $ .000000 $ .155052
Second..................................... $ .000000 $ .392365
Third.......................................$ .124258 $ .316596
Fourth.................................... $ .000000 $ .410961
As reported in the Trust's Form 10-K for the year ended December 31, 1996,
at March 30, 1997, the 4,751,510 Units outstanding were held by 2,831 Unit
holders of record.
7. Effect of the Offer on the Market for the Units, Unit Quotation and Exchange
Act Registration
The purchase of Units pursuant to the Offer will reduce the number of
Units that might otherwise trade publicly, which could adversely affect the
liquidity and market value of the remaining Units held by Unit holders other
than Purchaser. Purchaser cannot predict whether the reduction in the number of
Units that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for, or
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marketability of, the Units or whether such reduction would cause future market
prices to be greater or less than the Offer Price.
Whether the Units will continue to be traded on the OTC Bulletin Board
will depend upon the number of Unit holders and/or the aggregate market value of
the Units remaining, the interest in maintaining a market in the Units on the
part of securities firms, the possible termination of registration of the Units
under the Exchange Act as described below and other factors.
The Units are currently registered under the Exchange Act. Registration of
the Units under the Exchange Act may be terminated upon application of the Trust
to the Commission if the Units are neither listed on a national securities
exchange nor held by 300 or more holders of record. Termination of the
registration of the Units under the Exchange Act would substantially reduce the
information required to be furnished by the Trust to holders of Units and to the
Commission and would make certain of the provisions of the Exchange Act no
longer applicable to the Trust. Such provisions include the short-swing profit
recovery provisions of Section 16(b), the requirement of filing periodic reports
with the Commission and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions. Furthermore, "affiliates" of the
Trust and persons holding "restricted securities" of the Trust may be deprived
of the ability to dispose of such securities pursuant to Rule 144 as promulgated
under the Securities Act. Since Purchaser is tendering for 2,261,770 Units and
proration will occur unless exactly that number of Units is tendered, it is
unlikely that consummation of the Offer will in and of itself reduce the number
of Unit holders.
8. Certain Information Concerning the Trust
General. All information in this section has been obtained from publicly
available information prepared by, or on behalf of, the Trust. Purchaser assumes
no responsibility for the accuracy of any such information.
The Trust. The Trust, created under the laws of the State of Texas,
maintains its offices at the office of the corporate trustee, Texas Commerce
Bank National Association ("Corporate Trustee"), 712 Main Street, Houston, Texas
77002. The telephone number of the Trust is 713-216-5712. George Allman, Jr., W.
Leslie Duffy and Richard L. Melton serve as individual trustees ("Individual
Trustees") of the Trust. The Individual Trustees and the Corporate Trustee may
hereinafter collectively be referred to as Trustees.
The principal asset of the Trust consists of a 99.99% interest in the TEL
Offshore Trust Partnership ("Partnership"). Chevron U.S.A. Inc. ("Chevron") owns
the remaining 0.01% interest in the Partnership. The Partnership owns an
overriding royalty interest ("Royalty"), equivalent to a 25% net profits
interest, in certain oil and gas properties (the "Royalty Properties") located
offshore Louisiana.
On November 18, 1988, Chevron acquired most of the Gulf of Mexico offshore
oil and gas properties of Tenneco Oil Company ("Tenneco"), including all the
Royalty Properties. As a result of the acquisition, Chevron replaced Tenneco as
the working interest owner and Managing General Partner of the Partnership.
Chevron also assumed Tenneco's obligations under the instrument conveying the
Royalty to the Partnership (the "Conveyance").
The terms of the TEL Offshore Trust Agreement (the "Trust Agreement")
provide, among other things, that: (1) the Trust is a passive entity whose
activities are generally limited to the receipt of revenues attributable to the
Trust's interest in the Partnership and the distribution of such revenues, after
payment of or provision for Trust expenses and liabilities, to the owners of the
Units; (2) the Trustees may sell all or any part of the Trust's interest in the
Partnership or cause the sale of all or any part of the Royalty by
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<PAGE>
the Partnership with the approval of a majority of the Unit holders; (3) the
Trustees can establish cash reserves and can borrow funds to pay liabilities of
the Trust and can pledge the assets of the Trust to secure payment of such
borrowings; (4) to the extent cash available for distribution exceeds
liabilities or reserves therefor established by the Trust, the Trustees will
cause the Trust to make quarterly cash distributions to the Unit holders in
January, April, July and October of each year; and (5) the Trust will terminate
upon the first to occur of the following events: (i) total future net revenues
attributable to the Partnership's interest in the Royalty, as determined by
independent petroleum engineers, as of the end of any year, are less than $2
million or (ii) a decision to terminate the Trust by the affirmative vote of
Unit holders representing a majority of the Units. Total future net revenues
attributable to the Partnership's interest in the Royalty were estimated at
$30.9 million as of October 31, 1996. Upon termination of the Trust, the
Trustees will sell for cash all the assets held in the Trust estate and make a
final distribution to Unit holders of any funds remaining after all Trust
liabilities have been satisfied.
The terms of the Agreement of General Partnership of the Partnership (the
"Partnership Agreement") provide that the Partnership shall dissolve upon the
occurrence of any of the following: (a) December 31, 2030, (b) the election of
the Trust to dissolve the Partnership, (c) the termination of the Trust, (d) the
bankruptcy of the Managing General Partner of the Partnership or (e) the
dissolution of the Managing General Partner or its election to dissolve the
Partnership; provided that the Managing General Partner has agreed not to elect
to dissolve the Partnership.
Under the Conveyance and the Partnership Agreement, the Trust is entitled
to its share (99.99%) of 25% of the Net Proceeds (as defined therein) realized
from the sale of the oil, gas and associated hydrocarbons when produced from the
Royalty Properties.
Selected Consolidated Financial Data. Set forth below is certain selected
consolidated financial data with respect to the Trust excerpted or derived from
financial information contained in the Trust's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Trust Form 10-K"), and the Trust's
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 1997 (the "Trust Form 10-Q's"). More comprehensive financial
information is included in the Trust Form 10-K, the Trust Form 10-Q's and other
documents filed by the Trust with the Commission. The financial information that
follows is qualified in its entirety by reference to the Trust Form 10-K, the
Trust Form 10-Q's and such other documents, including the financial statements
and related notes therein. The Trust Form 10-K, the Trust Form 10-Q's and such
other documents should be available for inspection and copies thereof should be
obtainable from the offices of the Commission in the manner set forth below.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ended December 31, Fiscal Quarter Ended
--------------------------------------------- ----------------------------------------------
(Unaudited)
September 30, June 30, March 31,
1996 1995 1994 1997 1997 1997
-------------- -------------- -------------- --------------- --------------- --------------
Royalty income............... $ 785,708 $ 1,383,458 $ 3,435,312 $ 4,868,059 $ 3,177,825 $ 1,126,005
Distributable income......... 590,417 614,836 2,650,823 4,105,370 2,601,062 736,735
Distributions per Unit....... .124258 .129396 .557889 .864013 .547417 .155052
Total assets................. 1,818,212 2,333,224 2,412,692 3,633,524 3,941,915 2,725,105
</TABLE>
Other Information. The Trust is subject to the information filing
requirements of the Exchange Act and, in accordance therewith, is required to
file periodic reports and other information with the Commission relating to its
business, financial condition and other matters. Information, as of particular
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<PAGE>
dates, concerning the principal holders of the Trust's securities, any material
interests of such persons in transactions with the Trust and other matters is
required to be described in certain reports filed with the Commission. These
reports and other information should be available for inspection at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and should also be available for inspection and copying at
prescribed rates at the regional offices of the Commission located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this
material may also be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at 450 Fifth Street.
N.W., Washington, D.C. 20549. The Commission also maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
Except as otherwise provided in this Offer to Purchase, the information
concerning the Trust contained in this Offer to Purchase, including financial
information, has been taken from or based upon records on file with the
Commission and other publicly available information. Although Purchaser has no
knowledge that any such information is untrue, Purchaser takes no responsibility
for the accuracy or completeness of such information or for any failure by the
Trust to disclose events that may have occurred or may affect the significance
or accuracy of such information.
9. Certain Information Concerning Purchaser
Purchaser, a Nevada corporation, is an independent energy company engaged
in the exploitation and development, acquisition, exploration and operation of
oil and gas properties with a geographic focus in Texas, Oklahoma and New
Mexico. The principal executive offices of Purchaser are located at 600 East Las
Colinas Boulevard, Suite 1200, Irving, Texas 75039.
Set forth below is certain selected consolidated financial information
with respect to Purchaser and its consolidated subsidiaries excerpted from
Purchaser's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 (the "Purchaser Form 10-K") and from its Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1997 (the "Purchaser Form 10-Q"). More
comprehensive financial information is included in such reports and other
documents filed by Purchaser with the Commission. The following summary is
qualified in its entirety by reference to such reports and other documents and
all financial information (including any related notes) contained therein.
15
<PAGE>
MAGNUM HUNTER RESOURCES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
-----------------------------
Nine Months Ended
1995 1996 September 30, 1997
------------ ---------------- -------------------
Income Statement Data (unaudited)
Total operating revenues.................................. $ 649 $ 16,412 $ 34,306
Extraordinary loss from early extinguishment of -- -- (1,384)
debt......................................................
Net income (loss)......................................... (968) 509 (2,618)
Income (loss) per common share before (0.28) $ 0.01 (0.14)
extraordinary loss........................................
Extraordinary loss per common share....................... -- -- (0.10)
Net income (loss) per common share........................ (0.28) 0.01 (0.24)
Balance Sheet Data (at end of period)
Working capital........................................... (916) 2,279 1,927
Total assets.............................................. 40,065 83,072 240,158
Long-term debt............................................ 11,301 43,150 190,715
Total debt................................................ 15,569 47,918 208,254
Stockholders' equity...................................... 24,496 35,154 31,904
</TABLE>
In November 1997, Purchaser completed a public offering of 6,500,000
shares of Common Stock, resulting in net proceeds to Purchaser of approximately
$36.4 million. All of such proceeds were used to repay indebtedness under
Purchaser's credit facility. As adjusted for the public offering and the
issuance of 846,256 shares of Common Stock in November 1997 to holders of
warrants, stockholders' equity at September 30, 1997 would have been
approximately $72.9 million.
Purchaser is subject to the information filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning Purchaser's directors and officers, their remuneration, stock
options granted to them, the principal holders of Purchaser's securities, any
material interests of such persons in transactions with Purchaser and other
matters is required to be described in proxy statements distributed to
Purchaser's stockholders and filed with the Commission. These reports, proxy
statements and other information are available for inspection and copies are
obtainable in the manner set forth in Section 8 above.
The name, business address, present principal occupation or employment,
five year employment history and citizenship of each director and executive
officer of Purchaser are set forth in Schedule I.
Except as described in this Offer to Purchase, (i) none of Purchaser or,
to the best knowledge of Purchaser, any of the persons listed in Schedule I or
any associate or majority owned subsidiary of any such persons, beneficially
owns or has a right to acquire any equity security of the Trust and (ii) none of
Purchaser or, to the best knowledge of Purchaser, any of the other persons
referred to above, or any of
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<PAGE>
the respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in any equity security of the Trust
during the past 60 days.
Except as described in this Offer to Purchase, (i) none of Purchaser or,
to the best knowledge of Purchaser, any of the persons listed in Schedule I has
any contract, arrangement, understanding or relationship (whether or not legally
enforceable) with any other person with respect to any securities of the Trust,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss, or the giving or withholding of proxies; (ii) there
have been no contacts, negotiations or transactions between Purchaser or any of
its subsidiaries or, to the best knowledge of Purchaser, any of the persons
listed on Schedule I on the one hand, and the Trust or any of its trustees or
affiliates, on the other hand, that are required to be disclosed pursuant to the
rules and regulations of the Commission. See Section 11 regarding an agreement
between Purchaser and a third party relating to Units held by such third party.
10. Source and Amount of Funds
The Offer is not conditioned upon any financing arrangements. Purchaser
estimates that the total amount of funds required to consummate the Offer and to
pay related fees and expenses will be approximately $13.5 million (excluding the
cost of Units purchased by Purchaser in open market transactions prior to the
date of this Offer to Purchase).
Purchaser intends to obtain the funds necessary for the foregoing through
borrowings under its revolving credit facility (the "Credit Facility") with
Bankers Trust Company, as Administrative Agent, Banque Paribas, CIBC, Inc. and
Bank of America National Trust and Savings Association (collectively, the
"Lenders"). The Credit Facility presently has a maximum commitment of $125.0
million and a borrowing base of $65.0 million. The Credit Facility is subject to
a borrowing base determination established on October 1 and April 1 of each year
by the Lenders. At January 15, 1998, $21.0 million was outstanding under the
Credit Facility.
The Company may select an interest rate equal to the Base Rate (defined in
the Credit Facility as the higher of (i) the prime rate of Bankers Trust Company
or (ii) the sum of the overnight rate on federal funds transactions plus 0.50%)
or a LIBOR-based rate, which varies depending upon Purchaser's usage of its
borrowing base. The LIBOR-based interest rate will range from LIBOR plus 1.00%
if less than 25% of the borrowing base is used to LIBOR plus 1.75% if 75% or
more of the borrowing base is used. At January 15, 1998, the Credit Facility
bore interest at a weighted average rate of 7.0997% per annum under LIBOR and
prime rate interest options.
In January 1998, the Lenders consented, subject to certain conditions, to
Purchaser's borrowing of up to $17.5 million under the Credit Facility to
acquire at least a 50.1% interest in the Trust pursuant to a tender offer.
The Credit Facility has a maturity of five years with no required
principal payments until maturity, provided that the outstanding principal
balance does not exceed the borrowing base determinations established from time
to time by the Lenders. Purchaser has no definitive plans at the present time
with respect to the refinancing or repayment of indebtedness under the Credit
Facility. Outstanding indebtedness is secured by a first priority security
interest taken by the Lenders in substantially all assets owned now or in the
future by Purchaser (including its subsidiaries). All of the capital stock of
all wholly owned material subsidiaries of Purchaser is pledged pursuant to the
Credit Facility. Each of Purchaser's wholly owned subsidiaries has guaranteed
the Credit Facility.
17
<PAGE>
The Credit Facility contains representations and warranties, conditions to
extensions of credit, events of default and indemnifications on terms customary
for credit facilities of this type.
11. Background of the Offer
In September 1997 Purchaser was contacted by certain persons about the
opportunity to acquire a controlling interest in the Trust through a tender
offer. After reviewing publicly available information about the Trust and
reviewing or conducting various financial analyses with respect to the Trust,
Purchaser (i) agreed to pay such persons a fee if Purchaser acquired at least a
51% ownership interest in the Trust and (ii) commenced limited open market
purchases of Units.
Between October 1, 1997 and January 28, 1998, Purchaser acquired in open
market purchases an aggregate of 161,500 Units, or a 3.4% ownership interest in
the Trust. Information with respect to Purchaser's open market purchases of
Units during the 60-day period ended January 28, 1998 is as follows:
Date of Number of Price per
Transaction Units Unit
----------- ------------ -------
December 8, 1997 7,500 4 9/16
December 30, 1997 10,000 4 3/4
January 7, 1998 20,000 4 11/16
January 7, 1998 15,000 4 5/8
January 7, 1998 5,000 4 11/16
January 8, 1998 1,000 4 11/16
January 15, 1998 10,000 4 9/16
January 16, 1998 3,000 4 9/16
January 21, 1998 25,000 4 5/8
January 22, 1998 8,000 4 3/4
In October 1997 Purchaser entered into an agreement (the "Agreement") with
Oklahoma Oil Company ("OOC") and Chip Langston that requires OOC and Mr.
Langston, in connection with this Offer, to tender to Purchaser all Units owned
or controlled by them. It is Purchaser's understanding that OOC and Mr. Langston
owned or controlled an aggregate of 12,500 Units as of January 15, 1998. In
addition, by executing the Agreement, OOC and Mr. Langston assigned to Purchaser
their rights and obligations under certain confidentiality and non-circumvention
agreements relating to the possible acquisition of the Trust.
12. Purpose of the Offer and Future Plans; No Appraisal Rights
Purpose of the Offer and Future Plans
The purpose of the Offer is for Purchaser to acquire a majority equity
interest in the Trust. Purchaser regards its proposed purchase of Units pursuant
to the Offer as a good investment that may appreciate in value above the Offer
Price. Upon consummation of the Offer, Purchaser intends to continue its review
of the Trust and its investment in the Partnership and the Trust's operations,
structure, policies and management. Purchaser will thereafter consider and, if
appropriate, implement any changes Purchaser considers desirable in light of the
circumstances then existing.
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<PAGE>
By conditioning the Offer on Purchaser acquiring sufficient Units to own
51% of the Trust, Purchaser will have the ability, among other things, to amend
most provisions of the Trust Agreement, to remove the Trustees, to appoint an
independent or affiliated third party as the successor Corporate Trustee, and to
terminate the Trust and thereby cause a dissolution of the Partnership. While
Purchaser presently has no definite plans to take any of the foregoing actions
or otherwise to merge, reorganize or liquidate the Trust, Purchaser may in the
future elect to do so following its review of the Trust and its investment in
the Partnership and the Trust's operations, structure, policies and management.
Additionally, although it is possible in the future Purchaser may elect to
increase its ownership interest in the Trust above 51% by acquiring additional
Units, Purchaser has no present plans to do so and the acquisition of any
material number of additional Units would require the consent of the Lenders.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE UNIT HOLDERS. ANY SUCH SOLICITATION WHICH THE TRUST OR PURCHASER MIGHT MAKE
WOULD BE MADE ONLY PURSUANT TO SEPARATE PROXY OR SOLICITATION MATERIALS
COMPLYING WITH THE REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER.
No Appraisal Rights
No appraisal rights are available in connection with the Offer.
13. Determination of Offer Price
The Purchaser established the Offer Price based on its own independent
analysis of the Trust and the financial condition of the Trust. Purchaser had no
access to the books and records of the Trust other than information that is
publicly available. No appraisal was obtained by Purchaser for any of the
Trust's assets, and no independent person was retained by Purchaser to render
any valuation or fairness opinion. Purchaser reviewed and analyzed financial
information from publicly available information in the Trust's Form 10-K for the
year ended December 31, 1996 and the Trust's Form 10-Q for the quarter ended
September 30, 1997, the tax effects of the ownership of Units to the Purchaser,
publicly available reserve reports, historical trading prices of the Units and
its experience in owning, operating, purchasing and selling oil and gas
properties. Purchaser included a premium in the Offer Price in order to induce
Unit holders to tender their Units pursuant to the Offer.
14. Certain Conditions of the Offer
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-l(c) under the Exchange Act,
to pay for any Units tendered, and may postpone the acceptance for payment or,
subject to the restriction referred to above, payment for any such Units
tendered, and may terminate the Offer (whether or not any Units have theretofore
been purchased or paid for) if, (1) the Minimum Condition shall not have been
satisfied, (2) it is determined that the Partnership is an investment company
registered under the Investment Company Act of 1940 or (3) at any time before
acceptance for payment of, or payment for, Units, any of the following events
shall occur or be deemed to have occurred:
(A) there shall be pending any suit, action, or proceeding by any
governmental entity that has not been dismissed or otherwise withdrawn (1)
challenging the acquisition by Purchaser of any Units under the Offer or
seeking to restrain or prohibit the making or consummation of the Offer,
(2) seeking to prohibit or materially limit the ownership or operation by
Purchaser or any of its
19
<PAGE>
subsidiaries of a material portion of the business or assets of Purchaser
and its subsidiaries, taken as a whole, or to compel Purchaser to dispose
of or hold separate any material portion of the business or assets of
Purchaser and its subsidiaries, taken as a whole, as a result of the
Offer, (3) seeking to impose material limitations on the ability of
Purchaser to acquire or hold, or exercise full rights of ownership of, any
Units accepted for payment pursuant to the Offer, including, without
limitation, the right to vote such Units on all matters properly presented
to the Unit holders, (4) seeking to prohibit Purchaser or any of its
subsidiaries from effectively controlling in any material respect any
material portion of the business or operations of the Trust and its
subsidiaries or (5) otherwise materially adversely affecting the business,
financial condition or results of operations of the Trust except for any
such changes or effects resulting from changes in general economic,
regulatory or political conditions or changes that affect generally the
oil and gas industry; or
(B) any governmental entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, statute, rule, regulation, executive order, decree, injunction or
other order that is in effect and that, (1) materially restricts, prevents
or prohibits consummation of the Offer, (2) prohibits or limits materially
the ownership or operation by Purchaser or any of its subsidiaries of all
or any material portion of the business or assets of Purchaser and its
subsidiaries taken as a whole, or compels Purchaser or any of its
subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of the Purchaser and its subsidiaries taken as a
whole, (3) imposes material limitations on the ability of Purchaser or any
of its subsidiaries to exercise effectively full rights of ownership of
any Units, including, without limitation, the right to vote any such Units
acquired pursuant to the Offer or otherwise on all matters properly
presented to Unit holders, (4) requires divestitures by Purchaser or any
affiliate of Purchaser of any Unit or (5) otherwise materially adversely
affecting the business, financial condition or results of operations of
the Trust except for any such changes or effects resulting from changes in
general economic, regulatory or political conditions or changes that
affect generally the oil and gas industry; or
(C) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that any person or "group" (as defined in section
13(d)(3) of the Exchange Act), other than Purchaser and its subsidiaries
or any group of which any of them is a member, shall have acquired
beneficial ownership (determined pursuant to Rule 13d-3 under the Exchange
Act) of more than 331/3% of the Units outstanding through the acquisition
of Units, the formation of a group or otherwise, or shall have been
granted an option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 331/3% of such Units; or
(D) there shall have occurred and continued for at least two
business days (1) any general suspension of, or limitation on prices for,
trading in securities on the New York Stock Exchange or American Stock
Exchange, (2) the declaration of any banking moratorium or any suspension
of payments in respect of banks, or any limitation (whether or not
mandatory) by any governmental entity on, or other event materially
adversely affecting, the extension of credit by lending institutions in
the United States, (3) any extraordinary or material adverse change in the
financial markets or major stock exchange indices in the United States,
(4) a commencement of a declared or undeclared war or other hostilities
directly involving the United States or (5) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;
which, in the judgment of Purchaser in any such case, and regardless of the
circumstances giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payments.
20
<PAGE>
The foregoing conditions are for the sole benefit of Purchaser and its
affiliates and may be asserted by Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser, in whole or in
part, from time to time in its sole discretion. The failure by Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right and may be
asserted at any time and from time to time.
15. Certain Legal Matters
Except as described in this Section 15, based on a review of publicly
available filings made by the Trust with the Commission and other publicly
available information concerning the Trust, but without any independent
investigation, Purchaser is not aware of any license or regulatory permit that
appears to be material to the business of the Trust and its subsidiaries, taken
as a whole, that might be adversely affected by Purchaser's acquisition of Units
as contemplated in this Offer to Purchase or of any approval or other action by
any governmental authority that would be required for the acquisition or
ownership of Units by Purchaser as contemplated in this Offer to Purchase.
Should any such approval or other action be required, Purchaser presently
contemplates that such approval or other action will be sought, except as
described below under "State Takeover Laws." While Purchaser does not currently
intend to delay the acceptance for payment of Units tendered pursuant to the
Offer pending the outcome of any such matter, there can be no assurance that any
such approval or action, if needed, would be obtained or would be obtained
without substantial conditions or that adverse consequences might not result to
the business of the Trust or Purchaser or that certain parts of the businesses
of the Trust or Purchaser might not have to be disposed of in the event that
such approvals were not obtained or any other actions were not taken.
Purchaser's obligation under the Offer to accept for payment and pay for Units
is subject to certain conditions. See Section 14.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules that have been promulgated thereunder by the Federal
Trade Commission (the "FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice and the FTC and certain waiting period
requirements have been satisfied. The acquisition of Units by Purchaser pursuant
to the Offer is not subject to such requirements.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations or other entities that are
incorporated or organized in such states or have assets, shareholders, executive
officers or places of business in those states. In Edgar v. MITE Corp., the
Supreme Court of the United States held that the Illinois Business Takeover Act,
which involved state securities laws that made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate commerce
and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America,
however, the Supreme Court of the United States held that a state may, as a
matter of corporate law and, in particular, those laws concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without prior approval of the remaining
shareholders, provided that the laws were applicable only under certain
conditions.
Purchaser believes that the Trust only conducts business in Texas (which
does not have a takeover law). Should any person seek to apply any state
takeover law, Purchaser will take such action as then appears desirable, which
may include challenging the validity or applicability of any such statute in
appropriate court proceedings. In the event it is asserted that one or more
state takeover laws is applicable to the Offer, and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or receive
approvals from, the relevant
21
<PAGE>
state authorities. In addition, if enjoined, Purchaser might be unable to accept
for payment any Units tendered pursuant to the Offer, or be delayed in
continuing or consummating the Offer. In such case, Purchaser may not be
obligated to accept for payment any Units tendered. See Section 14.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
16. Fees and Expenses
Purchaser has retained Corporate Investor Communications, Inc. to act as
the Information Agent, and Securities Transfer Corporation to act as the
Depositary, in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws. See
Section 11 regarding compensation to be paid to certain persons who contacted
Purchaser about the opportunity to acquire a controlling interest in the Trust
through a tender offer.
Except as set forth above, Purchaser will not pay any fees or commissions
to any broker or dealer or other person for soliciting tenders of Units pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will be
reimbursed by Purchaser for customary mailing and handling expenses incurred by
them in forwarding the offering materials to their customers.
17. Miscellaneous
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Units residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of the jurisdiction. However, Purchaser may,
in its discretion, take such action as it may deem necessary to make the Offer
in any jurisdiction and extend the Offer to holders of Units in that
jurisdiction.
Purchaser has filed with the Commission the Schedule 14D-1 pursuant to
Rule 14d-3 under the Exchange Act containing certain additional information with
respect to the Offer. The Schedule and any amendments to the Schedule, including
exhibits, may be examined and copies may be obtained from the principal office
of the Commission in the manner set forth in Section 8 above (except that they
will not be available at the regional offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THE OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
January 28, 1998 MAGNUM HUNTER RESOURCES, INC.
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<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employment for the
past five years of each director and executive officer of Purchaser. The
business address of each such person is c/o Magnum Hunter Resources, Inc., 600
East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039 and each such person
is a citizen of the United States.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Title
- ------------------------------------ ------------------------------------------------------------
Gary C. Evans....................... Director, President and Chief Executive Officer of Purchaser
Matthew C. Lutz..................... Chairman and Executive Vice President of Exploration and
Business Development of Purchaser
Chris Tong.......................... Senior Vice President and Chief Financial Officer of Purchaser
David S. Krueger.................... Vice President and Chief Accounting Officer of Purchaser
Morgan F. Johnston.................. Vice President, General Counsel and Secretary of Purchaser
Richard R. Frazier.................. President and Chief Operating Officer of Magnum Hunter
Production, Inc. and Gruy Petroleum Management Co.
Michael McInerney................... Vice President, Corporate Development & Investor Relations
Gerald W. Bolfing................... Director of Purchaser
Oscar C. Lindemann.................. Director of Purchaser
John H. Trescot, Jr................. Director of Purchaser
James E. Upfield.................... Director of Purchaser
</TABLE>
Gary C. Evans has served as President, Chief Executive Officer and a
director of Purchaser since December 1995 and Chairman and Chief Executive
Officer of all of the subsidiaries (the "Hunter Subsidiaries") of Hunter
Resources, Inc. ("Hunter") since their formation or acquisition. He served as
Chief Financial Officer of Purchaser from January 1997 to August 1997. He acted
as Chairman, President and Chief Executive Officer of Hunter from September 1992
until October 1996. Previously, he was President and Chief Operating Officer of
Hunter from December 1990 to September 1992. From 1985 to 1990, Mr. Evans was
Chairman, President and Chief Executive Officer of Sunbelt Energy, Inc. and its
subsidiaries, which were merged with Hunter. From 1981 to 1985, Mr. Evans was
associated with the Mercantile Bank of Canada where he held various positions
including Vice President and Manager of the Energy Division of the Southwestern
United States. From 1978 to 1981, he served in various capacities with National
Bank of Commerce (now BancTexas, N.A.) including Credit Manager and Credit
Officer. Mr. Evans serves on the Board of Directors of Karts International
Incorporated, a Nasdaq-listed company.
Matthew C. Lutz became Chairman in March 1997 after having served as Vice
Chairman of Purchaser since December 31, 1995. Mr. Lutz has also served as
Executive Vice President of Exploration and Business Development since December
31, 1995. Mr. Lutz held similar positions with Hunter from September 1993 until
October 1996. From 1984 through 1992, Mr. Lutz was Senior Vice President of
Exploration and on the Board of Directors of Enserch Exploration, Inc. with
responsibility for such company's worldwide oil and gas exploration and
development program. Prior to joining Enserch, Mr. Lutz spent 28 years with
Getty Oil Company. He advanced through several technical, supervisory and
managerial positions which gave him various responsibilities including
exploration, production, lease acquisition, administration and financial
planning.
I-1
<PAGE>
Chris Tong became Senior Vice President and Chief Financial Officer of
Purchaser in August 1997. Previously, Mr. Tong was Senior Vice President of
Finance of Tejas Acadian Holding Company and its subsidiaries including Tejas
Gas Corp., Acadian Gas Corporation and Transok, Inc., all of which are
wholly-owned subsidiaries of Tejas Gas Corporation. Mr. Tong held these
positions since August 1996, and served in other treasury positions with Tejas
beginning August 1989. He was also responsible for managing Tejas' property and
liability insurance. From 1980 to 1989, Mr. Tong served in various energy
lending capacities with Canadian Imperial Bank of Commerce, Post Oak Bank, and
Bankers Trust Company in Houston, Texas. Prior to his banking career, Mr. Tong
also served over a year with Superior Oil Company as a Reservoir Engineering
Assistant. Mr. Tong is a Summa Cum Laude graduate of the University of
Southwestern Louisiana with a Bachelor of Arts degree in Economics and a minor
in Mathematics.
David S. Krueger has served as Vice President and Chief Accounting Officer
of Purchaser since January 1997. Mr. Krueger acted as Vice President-Finance of
Cimarron Gas Holding Co., a gas processing and natural gas liquids marketing
company in Tulsa, Oklahoma, from April 1992 until January 1997. He served as
Vice President/Controller of American Central Gas Companies, Inc., a gas
gathering, processing and marketing company from May 1988 until April 1992. From
1974 to 1986, Mr. Krueger served in various managerial capacities for Southland
Energy Corporation. From 1971 to 1973, Mr. Krueger was a staff accountant with
Arthur Andersen L.L.P. Mr. Krueger, a certified public accountant, graduated
from the University of Arkansas with a B.S./B.A. degree in Business
Administration and earned his M.B.A. from the University of Tulsa.
Morgan F. Johnston has served as Vice President and General Counsel since
April 1997 and has served as Purchaser's Secretary since May 1996. Mr. Johnston
was in private practice as a sole practitioner from May 1, 1996 to April 1,
1997, specializing in corporate and securities law. From February 1994 to May
1996, Mr. Johnston served as general counsel for Millennia, Inc. (formerly known
as SOI Industries, Inc.) and Digital Communications Technology Corporation, two
American Stock Exchange listed companies. He also served as general counsel to
Halter Capital Corporation, a private consulting firm from August 1991 to May
1996. For the two years prior to August 1, 1991 he was securities counsel for
Motel 6 L.P., a New York Stock Exchange listed company. Mr. Johnston graduated
cum laude from Texas Tech Law School in May 1986 and is licensed to practice law
in the State of Texas.
Richard R. Frazier has been President of Magnum Hunter Production, Inc.
and Chief Operating Officer of Magnum Hunter Production, Inc. and Gruy Petroleum
Management Co. ("Gruy") since January 1994. He has served as President of Gruy
since January 1998. From 1977 to 1993, Mr. Frazier was employed by Edisto
Resources Corporation in Dallas, serving as Executive Vice President Exploration
and Production from 1983 to 1993, where he had overall responsibility for its
property acquisition, exploration, drilling, production, gas marketing and
engineering functions. From 1972 to 1976, Mr. Frazier served as District
Production Superintendent and Petroleum Engineer with HNG Oil Company (now Enron
Oil & Gas Company) in Midland, Texas. Mr. Frazier's initial employment, from
1968 to 1971, was with Amerada Hess Corporation as a petroleum engineer involved
in numerous projects in Oklahoma and Texas. Mr. Frazier graduated in 1970 from
the University of Tulsa with a Bachelor of Science Degree in Petroleum
Engineering. He is a registered Professional Engineer in Texas and a member of
the Society of Petroleum Engineers and many other professional organizations.
Michael McInerney has been Vice President, Corporate Development & Investor
Relations of Purchaser since October 1997. Prior to joining Purchaser, Mr.
McInerney owned Energy Advisors, Inc., an energy consulting firm, from June 1993
until October 1997. Mr. McInerney was employed from 1981 until June 1993 by
Triton Energy Corporation, an independent energy company, where his
responsibilities included investor relations, acquisitions and corporate
planning. Before joining Triton Energy
I-2
<PAGE>
Corporation, Mr. McInerney served nine years in various financial
management positions with American National Resources Company, a gas
transmission and distribution corporation. Mr. McInerney graduated from the
University of Michigan with a B.B.A.
Gerald W. Bolfing has been a director of Purchaser since December 1995.
Mr. Bolfing was appointed a director of Hunter in August 1993. He is an investor
in the oil and gas business and a past officer of one of Hunter's former
subsidiaries. From 1962 to 1980, Mr. Bolfing was a partner in Bolfing Food
Stores in Waco, Texas. During this time, he also joined American Service Company
in Atlanta, Georgia from 1964 to 1965, and was active with Cable Advertising
Systems, Inc. in Kerrville, Texas from 1978 to 1981. He joined a Hunter
subsidiary in the well servicing business in 1981 where he remained active until
its divestiture in 1992. Mr. Bolfing is on the board of directors of Capital
Marketing Corporation of Hurst, Texas.
Oscar C. Lindemann has served as a director of Purchaser since December
1995. Mr. Lindemann was previously a director of Hunter, having been appointed
in November 1995. Mr. Lindemann has over 40 years experience in the financial
industry. Mr. Lindemann began his banking career with the Texas Bank and Trust
in Dallas, Texas in 1951. He served the bank until 1977 in many capacities,
including Chief Executive Officer and Chairman of the Board. Since leaving Texas
Bank and Trust, he has served as Vice Chairman of both the United National Bank
and the National Bank of Commerce, also in Dallas. Mr. Lindemann has also served
as a consultant to the banking industry. He retired from commercial banking in
1987. Mr. Lindemann is a former President of the Texas Bankers Association, and
a former state representative to the American Bankers Association. He was a
Founding Director and Board Member of VISA, and a member of the Reserve City
Bankers Association. He has served as an instructor at both the Southwestern
Graduate School of Banking at Southern Methodist University and the School of
Banking of the South at Louisiana State University. He has also served as a
faculty member for four years in the College of Business Administration at the
University of Texas in Austin teaching various banking subjects.
John H. Trescot, Jr. has served as a director of Purchaser since June 1997.
For the last five years, Mr. Trescot has been a principal of AWA Management
Corporation, a professional consulting firm specializing in oil, timber, pulp
and paper, and financial management. Early in his career, Mr. Trescot held
various positions in woodlands, and pulp and paper, advancing to the position of
Senior Vice President, Southern Operations at Hudson Pulp & Paper Corp. (now
part of Georgia Pacific Corp.) Later Mr. Trescot became Vice President of The
Charter Company, a corporation with operations in oil, communications and
insurance. In 1979, Mr. Trescot became the Chief Executive Officer of "Jari"
Florestal e Agropecuaria, Ltda., a pulp, timber, rice and kaolin operation in
the Amazon Basin of Brazil owned by D.K. Ludwig. In 1981, Mr. Trescot became the
Chief Executive Officer of TOT Drilling Corp., a contract drilling company
drilling in west Texas and New Mexico.
James E. Upfield has served as a director of Purchaser since December 1995.
Mr. Upfield was appointed a director of Hunter in August 1992. Mr. Upfield is
Chairman of Temtex Industries, Inc. based in Dallas, Texas, a public company
that produces consumer hard goods and building materials. In 1969, Mr. Upfield
served on a select Presidential Committee serving postal operations of the
United States of America. He later accepted the responsibility for the Dallas
region, which encompassed Texas and Louisiana. From 1959 to 1967. Mr. Upfield
was President of Baifield Industries, Inc. ("Baifield") and its predecessor, a
company he founded in 1949 which merged with Baifield in 1963. Baifield was
engaged in prime government contracts for military systems and sub-systems in
the production of high-strength, light-weight metal products. In 1967, Baifield
was acquired by Automatic Sprinkler Corporation of America, where Mr. Upfield
remained until resigning in 1968 to pursue other business opportunities.
I-3
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be accepted.
The Letter of Transmittal and certificates for Units and any other required
documents should be sent by each Unit holder or his or her broker, dealer,
commercial bank, trust company, or nominee to the Depositary at the address set
forth below:
------------------------------------
The Depositary for the Offer is:
Securities Transfer Corporation
By Mail:
P. O. Box 701629
Dallas, Texas 75370
Attn: Stock Transfer
By Facsimile:
(For Eligible Institutions Only)
(972) 248-4797
Confirm by Telephone:
(972) 447-9890
By Hand/Overnight Courier
16910 Dallas Parkway
Suite 100
Dallas, Texas 75248
Attn: Stock Transfer
------------------------------------
Any questions or requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information Agent
at the telephone numbers and address set forth below. You may also contact your
broker, dealer, commercial bank, trust company or nominee for assistance
concerning this Offer.
The Information Agent for this Offer is:
Corporate Investor Communications, Inc.
111 Commerce Road o Carlstadt, New Jersey 07072-2586
Banks and Brokers call toll-free (800) 346-7885
All others call toll-free (800) 206-9438
LETTER OF TRANSMITTAL
To Tender Units of Beneficial Interest
of
TEL OFFSHORE TRUST
Pursuant to the Offer to Purchase Dated January 28, 1998
by
MAGNUM HUNTER RESOURCES, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 27, 1998, UNLESS THE OFFER IS
EXTENDED.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
SECURITIES TRANSFER CORPORATION
By Mail:
P.O. Box 701629
Dallas, Texas 75370
Attn: Stock Transfer
By Facsimile:
(For Eligible Institutions Only)
(972) 248-4797
Confirm by Telephone:
(972) 447-9890
By Hand/Overnight Courier:
16910 Dallas Parkway
Suite 100
Dallas, Texas 75248
Attn: Stock Transfer
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU
MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND, TO AVOID BACKUP FEDERAL INCOME TAX WITHHOLDING, COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DESCRIPTION OF UNITS TENDERED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name(s) and Address(es) of Registered Holder(s) Unit Number of Number of
(Please fill in, if blank, exactly as name(s) Certificate Units Units
appear(s) on the Certificate(s)) Number(s)(1) Represented by Tendered(2)
Certificate(s)(1)
- ---------------------------------------------- -------------- ----------------- ---------------
Total Units
-------------- ----------------- ---------------
(1) Need not be completed by Unit holders delivering Units by Book-Entry Transfer.
(2) Unless otherwise indicated, it will be assumed that all Units represented
by Certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
This Letter of Transmittal is to be completed by holders of Units (as
defined below) of TEL Offshore Trust (the "Unit holders") if certificates
evidencing Units ("Certificates") are to be forwarded with this Letter of
Transmittal or if delivery of Units is to be made by book-entry transfer to an
account maintained by Securities Transfer Corporation (the "Depositary") at The
Depository Trust Company (the "Book-Entry Transfer Facility" or "DTC") pursuant
to the procedures set forth in Section 3 of the Offer to Purchase (as defined
below).
Unit holders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as defined
in Section 3 of the Offer to Purchase) with respect to, their Units and all
other required documents to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) may tender their Units according
to the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. See Instruction 2 hereof. Delivery of documents to the Book-Entry
Transfer Facility does not constitute delivery to the Depositary.
o CHECK HERE IF TENDERED UNITS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution:_____________________________________________
Account Number with DTC:___________________________________________________
Transaction Code Number:___________________________________________________
o CHECK HERE IF TENDERED UNITS ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE
OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):___________________________________________
Window Ticket Number (if any):_____________________________________________
Date of Execution of Notice of Guaranteed Delivery:________________________
Name of Institution Which Guaranteed Delivery:_____________________________
If delivered by book-entry transfer, check below:__________________________
o DTC
Account Number with DTC:___________________________________________________
Transaction Code Number:___________________________________________________
2
<PAGE>
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Magnum Hunter Resources, Inc., a Nevada
corporation ("Purchaser"), the above-described Units of beneficial interest (the
"Units"), of TEL Offshore Trust, a trust organized under the laws of Texas (the
"Trust"), for $5.80 per Unit, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated January 28, 1998 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, constitute the "Offer"). The
undersigned understands that Purchaser reserves the right to transfer or assign,
in whole or from time to time in part, to one or more wholly owned subsidiaries
of Purchaser, the right to purchase Units tendered pursuant to the Offer, but
any such transfer or assignment will not prejudice the rights of tendering Unit
holders to receive payment for Units validly tendered and accepted for payment
pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
Units tendered with this Letter of Transmittal in accordance with the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms or conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to, or upon the order of,
Purchaser all right, title and interest in and to all of the Units that are
being tendered hereby and any and all other Units or other securities issued or
issuable in respect of such Units on or after January 28, 1998 (a
"Distribution"), and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Units (and any Distributions), with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver Certificates evidencing such Units (and any Distributions), or
transfer ownership of such Units (and all Distributions) on the account books
maintained by the Book-Entry Transfer Facility together, in any such case, with
all accompanying evidences of transfer and authenticity to, or upon the order
of, Purchaser, upon receipt by the Depositary as the undersigned's agent, of the
purchase price with respect to such Units; (ii) present such Units (and any
Distributions) for transfer on the books of the Trust; and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such Units
(and any Distributions), all in accordance with the terms and subject to the
conditions of the Offer.
The undersigned hereby irrevocably appoints each designee of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to all
Units tendered hereby and accepted for payment and paid for by Purchaser (and
any Distributions), including, without limitation, the right to vote such Units
(and any Distributions) in such manner as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper. All such powers of
attorney and proxies, being deemed to be irrevocable, shall be considered
coupled with an interest in the Units tendered with this Letter of Transmittal.
Such appointment will be effective if, when, and only to the extent that,
Purchaser accepts such Units for payment pursuant to the Offer. Upon such
acceptance for payment, all prior powers of attorney, proxies and consents given
by the undersigned with respect to such Units (and any Distributions) will be
revoked, without further action, and no subsequent powers of attorneys and
proxies may be given by the undersigned with respect thereto (and, if given,
will be deemed ineffective). The designees of Purchaser will, with respect to
the Units (and any Distributions) for which such appointment is effective, be
empowered to exercise all voting and other rights of the undersigned with
respect to such Units (and any Distributions) as they in their sole discretion
may deem proper. Purchaser reserves the absolute right to require that, in order
for Units to be deemed validly tendered, immediately upon the acceptance for
payment of such Units, Purchaser or its designees are able to exercise full
voting rights with respect to such Units (and any Distributions), including
voting at any meeting of Unit holders then scheduled.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
3
<PAGE>
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Units tendered
hereby (and any Distributions), that the undersigned own(s) the Units tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that such tender of Units
complies with Rule 14e- 4 under the Exchange Act, and that, when the Units are
accepted for payment and paid for by Purchaser, Purchaser will acquire good,
marketable and unencumbered title thereto (and to any Distributions), free and
clear of all liens, restrictions, charges and encumbrances, and that the Units
tendered hereby (and any Distributions) will not be subject to any adverse
claim. The undersigned, upon request, will execute and deliver any additional
documents deemed by the Depositary or Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of Units tendered hereby (and any
Distributions). In addition, the undersigned shall promptly remit and transfer
to the Depositary for the account of Purchaser any and all Distributions issued
to the undersigned on or after January 28, 1998, in respect of the Units
tendered hereby, accompanied by appropriate documentation of transfer, and
pending such remittance and transfer or appropriate assurance thereof, Purchaser
shall be entitled to all rights and privileges as owner of any such
Distributions and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by Purchaser in its
sole discretion.
The undersigned understands that the valid tender of Units pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in the
instructions to this Letter of Transmittal will constitute a binding agreement
between the undersigned and Purchaser with respect to such Units, upon the terms
and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, Purchaser may not be required to accept for payment any
of the Units tendered hereby.
Unless otherwise indicated in this Letter of Transmittal under "Special
Payment Instructions," please issue the check for the purchase price and return
any Certificates evidencing Units not purchased or not tendered, in the name(s)
of the registered holder(s) appearing under "Description of Units Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price of all Units purchased and return
any Certificates evidencing Units not tendered or not purchased (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Units Tendered." In the event that
both the "Special Payment Instructions" and the "Special Delivery Instructions"
are completed, please issue the check for the purchase price of all Units
purchased and return any such Certificates evidencing Units not tendered or not
purchased (and accompanying documents, as appropriate) in the name(s) of, and
deliver such check and return such Certificates (and accompanying documents, as
appropriate) to, the person(s) so indicated. Unless otherwise indicated in this
Letter of Transmittal under "Special Payment Instructions," in the case of a
book-entry delivery of Units, please credit the account maintained by the
undersigned at the Book-Entry Transfer Facility with respect to any Units not
purchased. The undersigned recognizes that Purchaser has no obligation pursuant
to the "Special Payment Instructions" to transfer any Units from the name of the
registered holder(s) if Purchaser does not accept for payment any of the Units
tendered hereby.
4
<PAGE>
o CHECK HERE IF ANY OF THE CERTIFICATES EVIDENCING UNITS THAT YOU OWN HAVE
BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of Units represented by the lost or destroyed Certificates:__________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY
(See Instructions 1, 5, 6 and 7) INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if Certificates for
Units not tendered or not purchased and/or the To be completed ONLY if Certificates
check for the purchase price of Units purchased are for Units not tendered or not purchased
to be issued in the name of someone other than the and/or the check for the purchase price of
undersigned, or if Units delivered by book-entry Units purchased are to be sent to someone
transfer that are not purchased are to be returned other than the undersigned or to the
by credit to an account maintained at the Book- undersigned at an address other than that
Entry Transfer Facility, other than to the account shown above.
indicated above.
Issue Check and/or Certificate(s) to:
Name: ______________________________________ Mail Check and/or Certificate(s) to:
(Please type or Print)
Address: ____________________________________ Name: ____________________________________
(Please type or Print)
____________________________________ Address:__________________________________
(Include Zip Code)
__________________________________
(Tax Identification or Social Security No.) (Include Zip Code)
(Also complete Substitute Form W-9) __________________________________
(Tax Identification or Social Security No.)
Credit unpurchased Units delivered by book-entry
transfer to the Book-Entry Transfer Facility account
set forth below:
___________________________________
(DTC Account Number)
</TABLE>
5
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signatures. Except as otherwise provided below, no
signature guarantee is required on this Letter of Transmittal (a) if this Letter
of Transmittal is signed by the registered holder(s) (which term, for the
purposes of this document, includes any participant in the Book-Entry Transfer
Facility's system whose name appears on a security position listing as the owner
of the Units) of Units tendered herewith and such registered holder has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on this Letter of Transmittal or (b) if
such Units are tendered for the account of a financial institution (including
most commercial banks, savings and loan associations and brokerage houses) that
is a participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5. If the Certificates are registered in the name
of a person other than the signer of this Letter of Transmittal, or if payment
is to be made or delivered to, or Certificates evidencing unpurchased Units are
to be issued or returned to, a person other than the registered owner, then the
tendered Certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on the Certificates, with the signatures on the
Certificates or stock powers guaranteed by an Eligible Institution as provided
in this Letter of Transmittal. See Instruction 5.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
Unit holders if Certificates evidencing Units are to be forwarded with this
Letter of Transmittal or if delivery of Units is to be made pursuant to the
procedures for book-entry transfer set forth in Section 3 of the Offer to
Purchase. For a Unit holder to validly tender Units pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile), with any required signature guarantees and any other
required documents, must be received by the Depositary at one of its addresses
set forth in this Letter of Transmittal on or prior to the Expiration Date (as
defined in the Offer to Purchase) and either (i) Certificates for tendered Units
must be received by the Depositary at one of those addresses on or prior to the
Expiration Date or (ii) Units must be delivered pursuant to the procedures for
book-entry transfer set forth in Section 3 of the Offer to Purchase and a
Book-Entry Confirmation must be received by the Depositary on or prior to the
Expiration Date or (b) the tendering Unit holder must comply with the guaranteed
delivery procedures set forth below and in Section 3 of the Offer to Purchase.
Unit holders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary or
complete the procedures for book-entry transfer on or prior to the Expiration
Date may tender their Units by properly completing and duly executing a Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth
in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) tender
must be made by or through an Eligible Institution, (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by Purchaser, must be received by the Depositary prior to the
Expiration Date, and (iii) Certificates representing all tendered Units in
proper form for transfer, or a Book-Entry Confirmation with respect to all the
tendered Units, together with a Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined in Section 2 of the Offer
to Purchase) in connection with a book-entry transfer and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three American Stock Exchange, Inc. trading days after the date of such
Notice of Guaranteed Delivery. If Certificates are forwarded separately to the
Depositary, a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile) must accompany each delivery.
The method of delivery of Certificates, this Letter of Transmittal and any
other required documents, including delivery through the Book-Entry Transfer
Facility, is at the option and sole risk of the tendering Unit holder and the
delivery will be deemed made only when actually received by the Depositary. If
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
6
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Units will be purchased. All tendering Unit holders, by execution of
this Letter of Transmittal (or a facsimile), waive any right to receive any
notice of the acceptance of their Units for payment.
3. Inadequate Space. If the space provided in this Letter of Transmittal is
inadequate, the information required under "Description of Units Tendered"
should be listed on a separate signed schedule attached to this Letter of
Transmittal.
4. Partial Tenders. If fewer than all of the Units represented by any
Certificates delivered to the Depositary with this Letter of Transmittal are to
be tendered, fill in the number of Units which are to be tendered in the box
entitled "Number of Units Tendered." In such cases, a new Certificate for the
untendered Units that were evidenced by your old Certificate(s), together with
any tendered Units evidenced by such Certificates that were not purchased, will
be sent, without expense, to the person(s) signing this Letter of Transmittal,
unless otherwise provided in the box entitled "Special Payment Instructions" or
the box entitled "Special Delivery Instructions" on this Letter of Transmittal,
as soon as practicable after the expiration or termination of the Offer. All
Units represented by Certificate(s) delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Instruments of Transfer and
Endorsements. If this Letter of Transmittal is signed by the registered
holder(s) of the Units tendered hereby, the signature(s) must correspond exactly
with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Units tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Units tendered hereby are registered in different names on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
Certificates.
If this Letter of Transmittal or any Certificates or instruments of
transfer are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, that person should so indicate when signing, and
proper evidence satisfactory to Purchaser of that person's authority to so act
must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Units listed and transmitted hereby, no endorsements of Certificates or separate
instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on the Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Units evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Certificate(s). Signatures on
the Certificate(s) or instruments of transfer must be guaranteed by an Eligible
Institution.
6. Transfer Taxes. Except as set forth in this Instruction 6, Purchaser
will pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Units to it or its order pursuant to the Offer. If, however, payment of
the purchase price of any Units purchased is to be made to, or (in the
circumstances permitted hereby) if Certificates for Units not tendered or not
purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered Certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any transfer taxes (whether imposed on the registered holder(s), such
other person or otherwise) payable on account of the transfer to such other
person will be deducted from the purchase price of such Units purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes or exemption
therefrom is submitted. Except as
7
<PAGE>
provided in this Instruction 6, it will not be necessary for transfer tax stamps
to be affixed to the Certificate(s) listed in this Letter of Transmittal.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Units tendered hereby is to be issued, or a Certificate evidencing
Units not tendered or not purchased is to be issued in the name of a person
other than the persons signing this Letter of Transmittal or if such check or
any such Certificate is to be sent to someone other than the persons signing
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal must be completed. If any
tendered Units are not purchased for any reason and the Units are delivered by
the Book-Entry Transfer Facility, the Units will be credited to an account
maintained at the Book-Entry Transfer Facility.
8. Requests for Assistance or Additional Copies. Questions and requests for
assistance may be directed to the Information Agent (as defined below) at its
address or telephone number set forth below and requests for additional copies
of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed
Delivery and the Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 may be directed to the Information Agent or brokers,
dealers, commercial banks and trust companies and such materials will be
furnished at Purchaser's expense.
9. Waiver of Conditions. The conditions of the Offer may be waived by
Purchaser, in whole or in part, at any time or from time to time, in Purchaser's
sole discretion.
10. Substitute Form W-9. Under U.S. federal income tax law, each tendering
Unit holder is required to provide the Depositary with such holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9, which is provided
below. If the Unit holder is an individual, the TIN is his or her Social
Security number. If the Depositary is not provided with the correct TIN, the
Internal Revenue Service (the "IRS") may subject the Unit holder or other payee
to a $50 penalty and to 31% federal income tax withholding on the payment of the
purchase price for the Units.
To prevent backup withholding on any payment made to a Unit holder or other
payee pursuant to the Offer, the Unit holder is required to notify the
Depositary of the holder's current TIN (or the TIN of any other payee) by
completing the form below, certifying that the TIN provided on Substitute Form
W-9 is correct (or that such holder is awaiting a TIN) and that (i) the Unit
holder is exempt from backup withholding, (ii) the Unit holder has not been
notified by the IRS that the Unit holder is subject to backup withholding as a
result of failure to report all interest or dividends or (iii) the IRS has
notified the Unit holder that the holder is no longer subject to backup
withholding.
The box in Part 3 of the Substitute Form W-9 should be checked if the
tendering Unit holder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the holder must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 has been checked and the Certificate of
Awaiting Taxpayer Identification Number has been completed, if the Depositary is
not provided a TIN by the time of payment, the Depositary will withhold 31% of
all payments of the purchase price made pursuant to the Offer until a TIN is
provided to the Depositary.
The Unit holder is required to give the Depositary the TIN of the record
owner of the Units. If the Units are registered in more than one name or are not
in the name of the
8
<PAGE>
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
Certain Unit holders (including, among others, corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Such holders may nevertheless complete the attached Substitute
Form W-9 below and write "exempt" on the face thereof to avoid possible
erroneous backup withholding. A NonU.S. Unit holder may qualify as an exempt
recipient by submitting to the Depositary a properly completed IRS Form W-8
signed under penalties of perjury attesting to its exempt status. A Form W-8 may
be obtained from the Depositary. Please consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which Unit holders are exempt from backup withholding.
If backup withholding applies, the Depositary is required to withhold 31%
of any payment paid to the Unit holder or other payee. Backup withholding is not
an additional U.S. federal income tax. Rather, the U.S. federal income tax
liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of tax, a
refund may be obtained from the IRS provided the required information is
furnished.
Purchaser and Depositary reserve the right in their sole discretion to take
whatever steps are necessary to comply with their obligations regarding backup
withholding.
11. Lost or Destroyed Certificates. If any Certificate(s) representing
Units has been lost or destroyed, the Unit holder should promptly notify the
Depositary by checking the box immediately preceding the special payment/special
delivery instructions and indicating the number of Units lost or destroyed. The
Unit holders will then be instructed as to the steps that must be taken in order
to replace the Certificate(s). This Letter of Transmittal and related documents
cannot be processed until the procedures for replacing lost or destroyed
Certificates have been followed.
Important: This Letter of Transmittal or a manually signed facsimile
(together with Certificates or a Book-Entry Confirmation for Units and any other
required documents) must be received by the Depositary, or a Notice of
Guaranteed Delivery must be received by the Depositary, on or prior to the
Expiration Date.
9
<PAGE>
IMPORTANT
Unit holder: SIGN HERE AND COMPLETE SUBSTITUTE
FORM W-9 ON REVERSE
__________________________________________________________________
(Signature(s) of Unit holder(s))
__________________________________________________________________
(Signature(s) of Unit holder(s))
Dated: ..................................., 1998
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Certificate or on a security position listing or by person(s) authorized to
become registered holder(s) by Certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers or corporations or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 5.)
Name(s) ............................................................
............................................................
(Please Type or Print)
Capacity (Full Title)...................................................
(See Instruction 5)
Address ............................................................
............................................................
(Include Zip Code)
Daytime Area Code and Telephone Number ................................
(Home)
................................
(Business)
Taxpayer Identification or Social Security No. ........................
(Complete Substitute Form W-9 on Reverse Side)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
...................................................................
(Authorized Signature(s))
....................................................................
(Name)
....................................................................
(Name of Firm)
....................................................................
....................................................................
(Address Including Zip Code)
....................................................................
(Area Code and Telephone Number)
Dated: ..................................., 1998
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PAYER'S NAME: Securities Transfer Corporation
PAYEE'S NAME:__________________________________________________________________
BUSINESS NAME (IF DIFFERENT):__________________________________________________
ADDRESS:_______________________________________________________________________
MARK APPROPRIATE BOX: Individual/Sole Proprietor Corporation Partnership Other
SUBSTITUTE Part 1-PLEASE PROVIDE YOUR TIN IN __________________________
THE BOX AT RIGHT AND CERTIFY BY Social Security Number(s)
Form W-9 SIGNING AND DATING BELOW.
OR __________________________
Employer Identification
Number(s)
Department of the Treasury Part 2- Part 3-
Internal Revenue Service Certification - Under Penalties of Perjury, I Awaiting TIN |_|
certify that:
(1) The number shown on this form is my
correct taxpayer identification number
(or I am waiting for a number to be
issued for me), and
(2) I am not subject to backup withholding
because: (a) I am exempt from backup
withholding, or (b) I have not been
notified by the Internal Revenue
Service (IRS) that I am subject to
backup withholding as a result of a
failure to report all interest or
dividends, or (c) the IRS has notified
me that I am no longer subject to
backup withholding.
Payer's Request for Taxpayer Certification Instructions - You must cross out item (2) above if you have been
identification Number ("TIN") notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest or dividends on your tax return.
SIGNATURE DATE
--------------------------------------- ------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER TO PURCHASE. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments of the purchase price made to me pursuant to the Offer
thereafter will be withheld until I provide a taxpayer identification number.
SIGNATURE DATE
- -------------------------------- ---------------------------------
11
<PAGE>
The Information Agent for the Offer is:
Corporate Investor Communications, Inc.
111 Commerce Road o Carlstadt, New Jersey 07072-2586
Banks and Brokers call toll-free (800) 346-7885
All others call toll-free (800) 206-9438
January 28, 1998
Notice of Guaranteed Delivery
for
Tender of Units of Beneficial Interest
of
TEL Offshore Trust
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME,
ON FRIDAY, FEBRUARY 27, 1998, UNLESS THE OFFER IS EXTENDED.
This Notice of Guaranteed Delivery or a notice substantially equivalent
hereto must be used to accept the Offer (as defined below) if certificates
representing the Units of beneficial interest (the "Units"), of TEL Offshore
Trust, a trust organized under the laws of Texas, are not immediately available
or the procedure for book-entry transfer cannot be completed on a timely basis
or time will not permit all required documents to reach Securities Transfer
Corporation (the "Depositary") prior to the Expiration Date (as defined in the
Offer to Purchase). This Notice of Guaranteed Delivery may be delivered by hand
or transmitted by facsimile transmission or mail to the Depositary. See Section
3 of the Offer to Purchase.
The Depositary for the Offer is:
SECURITIES TRANSFER CORPORATION
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile: By Hand/Overnight Courier:
P.O. Box 701629 (For Eligible Institutions Only) 16910 Dallas Parkway, Suite 100
Dallas, Texas 75370 (972) 248-4797 Dallas, Texas 75248
Attn: Stock Transfer Confirm by Telephone: Attn: Stock Transfer
(972) 447-9890
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Units to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to the Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Magnum Hunter Resources, Inc., a Nevada
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated January 28, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, constitute the "Offer"), receipt of each of which is hereby
acknowledged, the number of Units indicated below pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
Number of Units Tendered:__________ Name(s) of Record Holder(s) _______
- --------------------------------- -----------------------------------
(Please Type or Print)
Certificate Nos. (if available):________ Address(es)_________________________
- ----------------------------------- ------------------------------------
Check box below if Units will be (Zip Code)
tendered by book-entry transfer:
Area Code and Tel. No.:_____________
|-| Signature(s):_______________________
Account Number:__________________ ____________________________________
Date:_____________________, 1998
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution (as such term is defined in
Section 3 of the Offer to Purchase), hereby (a) represents that the above-named
person(s) "own(s)" the Units tendered hereby within the meaning of Rule 14e-4
under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b)
represents that the tender of Units effected hereby complies with Rule 14e-4,
and (c) guarantees the delivery to the Depositary of the certificates evidencing
the Units tendered hereby, in proper form for transfer, or a Book-Entry
Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to
such Units, in either case together with a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), with any
required signature guarantees, or an Agent's Message (as defined in Section 2 of
the Offer to Purchase) in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, all within three American Stock
Exchange, Inc. trading days after the date hereof.
Name of Firm:___________________ ___________________________________
(Authorized Signature)
Address:________________________ Name: ___________________________
________________________________ (Please Type or Print)
(Zip Code)
Title: __________________________
Area Code and Tel. No. :________
Date:_____________________________
NOTE: DO NOT SEND CERTIFICATES EVIDENCING UNITS WITH THIS NOTICE OF
GUARANTEED DELIVERY. CERTIFICATES FOR UNITS SHOULD ONLY BE SENT
TOGETHER WITH YOUR LETTER OF TRANSMITTAL.
Offer to Purchase for Cash
2,261,770 Units of Beneficial Interest
of
TEL OFFSHORE TRUST
at
$5.80 Net Per Unit
by
MAGNUM HUNTER RESOURCES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME,
ON FRIDAY, FEBRUARY 27, 1998, UNLESS THE OFFER IS EXTENDED.
January 28, 1998
TO: BROKERS, DEALERS, BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
We have been appointed by Magnum Hunter Resources, Inc., a Nevada
corporation ("Purchaser"), to act as Information Agent in connection with its
offer to purchase 2,261,770 Units of beneficial interest (the "Units") of TEL
Offshore Trust, a trust created under the laws of the State of Texas (the
"Trust"), or such other number of Units that, together with the Units then owned
by Purchaser, represents 51% of the Trust's outstanding Units on the date of
purchase, at a price of $5.80 per Unit, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase dated January 28, 1998 (the "Offer to Purchase") and the related Letter
of Transmittal (which together constitute the "Offer"), copies of which are
enclosed herewith.
Please furnish copies of the enclosed materials to your clients for whose
accounts you hold Units registered in your name and in the name of your nominee.
The Offer is conditioned upon, among other things, there being validly
tendered prior to the expiration of the Offer and not withdrawn, 2,261,770
Units, or such other number of Units that, together with the Units then owned by
Purchaser, represents 51% of the Trust's outstanding Units on the date of
purchase. See the Introduction and Sections 1 and 14 of the Offer to Purchase.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. Offer to Purchase dated January 28, 1998;
2. Letter of Transmittal to tender Units (together with accompanying
Substitute Form W-9);
3. A printed form of letter which may be sent to your clients for whose
account you hold Units in your name or in the name of your nominee,
with space provided for obtaining such client's instructions with
regard to the Offer;
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Units are not immediately available, if time will not
permit all required documents to reach the Depositary prior to the
Expiration Date (as defined in the Offer to Purchase) or if the
procedure for book-entry transfer cannot be completed on a timely
basis;
<PAGE>
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 27, 1998,
UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Units accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates
evidencing such Units (or a confirmation of a book-entry transfer of such Units
into the Depositary's account at the Book-Entry Transfer Facility (as defined in
the Offer to Purchase)), a Letter of Transmittal (or facsimile thereof) properly
completed (or an Agent's Message (as defined in the Offer to Purchase)) and duly
executed and any other required documents.
If holders of Units wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedure described in Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker or dealer or
any other persons (other than the fees of the Depositary and Information Agent)
in connection with the solicitation of tenders of Units pursuant to the Offer.
You will be reimbursed for customary mailing and handling expenses incurred by
you in forwarding any of the enclosed materials to your clients. Purchaser will
pay or cause to be paid any transfer taxes payable on the transfer of Units to
it, except as otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained by
contacting, Corporate Investor Communications, Inc., the Information Agent, at
its address and telephone number set forth on the back of the Offer to Purchase.
Very truly yours,
CORPORATE INVESTOR COMMUNICATIONS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY
OTHER PERSON THE AGENT OF THE PURCHASER, THE DEPOSITARY OR THE INFORMATION
AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO
GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY
OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
Offer to Purchase for Cash
2,261,770 Units of Beneficial Interest
of
TEL OFFSHORE TRUST
at
$5.80 Net Per Unit
by
MAGNUM HUNTER RESOURCES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 27, 1998, UNLESS
THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To Our Client:
Enclosed for your consideration are the Offer to Purchase dated January
28, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer") relating to the Offer by Magnum Hunter
Resources, Inc., a Nevada corporation ("Purchaser"), to purchase 2,261,770 Units
of beneficial interest (the "Units"), of TEL Offshore Trust, a trust created
under the laws of Texas (the "Trust"), or such other number of Units that,
together with the Units then owned by Purchaser, represents 51% of the Trust's
outstanding Units on the date of purchase, at a price of $5.80 per Unit net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer. This material is being forwarded to you as the beneficial owner of
Units carried by us in your account but not registered in your name.
We are the holder of record of Units held by us for your account. A tender
of such Units can be made only by us as the holder of record and pursuant to
your instructions. The Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Units held by us for your
account.
Accordingly, we request instructions as to whether you wish to tender any
and all of such Units held by us for your account, upon the terms and subject to
the conditions set forth in the Offer.
Please note the following:
1. The tender price is $5.80 per Unit net to you in cash.
2. The Offer is being made for 2,261,770 Units or such other number of
Units that, together with the Units then owned by Purchaser, represents
51% of the Trust's outstanding Units on the date of purchase.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, February 27, 1998, unless the Offer is
extended.
4. The Offer is conditioned upon, among other things, there being
validly tendered prior to the expiration of the Offer and not withdrawn,
2,261,770 Units or such other number of Units that, together with the
Units then owned by Purchaser, represents 51% of the Trust's outstanding
Units on the date of purchase. See the Introduction and Sections 1 and 14
of the Offer to Purchase.
5. Tendering Unit holders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Units pursuant to the
Offer.
1
<PAGE>
If you wish to have us tender any or all of your Units, please so instruct
us by completing, executing, detaching and returning to us the instruction form
attached to this letter. An envelope in which to return your instructions to us
is enclosed. If you authorize tender of your Units, all such Units will be
tendered unless otherwise indicated in the instruction form. Please forward your
instructions to us in ample time to permit us to submit a tender on your behalf
prior to the expiration of the Offer.
The Offer is made solely by the Offer to Purchase dated January 28, 1998
and the related Letter of Transmittal and any amendments or supplements thereto.
The Offer is not being made to (nor will tenders be accepted from or on behalf
of) holders of Units residing in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the securities laws
of such jurisdiction. However, Purchaser may, in its discretion, take such
action as it may deem necessary to make the Offer to holders of Units in such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of Purchaser by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
2
<PAGE>
Instructions with Respect to the
Offer to Purchase for Cash
2,261,770 Units of Beneficial Interest of
TEL OFFSHORE TRUST
at $5.80 Net Per Unit by
MAGNUM HUNTER RESOURCES, INC.
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer
to Purchase dated January 28, 1998, and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer") in connection with the offer by Magnum Hunter Resources, Inc., a Nevada
corporation ("Purchaser"), to purchase 2,261,770 Units of beneficial interest of
TEL Offshore Trust, a trust created under the laws of the State of Texas (the
"Trust"), or such other number of Units that, together with the Units then owned
by Purchaser, represents 51% of the Trust's outstanding Units on the date of
purchase, at a price of $5.80 per Unit, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer.
This will instruct you to tender to Purchaser the number of Units
indicated below (or if no number is indicated below, all Units) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Units Tendered*: SIGN HERE
_______________________________________ _________________________________
Certificate Nos.(if available):________ _________________________________
Signature(s)
_______________________________________ _________________________________
_________________________________
Please Type or Print Name(s) Here
Account Number:________________________ _________________________________
Date: __________________________ , 1998 _________________________________
Please Type or
Print Address(es) Here
_________________________________
* Unless otherwise indicated, it will be Area Code and Tel. No.
assumed that all Units held by us for
your account are to be tendered. _________________________________
Taxpayer Identification or
Social Security Number
3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hypens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Give the Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION
number of-- number of--
- --------------------------------- ------------------------------- ----------------------------- ----------------------------
1. An individual's account The individual 6. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated in
the account title.)(4)
2. Two or more individuals The actual owner of the account 7. Corporate account The corporation
(joint account) or, if combined funds, the first
individual on the account) (1)
3. Custodian account of a The minor(2) 8. Association, club,religious, The organization
minor (Uniform Gift to charitable, educational, or
Minors Act) other tax-exempt
organization account
4. a. The usual revocable The grantor-trustee(1) 9. Partnership The partnership
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1) 10. A broker or registered The broker or nominee
that is not a legal or nominee
valid trust under State
law
5. Sole proprietorship account The owner(3) 11. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
If only one person on a joint account has a social security number,
that person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name. You may also enter your business or
"doing business as" name. You may use either your social security
number or, if you have one, your employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name listed, the
number will be considered to be that of the first name listed.
1
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number. You may also obtain Form SS-4 by calling the IRS at 1-800-TAX-FORM.]
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include
the following:
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any wholly-owned agency or instrumentality thereof
o A State, the District of Columbia, a possession of the United States,
or any political subdivision or wholly-owned agency instrumentality
thereof.
o A foreign government, a political subdivision of a foreign government,
or any wholly-owned agency or instrumentality thereof.
o An international organization or any wholly-owned
agency, or instrumentality thereof.
Payees specifically exempted from backup withholding on interest and dividend
payments include the following:
o A corporation.
o A financial institution.
o A registered dealer in securities or commodities registered in the
U.S., the District of Columbia, or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described
in section 4947.
o An entity registered at all times during the tax year under the
Investment Advisors Act of 1940.
o A foreign central bank of issue.
o A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section
1441.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
2
<PAGE>
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. Note: You
may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exemptinterest dividends
under section 852).
o Payments described in section 6049(b)(5) to non-resident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
Exempt payees described above may file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDEN
TIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM, AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A, 6045, and 6050A, 6050N, and
their regulations. Privacy Act Notice. Section 6109 requires most recipients of
dividend, interest, or other payments to give taxpayer identification numbers to
payers who must report the payments to IRS. IRS uses the numbers for
identification purposes and to help verify the accuracy of tax returns. The IRS
also may provide this information to the Department of Justice for civil and
criminal litigation and to cities, states, and the District of Columbia to carry
out their tax laws. Payers must be given the numbers whether or not recipients
are required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number. --If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
3
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Units. The Offer is made solely by the Offer to Purchase dated
January 28, 1998 and the related Letter of Transmittal and any amendments or
supplements thereto, and is being made to all holders of Units. The Offer is not
being made to, nor will tenders be accepted from or on behalf of, holders of
Units residing in any jurisdiction in which the making of the Offer or the
acceptance thereof would not be in compliance with the securities, blue sky laws
or other laws of such jurisdiction. However, the offeror may, in its discretion,
take such action as it may deem necessary to make the Offer in any jurisdiction
and extend the Offer to holders of Units in such jurisdiction.
Notice of Offer to Purchase for Cash 2,261,770 Units of
Beneficial Interest of TEL Offshore Trust at $5.80
Net Per Unit by Magnum Hunter Resources, Inc.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, E.S.T., ON FRIDAY, FEBRUARY 27, 1998, UNLESS EXTENDED
Magnum Hunter Resources, Inc., a Nevada corporation ("Purchaser"), hereby
offers to purchase 2,261,770 Units of beneficial interest (the "Units") of TEL
Offshore Trust, a Texas trust (the "Trust"), or such other number of Units that,
together with the Units then owned by Purchaser, represents 51% of the Trust's
outstanding Units on the date of purchase, at a purchase price of $5.80 per
Unit, net to the seller in cash, without interest thereon, subject to the
conditions set forth in the Offer to Purchase dated January 28, 1998 (the "Offer
to Purchase") and the Letter of Transmittal (which, together with any amendments
or supplements thereto, constitute the "Offer"). Tendering Unit holders who have
Units registered in their names will not be charged brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Units pursuant to the Offer. The offer is conditioned
upon, among other things, there being validly tendered and not withdrawn prior
to the Expiration Date (as defined below) 2,261,770 Units or such other number
of Units that, together with the Units then owned by Purchaser, represents 51%
of the Trust's outstanding Units on the date of purchase (the "Minimum
Condition" and such number of Units being the "Minimum Number of Units"). The
Offer also is subject to other conditions, which are set forth in the
Introduction and Sections 1 and 14 of the Offer to Purchase. One purpose of the
Offer is to acquire, and possibly influence control over, the Trust.
"Expiration Date" means 12:00 midnight, E.S.T., on Friday, February 27,
1998, unless and until Purchaser shall have extended the period of time during
which the Offer is open, in which event "Expiration Date" means the latest time
and date at which the Offer, as so extended, expires. Purchaser expressly
reserves the right, subject to applicable law, to extend the Offer by giving
oral or written notice of such extension to Securities Transfer Corporation (the
"Depositary") and by making a public announcement of such extension.
Subject to the conditions of the Offer, if more than the Minimum Number of
Units is validly tendered and not withdrawn in accordance with Section 4 of the
Offer to Purchase prior to the Expiration Date, Purchaser will accept for
payment and pay for the Minimum Number of Units, on a pro rata basis (with
adjustments to avoid purchases of fractional Units) based upon the number of
Units properly tendered and not withdrawn prior to the Expiration Date. In the
event that proration is required, because of the difficulty of determining the
precise number of Units properly tendered and not withdrawn, Purchaser does not
expect to announce the final results of proration or pay for any Units until at
least seven business days after the Expiration Date. Unit holders may obtain
preliminary results of proration from the Information Agent and may be able to
obtain such information from their brokers. Purchaser reserves the right (but
shall not be obligated) to accept for payment more than the Minimum Number of
Units pursuant to the Offer. If a number of additional Units in excess of 2%of
the outstanding Units is to be accepted for payment, and, at the time notice of
Purchaser's decision to accept for payment such additional Units is first
published, sent or given to holders of Units, the Offer is scheduled to expire
at any time earlier than the tenth business day from the date of such notice,
the Offer will be extended until the expiration of such period of 10 business
days.
<PAGE>
If the Minimum Condition or any other condition of the Offer has not been
satisfied prior to the Expiration Date, Purchaser reserves the right to waive
any or all of the conditions of the Offer. If at such time any or all of the
conditions have not been satisfied or waived, Purchaser may (i) decline to
purchase any Units tendered and terminate the Offer, (ii) waive all of the
unsatisfied conditions and, subject to complying with applicable rules and
regulations of the SEC, purchase all Units validly tendered, (iii) extend the
Offer and, subject to the right of Unit holders to withdraw Units until the
Expiration Date, retain the Units that have been tendered during the period or
periods for which the Offer is extended, and/or (iv) amend the Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Units properly tendered to Purchaser and not
withdrawn, if and when Purchaser gives oral or written notice to the Depositary
of Purchaser's acceptance of such Units for payment pursuant to the Offer. In
all cases, payment for Units accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering Unit holders for the purpose of receiving payment
from Purchaser and transmitting payment to tendering Unit holders. Under no
circumstances will interest on the purchase price for Units be paid by Purchaser
by reason of any delay in making such payment. In all cases, payment for Units
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (a) certificates for such Units ("Certificates") or
a book-entry confirmation of the book-entry transfer of such Units into the
Depositary's account at the Depository Trust Company (the "Book-Entry Transfer
Facility"), pursuant to procedures set forth on the Offer to Purchase, (b) the
Letter of Transmittal, or facsimile thereof, properly completed and duly
executed with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer, and
(c) any other documents required by the Letter of Transmittal.
If certain events occur, Purchaser will not be obligated to accept for
payment or pay for any Units tendered pursuant to the Offer. If any tendered
Units are not purchased pursuant to the Offer for any reason, including because
of proration, or are not paid for because of invalid tender, or if Certificates
are submitted representing more Units than are tendered, Certificates
representing unpurchased or untendered Units will be returned, without expense
to the tendering Unit holder (or in the case of Units delivered by book-entry
transfer into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3 of the Offer to Purchase, such
Units will be credited to an account maintained within the Book-Entry Transfer
Facility), as promptly as practicable following the expiration or termination of
the Offer. If Purchaser extends the Offer, is delayed in its purchase of or
payment for Units or is unable to purchase or pay for Units for any reason then,
without prejudice to the rights of Purchaser, tendered Units may be retained by
the Depositary on behalf of Purchaser and may not be withdrawn, except to the
extent that tendering Unit holders are entitled to withdrawal rights as set
forth in Section 4 of the Offer to Purchase.
<PAGE>
Except as otherwise provided in Section 4 of the Offer to Purchase,
tenders of Units made pursuant to the Offer are irrevocable. Units tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration Date
and, unless theretofore accepted for payment and paid for by Purchaser pursuant
to the Offer, may also be withdrawn at any time after March 28, 1998. For a
withdrawal to be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address
set forth on the back cover of the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Units to be
withdrawn, the number of Units to be withdrawn and the name of the registered
holder, if different from that of the person who tendered the Units. If
Certificates evidencing Units have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Certificates, the
tendering Unit holder must also submit to the Depositary the serial numbers
shown on the particular Certificates evidencing the Units to be withdrawn, and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in the Offer to Purchase) (except in the case of Units
tendered for the account of an Eligible Institution). If Units have been
tendered pursuant to the procedure for book-entry transfer set forth in Section
3 of the Offer to Purchase, the notice of withdrawal must also specify the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Units and otherwise comply with such Book-Entry Transfer
Facility's procedures. Any Units properly withdrawn will be deemed not to be
validly tendered for purposes of the Offer. Withdrawn Units may, however, be
retendered by repeating one of the procedures set forth in Section 3 of the
Offer to Purchase at any time before the Expiration Date. All questions as to
the form and validity (including time of receipt) of notices of withdrawal will
be determined by Purchaser, in its sole discretion, whose determination will be
final and binding on all parties.
The information required by Paragraph (e)(1)(vii) of Rule 14d-6 under the
Exchange Act is in the Offer to Purchase and is incorporated by reference.
Purchaser is asking the Trust for a Unit holder list and security position
listing pursuant to Rule 14d-4(a)(3) promulgated under the Exchange Act. The
Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Units whose names appear on the
Trust's Unit holder list and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the Unit holder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Units. The Offer to Purchase and the related
Letter of Transmittal contain important information which should be read
carefully before any decision is made with respect to the Offer. Questions and
requests for assistance may be directed to the Information Agent. Copies of the
Offer to Purchase, the Letter of Transmittal and other related materials may be
obtained from the Information Agent or brokers, dealers, commercial banks or
trust companies, and will be furnished promptly at Purchaser's expense.
The Information Agent for this Offer is: Corporate Investor Communications,
Inc. 111 Commerce Road o Carlstadt, New Jersey 07072-2586; Banks and Brokers
call toll-free (800) 346-7885; All others call toll-free (800) 206-9438.
Magnum Hunter Resources, Inc. 600 East Las Colinas Blvd., Suite 1200,
Irving, TX 75039 Phone (972) 401-0752 Fax (972) 401-3110
Internet Address: http://www.magnumhunter.com
NEWS
FOR IMMEDIATE RELEASE
American Stock Exchange
o Common - MHR
o Bonds - MHR.B
- --------------------------------------------------------------------------------
MAGNUM HUNTER ANNOUNCES CASH TENDER OFFER
FOR 51% OF THE UNITS OF TEL OFFSHORE TRUST
Irving, Texas, January 28, 1998, Magnum Hunter Resources, Inc. ("Magnum
Hunter") announced today a cash purchase offer for, together with the Units it
already owns, 51% of the Units of TEL Offshore Trust (OTC Bulletin Board -
"TELOZ"), which indirectly owns net profit interests in 19 federal leases in the
Gulf of Mexico, 13 of which are currently producing.
Magnum Hunter is offering to purchase 2,261,770 Units of Tel Offshore Trust
at a purchase price of $5.80 per Unit, net to the seller in cash. The aggregate
amount of the offer is $13.1 million. Magnum Hunter currently owns 161,500 Units
representing 3.4% of the Units outstanding. Terms and conditions of the offer to
purchase are set forth in the Offer to Purchase and related Letter of
Transmittal which is being mailed to all holders of Units of TEL Offshore Trust.
The offer will expire at 12:00 midnight, New York City time, on Friday, February
27, 1998.
Commenting on the offer, Mr. Gary C. Evans, President and Chief Executive
Officer remarked "Magnum Hunter has established a strong foundation of
long-lived onshore oil and gas reserves, principally in Texas, New Mexico and
Oklahoma. We are developing these properties through an active drilling program,
having successfully completed 75 out of 80 wells last year. Ownership of Units
in the TEL Offshore Trust will strategically allow us to expand our geographic
focus to the Gulf of Mexico where our management has significant experience and
where reserve life is typically much shorter and would therefore compliment
Magnum Hunter's 15 year reserve life index."
###
Magnum Hunter Resources, Inc. is an exploration and development company engaged
in four principal activities: (1) the acquisition, production and sale of crude
oil, condensate and natural gas; (2) the gathering, transmission and marketing
of natural gas; (3) the managing and operating of producing oil and natural gas
properties for interest owners; and (4) providing consulting and U.S.
export services to facilitate Latin American trade in energy products.
FOR FURTHER INFORMATION CONTACT: MICHAEL P. MCINERNEY
INVESTOR RELATIONS (972) 401-0752
- --------------------------------------------------------------------------------
To Unit Holders of TEL Offshore Trust:
Magnum Hunter Resources, Inc., a Nevada corporation ("Magnum Hunter" or the
"Purchaser") headquartered in Irving, Texas, hereby offers to purchase 2,261,770
Units of beneficial interest (the "Units") of TEL Offshore Trust, a trust
created under the laws of the State of Texas (the "Trust"), or such other number
of Units that, together with the Units already owned by Purchaser, represents
51% of the Trust's outstanding Units on the date of purchase. The price per Unit
that Magnum Hunter is offering in cash is $5.80 (such amount, or any greater
amount per Unit paid pursuant to the Offer as defined below), being hereinafter
referred to as the ("Offer Price"), net to the seller without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which, together with any amendments of
supplements hereto or thereto, collectively constitute the "Offer").
The purpose of the Offer is to enable Magnum Hunter to acquire a
significant ownership interest in the Trust as an investment, based on its
expectation that there may be underlying value in the oil and gas properties
owned by the Trust. Our future plans with respect to the Trust will depend in
part on the Unit Holders response to the Offer. If more than the maximum number
of Units being sought are tendered and not withdrawn prior to the Expiration of
the Offer, we will accept Units for purchase on a pro rata basis, subject to
certain conditions described in the Offer.
The Offer presents Unit Holders with an opportunity to sell their Units at
a substantial premium to both the current market trading price as well as the
recent historical market trading price of the Units, without the customary costs
associated with market sales with a brokerage firm. Additionally, due to the
recent volatility in oil and gas prices and the reduction in value associated
with the natural decline in oil and gas reserves, Magnum Hunter believes this
Offer presents a unique opportunity to the Unit Holders to sell their Units.
Magnum Hunter Resources, Inc. is a rapidly growing independent energy
company whose Common Stock and Bonds are listed on the American Stock Exchange
under the symbols "MHR"and "MHR.B", respectively. The company is engaged in the
acquisition, exploration and development, gas gathering and processing, and
marketing for onshore oil and gas properties with a geographic focus in Texas,
Oklahoma, and New Mexico. The company believes that ownership of the Units in
the TEL Offshore Trust will strategically allow it to expand its geographic
focus to offshore in the Gulf of Mexico where reserve life is typically much
shorter and would therefore complement Magnum Hunter's 15 year reserve life
index.
The materials included in this package include important information
concerning Magnum Hunter, the terms and conditions to the Offer, tax
implications and instructions for tendering your Units. It is important that
Unit Holders take some time to carefully read the attached Offer, the Letter of
Acceptance and other accompanying materials in order to evaluate the Offer being
made by the Purchaser.
Each Unit Holder must make his or her own decision based on his or her
particular circumstances. Unit holders should consult with their respective
advisors about the financial, tax, legal and other implications to them of
accepting this Offer to purchase your Units. If you desire additional
information regarding the Offer or need assistance in tendering your Units to
the Purchaser, you may call the Information Agent, Corporate Investor
Communications, Inc. at (800) 206-9438.
MAGNUM HUNTER RESOURCES, INC.
Gary C. Evans
President and CEO
